Sunday, April 21, 2013

Vacation Budgeting

Some prefer approaching vacations like the open road.  You start driving and see where it takes you.  However, financially this can cause lots of issues making your vacation activities more expensive or, even worse, impossible.  For example, in my last post, if you plan ahead and carry enough cash, you may end up paying some extra fees whether by using your credit card or from merchants who only accept cash.  We only encountered one such situation on our vacation: one of the holiday parks we were planning on staying at only accepted cash so we were forced to try another place with a higher rate.  While these may be minor annoyances, they can add up over the course of your vacation and can be avoided with a bit of forethought.

I'm going to focus on budgeting in this post which serves a couple purposes.  First, budgeting can help you get an idea of how much you want to spend on your vacation.  Like all budgets, it helps you avoid overspending or spending in the heat of the moment.  Of course, you could arrive to your vacation spot and then consciously decide to spend more because you enjoy the place and want to consume more goods and services there, but at least then you won't have any regrets later.  Secondly, budgets can be a good way to identify where you are spending too much and help you correct certain unwanted behaviors before the end of the trip.

When budgeting for our New Zealand trip, we first planned out our route and activities we wanted to do.  This gave us a pretty good idea about how much we were spending on activities.  We also bought our tickets for the plane and ferry between both islands early.  The main costs we had to estimate were food, gas, and housing.  To calculate food, we came up with a daily estimate and multiplied it with the days we would stay there.  We also looked up the average cost for holiday parks and campsites and did the same thing for housing.  For gas, we took the fuel efficiency of our campervan and multiplied it by an estimated price of gas and estimated distance traveled (we just used google maps for different routes and added it up).  Of course, none of these estimates were probably going to be correct and they didn't come out correct either.  We had a couple plan changes which resulted in some more driving and we originally overestimated how much we would spend on food.

After we got a good idea about how much we were supposed to spend, we were able to see how well we followed it.  Halfway through the trip, we realized that we were well under budget for food so we ate out a lot more often during the second half.  We also noticed our estimates for gas were not as conservative as they should have been (we should have priced in a higher price for gas and a lower fuel efficiency) which offset some of the savings on food.  In the end however, we managed to stay on track and not go over budget.

Below, I have posted the percentage of our total vacation spending for each of several different categories.

It is important to remember that this is for a group of two people.  For one person, the campervan rental would be a larger portion since it is a high fixed cost just to rent it and for more than 2 people, it should be a smaller proportion since you are dividing that fixed cost among more people.  It is also interesting how close the costs were for food, housing, and gas.  Our other category included some of the souvenirs we bought as well as some gear we prepared for the trip like our backpacks and rain jackets.  Also, our vacation was focused much more on the activities rather than the dining which makes sense looking back.  For another couple going to New Zealand on vacation, their proportions could be extremely different.  But these budgets give great insights into your own spending habits and how to plan future vacations.

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