7 Steps to Save for Your Next Vacation (in advance!)
And the science that says we’ll enjoy it more.
This post is sponsored by SoFi Money.
We all know that saving for something in advance makes financial sense, but can it also make us happier? Science says yes. Researcher Elizabeth Dunn says that paying for a vacation ahead of time separates the pain of paying with the vacation itself, so we are able to enjoy it more.
Have you experienced this? You’re mid-way through an island vacation you’ve been excited about all winter long, but each time you swipe your credit card at a hotel or fun restaurant, you can’t help but think about your increasing credit card balance.
As much as we try, it’s hard to not think about the time when the rubber will meet the road and we’ll have to actually pay (or try to pay) for our vacations. That robs us of joy in the moment.
Paying for something in advance also means we must plan in advance, and we derive so much joy (some say the most joy) from planning a vacation. For example, in order to estimate the cost of hotels, we have to figure out where we’re going. We’ll probably do research, talk to friends, get recommendations, and read articles. Studies show that this planning can be the best part!
But practically, how do we do this? Do we really prepay for our hotels? And what about meals and activities? Not to mention there are also those of us who want to be a bit spontaneous while we travel. How does it all work?
Along with our partners at SoFi Money, we’ve got you covered. Here is a step-by-step tutorial on how to prepay for your next vacation.
Step 1: Dream it up.
Have fun with this step because this is where you get to design your vacation. Where do you want to go? What do you want to do? Where do you want to stay? Is there a type of food you’re really excited to try? Read articles, travel guides, get recommendations from friends, and watch movies that take place where you’re going.
If you are going with your family, a partner, or a group, bring them in on the brainstorming. You don’t have to create a complete itinerary, but a list of a few restaurants you’re interested in trying or some sights you’d like to see will be helpful. Some of us like a very scheduled vacation while others prefer a loose agenda that allows them to explore or try local recommendations. Any way you like to plan will work.
Step 2: Estimate the cost.
Once we have a good idea of where we want to go and what want to do, we can estimate the cost. I use the word estimate very purposefully. I find that a lot of times we avoid planning because we aren’t sure exactly what things will cost. It’s much better to estimate and be off (which we will be!) than to not plan at all.
Go through and add up estimates for your entire vacation. The flights (don’t forget to include transportation to and from the airport or parking at the airport), rental cars, hotels, meals, activities, shopping, and anything else you can think of. Add it all in there.
Pro tip: If you weren't on vacation, you would still be eating and doing other activities. So when we’re estimating, we only have to include the amount we’re going to spend in addition to our typical food and entertainment spending. You also can net that against anything you won’t be spending while you’re away.
To build in spontaneity, you can estimate a daily spend or set aside a flat amount for things you’d like to do or buy on a whim.
Then, add it all up! This is the total expected cost of your vacation.
Step 3: If you need or want to, make it fabulously frugal.
Step three is for those of us who see the total vacation cost and think, “yikes!” or decide that’s not what we’d like to spend on this vacation. We can get the cost down by making it fabulously frugal.
Start by considering what about the vacation is most important to you. If you’re going with others, make sure to have this conversation with them as well. Is the neighborhood of the hotel important to you? Do you prefer luxury, or do you not really care? Are you more interested in finding local gems rather than going to more expensive restaurants?
This helps us get clear on what we want to prioritize as far as our spending and what we’d be happy to let go of. If we’re going with others, we will compromise. The letting go of the things that are less important to us allows us to decrease the cost of the trip without giving up the things we love.
Step 4: Determine your timeline.
Next, we look at the timeline, or how long until we’ll need to pay for the vacation. Most expenses might take place during the vacation while others happen in advance. For example, if we’re booking flights, how far in advance do we want to make reservations?
We can look at this in increments of months, weeks, or paychecks. For example, we calculate that we have 15 paychecks or 30 weeks until we go on vacation. Keep that number handy.
Step 5: Create the space.
Next, we want to set up a dedicated space for our vacation fund. That way, it’s clear that the money in there is for our upcoming vacation. Our dollars have a purpose. SoFi Money, a cash management account, makes this really easy because we can set up a “vault” or sub-account specifically for our vacation. I recommend naming your vault something specific that gets you excited about your upcoming trip, like “Azores Vacation” or “Island Getaway.”
Step 6: Make it automatic.
Next we want to make saving for our vacation automatic so we can rest assured the account is growing at the rate we want it to in order to pay for our vacation in advance. This gives us peace of mind and also makes sure that the money isn’t used to cover other expenses. We are prioritizing our vacation.
To figure out how much to transfer, you’d take the total estimated cost of your vacation (from steps #2 and #3) and divide it by the number of weeks, paychecks, or months (whichever you prefer) until you need the money (from step #4).
Pro tip: If you know you need to pay for a flight or book a hotel in advance, calculate how much money you will have set aside by then to make sure your account can cover that expense.
Set up that amount to automatically transfer to your vacation vault at whatever interval you decided.
Step 7: Relax. Cash in. Enjoy.
The final step has three parts. First, you can relax as you excitedly await your trip and watch your vacation fund build up. The best part is that in the SoFi Money vaults, your vacation fund will also earn some interest (currently 1.6%) as you wait to pay for your vacation.
As you want to pay for things, you can transfer the money to your checking account (SoFi Money allows unlimited transfers) or you can put your vacation expenses on a credit card and pay them off right after (if you don’t want to miss out on those points).
Now, all there’s left to do is enjoy your vacation without worrying about paying for it later.
As you’re dreaming up your next trip, whether it’s a night away or a two-week getaway, minimize your financial stress and maximize your joy by paying in advance. Walk through these seven steps to set it all up so that the money is there waiting when you are ready to use it.
Bon voyage!