Planning a Vacation – Save Now or Pay More Later

If a vacation is in your plans, you should consider the financial aspects along with all the details of your trip.  Those issues are how much is the vacation going to cost and how to pay it.

Costs of the Vacation

The actual costs will depend on the type of trip you plan.  But, probably at a minimum you will have transportation (airfare and car rental), accommodations (hotel), meals, activities, and a general category called other.  Here is a worksheet that may help.

Estimated Vacation Cost Worksheet
Airline tickets
Parking or trip to/from airport
Rental car
Other transportation
Hotel $_____ x ___ nights
Meals $_____ x ___ days
Entertainment/nightlife $____ x ___days
Admission fees
Estimated Total

Save Before You Go or Pay More Later

The actual cost of your vacation will depend on where you go and what you do on your trip and those decisions are up to you.  One of the best decisions you can make is to save the money you will need before you go.  That way, you can enjoy the trip without financial worry.  In addition, the additional cost of using a credit card for the trip can be significant.

Here is a simple chart showing how much you need to save monthly so you will have what you need before the trip.

Amount you want to save Monthly savings over 6 months Monthly savings over 12 months Monthly savings over 18 months
$2,500 $414 $205 $136
$5,000 $828 $411 $272
$7,500 $1,242 $616 $408
$10,000 $1,656 $822 $544

(assumes you earn 3% on your savings)

Start Your Automatic Savings Today

There is no easier way to save than with an automatic savings plan. If you are already using direct deposit for your paycheck, have your financial institution transfer the amount each month. Here is an Automatic Transfer Authorization form to help you enroll. You can also have your employer deduct the amount each month and deposit into the account of your choice. Here is a Payroll Deduction Direct Deposit form.

If you are not already using direct deposit for your paycheck, here is a Payroll Direct Deposit form to help you get started.

Paying more later by using your credit card for your vacation

As tempting as it may be to just charge your vacation on your credit card, the costs of doing so can be significant.  Here is a chart showing what your monthly payments would be to pay off the vacation.

Amount charged on your vacation Monthly payment to pay off in 6 months Monthly payment to pay off in 12 months Monthly payment to pay off in 18 months
$2500 $438 $229 $159
$5000 $878 $457 $318
$7500 $1315 $686 $477
$10,000 $1753 $914 $636

(assumes a 17.5% interest rate on credit card debt)


Your vacation should be fun and carefree.  Saving before you go can provide the peace of mind knowing that the cost is covered.  In addition, you can save quite a bit of money.  Consider the following:

  • If you are planning a $7,500 vacation and save for 12 months, you total cost will be $7,392 because you will earn some interest.
  • If you return from your $7500 vacation owning that amount on your credit card and pay it off over 12 months, your total cost will be $8,232.

The decision is yours, but you may find better ways to spend that $840, like extending the vacation for two extra days.