Prepaid Vacations

My family and I just got back from a weeks vacation in Minnesota where we stayed in a cabin, bought groceries for the week, rented a paddle boat, shopped, and even splurged and ate dinner at a steak house all without even dipping into our current bank account. Our vacation was completely paid for. We came home with the same amount of money that we left with!

Here is how we did it and how you can too.

First, figure out what your vacation is likely to cost and when you plan to take it. For us, I budgeted $1600. I knew our vacation was being taken in July. I would need 8 months to save. In November I started putting $200 each month into a separate savings account (I used an online account, earning a higher interest rate. You might as well make your vacation fund grow faster by earning higher rates!). Having it in a separate account, I never saw the money, therefore resisting the urge to spend it.

When July came I had the $1600 already saved up. I transferred the money to my regular savings. For us, what worked was withdrawing part of it and using our debit for the rest. Other options would be to withdraw the entire amount and pay everything with cash. This way you know exactly what you have to spend.

Another option would be you could pay for your entire vacation on one credit card then just use the money you have in your savings to pay off your credit card when the bill comes due. Be careful doing this though you want to make sure you don't go over what you have budgeted and you want to pay the bill as soon as you receive it so you don't accumulate interest and late fees.

By being able to plan and have your vacation already paid for it will give you peace of mind and you can avoid any guilty feelings about overspending.

Linked to Works for Me Wednesday at We are that Family.