Vacation on a Budget - Doesn't Mean What You Think

We are less than a week away from our big family vacation.  Hooray!  Most of our planning is done, although we still have a few items to take care of before we depart.

As we head towards our departure date, I need to do laundry and pack.  I also have one more Amazon Prime order to execute on.  But as for our travel plan, the airline tickets are paid for, the hotels are reserved and the rental car is booked.

We vacation on a budget, but we don't scrimp.  What does that mean you ask?  Well it means that we always have a short term savings account earmarked for travel/vacation.  We also have an automatic deposit set up, so $200 per pay period goes into our vacation/travel fund.  That normally means that we have more than enough in our travel/savings account to pay cash for airline tickets.  After our airline tickets are booked and our vacation is planned I often up extra savings into our travel/vacation fund to make sure we have more than enough cash on hand for our hotel, rental car and spending.  This time around we didn't need to since our savings account was well funded.

I don't scrimp when I go on vacation, so I normally budget at least $100 a day for food which seems like a lot, but if you are eating out or stopping at a local brewery for a couple of $10 beers it works out to the right amount for us.  I also think about and plan for other spending, we'll be stopping at two national parks, so I'm accounting for entry fees, gas, and misc. spending on a t-shirt here or there or a special souvenir.  Mr. Sam likes to pick up t-shirts on his travel and he wears them a lot.  I like a more upscale souvenir, a piece of art from a local or maybe a handcrafted piece of jewelry.  I am picky so that means I often come home with nothing and that is ok.  Baby Sam gets to pick out something fun for herself that is inexpensive and I will likely pick out something for her along the way.  I normally set aside another $100 in cash for misc. spending.

All of this preplanning means that when we get home from vacation we only bring memories, a rock or two for our collection and no debt.

Another Budget Proposal

In my humble opinion, if you have a budget, a spending plan or some other written system for managing your personal finances you are way ahead of most people.  Having a plan and working that plan, whether it is an envelope system, an Excel spreadsheet, an allowance system, etc. will help you kill debt, save more and have better control over your money.

We work off a spending plan/allowance system, but even though we have a plan that works for us I still am interested in reading proposed plans by the experts.

Mitchell Weiss via NBCnews.com suggests the 25% plan (25% for taxes, 25% for housing, 25% for debt and 25% for living expenses).  I think his advice of planning your budget before locking in expenses is a good one.  If you are going to limit housing expenses to 25% of your before tax income, then you need to know that number before you buy a house or rent an apartment.  And limiting big expenses is a great way to free up income to kill debt or save money.

But, the rest of the advice fell flat for me.  First, I was surprised that he would include payroll taxes in the budget plan.  It is true you need to pay attention to taxes, but I think most budget plans and advice just utilize after tax income which to me seems easier.  I guess if you are an independent contractor or you run your own business this advice makes more sense since you will be responsible for taxes.

25% of pretax income for housing seems reasonable, most guidance provides for limiting housing expenses to no more than a third of after tax income.

I thought the debt advice was lame.  Sure, limit your debt obligations to 25% of your gross monthly income, but that ignores a whole variety of issues.  Maybe your budget should be set up to put more towards debt if you are trying to kill debt, etc.  And since this advice seems geared towards recent graduates it ignores the topic of student loans all together.

Finally, the last 25% of the formula is for living expenses.  But, living expenses is supposed to also include savings for an emergency fund.  Nothing in the post mentions retirement savings, so I would assume that long term savings is also supposed to come out of the last 25%.  I prefer a budget plan that prioritizes savings rather than lumping it together with living expenses.