If you have been responsible and conscientious for all of 2022, you probably didn’t get to go on a vacation this past year.
Though some celebrities were able to get out of their homes and party on private islands, most Americans were stuck inside, sometimes confined to a single room if their households became COVID-compromised.
Though 2022 isn’t over, 2023 is already looking brighter. Thanks to a few different vaccines, it seems more than probable that most Americans — perhaps even most of the world — will be safe from the disease by summertime, leaving more than half the year open for some much-needed travel.
Yet, there might be one more obstacle standing in the way: finances. For all sorts of reasons, 2021 has been devastating to household savings.
If you want to plan a vacation to celebrate the end of quarantine and get far, far away from your home and work, here are a few ways to help you do so on a tight budget.
Open a Vacation Savings Account
Though many people tend to stockpile money in their checking account, you should make it a habit to move the money you accumulate for travel to a dedicated savings account. There are two big reasons to do this:
#1. Savings accounts accrue interest. Though interest rates on savings accounts tend to be relatively low, as you put more money into the account, the interest accrued will rise, boosting your savings and getting you closer to your goal. You could open a high-yield savings account to get the most possible interest, but these accounts often come with fees or rules that make them harder to use.
#2. Savings accounts are less accessible. Checking accounts are connected directly to your debit card and checks, making the money stored there easy to spend. By putting a buffer between your spending account and your travel savings account, you will be less likely to dip into those savings for other expenses.
Setting up a savings account is as easy as visiting your bank and asking for one. You might even be able to open a new savings account through an online portal or over the phone, depending on your bank.
Create a Budget and Stick to It
Perhaps the most important element of saving up for a vacation is developing a budget that allows you to generate savings. The exact elements of your budget will depend on your income, your expenses and the cost of your intended vacation; you might use a money management tool to help make sense of these variables and develop a budget that works for your lifestyle.
If you have an average income, you might tinker with the 50/30/20 budget to fit your needs. This budget allocates 50 percent of your income to needs (like rent, utilities, insurance, etc.), 30 percent to wants (like date nights and unnecessary shopping) and 20 percent to savings.
However, because you want to take a vacation, you might increase your savings percentage and decrease your wants budget to ensure you save up enough by your departure date in 2023.
Use a Travel Rewards Credit Card
There are a few different credit cards that offer travel-related rewards, like airline miles, hotel points, rental car options and the like. Using cards like these at gas stations and restaurants can help with paying for vacation-related expenses.
However, it is important to remember that credit cards, even rewards cards, generate debt. The money you spend using your card will need to be repaid, ideally at the end of every month.
Often, rewards cards come with especially high interest rates, making it even more important that you only spend within your means, following your budget, to prevent your debt from getting out of control and preventing you from enjoying your vacation.
Choose an Affordable Destination
Finally, you need to be realistic in your vacation plans. If you were hit hard financially by 2022, you might struggle to afford a luxury vacation to an expensive destination like Bora Bora or Tuscany. Using your budget and your timeline, you should consider destinations that are more affordable for you.
If you are dead set on traveling abroad, you might consider South America or Southeast Asia, both of which tend to have lower costs for accommodations and activities. Then again, because the COVID crisis in 2023 continues to be a question mark, you might plan on a destination closer to home, like California or New York.
Already, people are making post-pandemic plans, and you might be one of them. With the right financial strategy, you can get out of the house and see the world in 2023 — barring another international catastrophe, of course.