Vacation cost rule of thumb

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Vacation cost rule of thumb

Postby Meaty » Sun Sep 01, 2013 12:06 pm

Is there a recommended percentage of annual income to keep vacation expenses under? Something similar to the 25% of net for mtg payments?

Thanks
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Re: Vacation cost rule of thumb

Postby texasdiver » Sun Sep 01, 2013 12:30 pm

I don't think it would make sense to come up with any rule of thumb because everyone's lifestyle is different and vacation costs are really just a subset of a larger category of discretionary spending.

For example, I have a co-worker with the same salary and size family as me. He is a hard core football fan and has season tickets to our local university team and is always doing road trips to away games with his friends. They also eat out a whole lot more than we do and always seems to be going out for lunch.

My wife and I spend much less money here at home but then do more international travel.

I expect my co-worker and I both spend similar amounts of discretionary $$ on recreation and travel except that I actually travel and he never gets farther than taking the kids 2 hours away to SeaWorld or Six Flags in the summer.

I think the better rule of thumb is to budget your important spending first (savings, retirement, housing, etc.) and then make your vacation costs fit into what's left. Too many people just put that once a year vacation onto plastic without really knowing what it is costing them and then spend the rest of the year trying to climb back out of the hole.
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Re: Vacation cost rule of thumb

Postby Meaty » Sun Sep 01, 2013 12:42 pm

texasdiver wrote:I don't think it would make sense to come up with any rule of thumb because everyone's lifestyle is different and vacation costs are really just a subset of a larger category of discretionary spending.

For example, I have a co-worker with the same salary and size family as me. He is a hard core football fan and has season tickets to our local university team and is always doing road trips to away games with his friends. They also eat out a whole lot more than we do and always seems to be going out for lunch.

My wife and I spend much less money here at home but then do more international travel.

I expect my co-worker and I both spend similar amounts of discretionary $$ on recreation and travel except that I actually travel and he never gets farther than taking the kids 2 hours away to SeaWorld or Six Flags in the summer.

I think the better rule of thumb is to budget your important spending first (savings, retirement, housing, etc.) and then make your vacation costs fit into what's left. Too many people just put that once a year vacation onto plastic without really knowing what it is costing them and then spend the rest of the year trying to climb back out of the hole.


I agree to a certain extent but one has to live for today somewhat. My wife and I are saving 35% of our gross in one form or another. We could get that number to 40%, but at some point you have to enjoy life
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Re: Vacation cost rule of thumb

Postby stan1 » Sun Sep 01, 2013 1:50 pm

Meaty wrote:
I agree to a certain extent but one has to live for today somewhat. My wife and I are saving 35% of our gross in one form or another. We could get that number to 40%, but at some point you have to enjoy life


Percentages are somewhat arbitrary. If you make $40K per year a $4K vacation puts a much bigger dent in your budget than a $40K vacation on a $400K salary. I think saving 35% of gross income should in most cases give you some flexibility to partake in some things you enjoy.
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Re: Vacation cost rule of thumb

Postby eddiejov55 » Sun Sep 01, 2013 3:04 pm

I target saving 5% for vacations until my vacation fund is maxed out. This is my rule of thumb. My wife and i try to take one international trip per year. Essentially I keep a vacation fund of $10K. If I spend it, then I start saving again. If I only spend a portion on vacations, then I replenish. But you only live once so the $10k for us means we can take any vacation we want. This year we went to the Dominican Republic and it cost $2900, so minimal replacement needed.

Bogleheads disclaimer: we have 8 months expenses in emergency fund, we both max out 401k's and Roth IRA's, and carry no consumer debt :)
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Re: Vacation cost rule of thumb

Postby protagonist » Sun Sep 01, 2013 3:06 pm

Meaty wrote:Is there a recommended percentage of annual income to keep vacation expenses under? Something similar to the 25% of net for mtg payments?

Thanks


No (none I recommend, anyway). It depends on your priorities. Recommending a percentage would be tantamount to micro-managing a stranger's life. If you are not saving as much as you wish to, look over all your expenses and decide which ones you could most do without. Otherwise, don't worry about it.
Last edited by protagonist on Sun Sep 01, 2013 3:11 pm, edited 2 times in total.
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Re: Vacation cost rule of thumb

Postby chaz » Sun Sep 01, 2013 3:09 pm

DW and I spend a lot on cruises without a "rule of thumb".
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Re: Vacation cost rule of thumb

Postby mhc » Sun Sep 01, 2013 4:04 pm

No rule of thumb.

There are ways to have expensive or inexpensive vacations. Just depends on what you want. We just spent 2 weeks in Montana. We stayed in hotels the whole time. Hotels were about 50% of the cost. We could have camped for much less, but we prefer hotels.

I set a budget for vacation based around other financial goals. I also want to make sure that the money I spend is a good value. For example, I preferred 2 weeks in Montana over 1 week in Mexico. Same cost, but I got twice as much time in Montana. The main things my kids want to do are swim and eat ice cream. Much cheaper in Montana.
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Re: Vacation cost rule of thumb

Postby pennstater2005 » Sun Sep 01, 2013 4:07 pm

No rule of thumb here either. Although it's been years since I've actually gone to a destination for vacation. Usually I'm working around the house or having fun with the kids. Once they get older we'll go. I'm thinking some different National Parks which will definitely keep the cost down.
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Re: Vacation cost rule of thumb

Postby mickeyd » Sun Sep 01, 2013 4:14 pm

I have never been a big vacation guy, but when I decide to go I don't really have a limit on % or $.
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Re: Vacation cost rule of thumb

Postby The Wizard » Sun Sep 01, 2013 4:36 pm

No rule of thumb here, either, but when I was in my 20's, I just didn't have a lot of $$$ left over after expenses and retirement saving. So we did driving trips mostly and camped out or stayed in cheap motels.
But once you get older, you may tend to "home in" on the type of vacation you enjoy, whether ala carte or a package deal.
Once you get to that point, the question arises: is seven days enough or should we up it to 10 or 14?
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Re: Vacation cost rule of thumb

Postby TRC » Sun Sep 01, 2013 4:45 pm

As long as the rest of your house is in financial order, I would say its whatever you can pay for with cash that meets your family's needs.
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Re: Vacation cost rule of thumb

Postby dickenjb » Sun Sep 01, 2013 5:03 pm

Liz Weston popularized the 50/30/20 plan.

http://money.msn.com/how-to-budget/how- ... -on-weston

50% of your take home goes to fixed needs, 20% to savings, and 30% to wants (discretionary items).

Vacations come out of the 30%.

If you pack your lunch, never eat out, get all your books at the library and carry a Tracfone that leaves you nearly 30% for vacations.

If on the other hand you live a little between vacations, maybe 10 to 15% for vacations.
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Re: Vacation cost rule of thumb

Postby derosa » Sun Sep 01, 2013 6:16 pm

Sounds like you want to justify something that you want to do?
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Re: Vacation cost rule of thumb

Postby scubadiver » Mon Sep 02, 2013 8:26 pm

texasdiver wrote:I think the better rule of thumb is to budget your important spending first (savings, retirement, housing, etc.) and then make your vacation costs fit into what's left. Too many people just put that once a year vacation onto plastic without really knowing what it is costing them and then spend the rest of the year trying to climb back out of the hole.


This is pretty much what we do.

I agree with others - developing a rule of thumb here is difficult. I spent a week of vacation building a retaining wall earlier this year. Cost $750 in supplies for the wall, $0 for travel related expenses. And the $750 came out of my home maintenance budget. I tend to take off a lot of time for just doing things around the house (yard / home projects, activities with my children, etc) but for many I doubt this would really be considered a vacation.
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Re: Vacation cost rule of thumb

Postby ddunca1944 » Mon Sep 02, 2013 10:53 pm

This probably won't help you, but this is how we figure out how much we can afford to spend on trips - our biggest indulgence (we're aleady retired).

Our basic living expenses are covered by our pensions and SS. At the end of the year, I figure out what % our retirement accounts earned. Then I subtract inflation (I use whatever % SS uses to increase our SS benefit). Then I subtract 3% because I want our retirement account to grow 3% more than inflation. If the accounts have grown more than 3% over inflation, I feel we can take out up to 3%. Whatever that number turns out to be is what we can spend.

Some years we go camping and some years we go to Europe. Last year was a good year so we are going to Nepal/Bhutan next month.
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Re: Vacation cost rule of thumb

Postby Professor Emeritus » Mon Sep 02, 2013 11:50 pm

ddunca1944 wrote:This probably won't help you, but this is how we figure out how much we can afford to spend on trips - our biggest indulgence (we're aleady retired).

Our basic living expenses are covered by our pensions and SS. At the end of the year, I figure out what % our retirement accounts earned. Then I subtract inflation (I use whatever % SS uses to increase our SS benefit). Then I subtract 3% because I want our retirement account to grow 3% more than inflation. If the accounts have grown more than 3% over inflation, I feel we can take out up to 3%. Whatever that number turns out to be is what we can spend.

Some years we go camping and some years we go to Europe. Last year was a good year so we are going to Nepal/Bhutan next month.


I'm confused Why would you care if your retirement fund "grows" 3% in real dollar terms. Retirement funds are supposed to be consumed over your remaining lifetime. Do you have your eye on a gold plated casket? if your answer is planning for long term care, no problem but its not a good way to do it. We are also retired. I have set aside resources for long term care. Each year I calculate the annuity value of the retirement funds (ie the income it would bring if we bought an annuity) and add it to pensions etc. whatever is over the long term basic budget is available for travel. or similar frivolity
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Re: Vacation cost rule of thumb

Postby ddunca1944 » Tue Sep 03, 2013 9:23 am

Professor Emeritus wrote:
ddunca1944 wrote:This probably won't help you, but this is how we figure out how much we can afford to spend on trips - our biggest indulgence (we're aleady retired).

Our basic living expenses are covered by our pensions and SS. At the end of the year, I figure out what % our retirement accounts earned. Then I subtract inflation (I use whatever % SS uses to increase our SS benefit). Then I subtract 3% because I want our retirement account to grow 3% more than inflation. If the accounts have grown more than 3% over inflation, I feel we can take out up to 3%. Whatever that number turns out to be is what we can spend.

Some years we go camping and some years we go to Europe. Last year was a good year so we are going to Nepal/Bhutan next month.


I'm confused Why would you care if your retirement fund "grows" 3% in real dollar terms. Retirement funds are supposed to be consumed over your remaining lifetime. Do you have your eye on a gold plated casket? if your answer is planning for long term care, no problem but its not a good way to do it. We are also retired. I have set aside resources for long term care. Each year I calculate the annuity value of the retirement funds (ie the income it would bring if we bought an annuity) and add it to pensions etc. whatever is over the long term basic budget is available for travel. or similar frivolity


No desire for a gold plated casket, but I do want our retirement funds to grow for several reasons:
1. I believe real inflation is more than the CPI (gas, food and healthcare are the main aras I'm concerned about)
2. Although we do have long term care insurance, the coverage is only for 4 years. I have a strong family history of Alzheimer's - my mother was diagnosed 11 years ago and is in her 6th year of institutionalization.
3. I hope to leave an inheritance for a severely disabled granddaughter
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Re: Vacation cost rule of thumb

Postby Go Blue 99 » Tue Sep 03, 2013 12:18 pm

After paying our bills and contributing to retirement & savings, any leftover money is fair play to spend on vacations. Vacations is actually the only item we don't budget for. We love to travel and work time off is typically our limiting factor, not money.
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Re: Vacation cost rule of thumb

Postby stemikger » Tue Sep 03, 2013 12:24 pm

Meaty wrote:Is there a recommended percentage of annual income to keep vacation expenses under? Something similar to the 25% of net for mtg payments?

Thanks


I didn't read the other replies, but my one and only rule for vacation is I don't put it on a credit card and pay it off in full before I go. This includes my spending money. No credit cards allowed on vacation.
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Re: Vacation cost rule of thumb

Postby The Wizard » Tue Sep 03, 2013 12:53 pm

stemikger wrote:
Meaty wrote:Is there a recommended percentage of annual income to keep vacation expenses under? Something similar to the 25% of net for mtg payments?

Thanks


I didn't read the other replies, but my one and only rule for vacation is I don't put it on a credit card and pay it off in full before I go. This includes my spending money. No credit cards allowed on vacation.

No CCs while traveling is a bit odd.
I get a fair amount of credit card rewards for all of my travel expenses, many of which are incurred while on the road. And of course, they're all paid off each month.

I probably worried more about the cost of travelling when I first started doing it on my own 45 years ago.
But at this point, after a few hundred trips of various sorts, I've developed a gut feeling for what things will cost (roughly) and I've never had issues paying the bills afterwards...
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Re: Vacation cost rule of thumb

Postby ddunca1944 » Tue Sep 03, 2013 7:00 pm

stemikger wrote:I didn't read the other replies, but my one and only rule for vacation is I don't put it on a credit card and pay it off in full before I go. This includes my spending money. No credit cards allowed on vacation.


That sounds pretty inconvenient. How do you pay? Traveler's Checks? Cash? Fewer places are accepting traveler's checks and carrying several thousand in cash is too risky for me.

I put as much as possible on my credit card (I've already budgeted the entire vacation and pay the card off in full before the due date). If the card is lost or stolen, I can report it and use the backup card that DH carries.

In addition, I rack up rewards points to use on the next vacation... :D
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Re: Vacation cost rule of thumb

Postby Meaty » Tue Sep 03, 2013 7:23 pm

derosa wrote:Sounds like you want to justify something that you want to do?


Nope. I just tend to over analyze things and have my overall budget pretty well drilled down.
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Re: Vacation cost rule of thumb

Postby Professor Emeritus » Tue Sep 03, 2013 8:04 pm

ddunca1944 wrote:
Professor Emeritus wrote:
ddunca1944 wrote:This probably won't help you, but this is how we figure out how much we can afford to spend on trips - our biggest indulgence (we're aleady retired).

Our basic living expenses are covered by our pensions and SS. At the end of the year, I figure out what % our retirement accounts earned. Then I subtract inflation (I use whatever % SS uses to increase our SS benefit). Then I subtract 3% because I want our retirement account to grow 3% more than inflation. If the accounts have grown more than 3% over inflation, I feel we can take out up to 3%. Whatever that number turns out to be is what we can spend.

Some years we go camping and some years we go to Europe. Last year was a good year so we are going to Nepal/Bhutan next month.


I'm confused Why would you care if your retirement fund "grows" 3% in real dollar terms. Retirement funds are supposed to be consumed over your remaining lifetime. Do you have your eye on a gold plated casket? if your answer is planning for long term care, no problem but its not a good way to do it. We are also retired. I have set aside resources for long term care. Each year I calculate the annuity value of the retirement funds (ie the income it would bring if we bought an annuity) and add it to pensions etc. whatever is over the long term basic budget is available for travel. or similar frivolity


No desire for a gold plated casket, but I do want our retirement funds to grow for several reasons:
1. I believe real inflation is more than the CPI (gas, food and healthcare are the main aras I'm concerned about)
2. Although we do have long term care insurance, the coverage is only for 4 years. I have a strong family history of Alzheimer's - my mother was diagnosed 11 years ago and is in her 6th year of institutionalization.
3. I hope to leave an inheritance for a severely disabled granddaughter


Break this into three Rationales
1) the first is retirement related.but the way to address is to use a price index related to basic consumption commodities instead of the CPI.
2) An adequate reserve for health care including LTC is critical but is not part of a "retirement fund". You have to do health care planning "up front (not by growth), since health care expenses may not wait perhaps the best is to think of travel and health care as alternative spending strategies.
3) this should be in the form of a special medical trust that can pay your health care related expenses as in # 2 or hers if she survives you while protecting medicaid eligibility.
I suggest consulting an elder care lawyer.

good luck on #3 We have a severely disabled grandniece and her Grandparents are doing much the same.
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Re: Vacation cost rule of thumb

Postby ddunca1944 » Tue Sep 03, 2013 8:47 pm

Professor Emeritus,
I am digesting your post. Some excellent points. One question- if not the CPI, what would be a better (more accurate) measure of inflation?
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Re: Vacation cost rule of thumb

Postby Professor Emeritus » Tue Sep 03, 2013 9:54 pm

ddunca1944 wrote:Professor Emeritus,
I am digesting your post. Some excellent points. One question- if not the CPI, what would be a better (more accurate) measure of inflation?


There is what is called the CPI E
"Bureau of Labor Statistics (BLS) computes an unofficial index that reflects the purchasing patterns of older people, called the experimental CPI for Americans 62 years of age and older (CPI-E). Since 1982 (the earliest date for which that index has been computed), annual inflation as measured by the CPI-E has been 0.2 percentage points higher, on average, than inflation as measured by the traditional CPI-U or the CPI-W. However, since December 2007, when the most recent recession began, inflation as measured by the CPI-E has generally been lower than inflation as measured by the CPI-U or CPI-W (see the figure below). "

http://www.cbo.gov/publication/44090


The usual alternative is the PCE http://conversableeconomist.blogspot.co ... sonal.html
http://conversableeconomist.blogspot.co ... sonal.html

FWIW for example the TOTAL cost of driving on a per mile basis is far more stable than the cost of gasoline.
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Re: Vacation cost rule of thumb

Postby VictoriaF » Wed Sep 04, 2013 11:07 am

I don't have a numerical vacation rule of thumb, such as a percentage of income, but I have a philosophical rule of thumb. My rule is "travel like a student." This means that I fly economy, use public transportation at my destinations, and stay in hostels and hotels without stars. When planning my vacations I get ideas from "Lonely Planet" rather than Rick Steves. While staying at hostels I learn about cheap fun from people I meet in line to a shared hallway bathroom {a joke, but read my signature line}.

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Re: Vacation cost rule of thumb

Postby coachz » Wed Sep 04, 2013 11:14 am

What's this vacation thing you speak of ? Married 26 years, i think we have had 4 that were 1 week each. :annoyed
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Re: Vacation cost rule of thumb

Postby Meaty » Wed Sep 04, 2013 5:59 pm

coachz wrote:What's this vacation thing you speak of ? Married 26 years, i think we have had 4 that were 1 week each. :annoyed


Yikes! Sorry to hear that. I take 2 per year, sometimes 3. They're always at least a week but they're cheap (hunting, fishing, camping)
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Re: Vacation cost rule of thumb

Postby skylar » Wed Sep 04, 2013 7:55 pm

coachz wrote:What's this vacation thing you speak of ? Married 26 years, i think we have had 4 that were 1 week each. :annoyed


Yeah, my wife has had one job with paid time off, but the commute was so awful that it wasn't worth it. Since then she's had to take unpaid leave or try to squeeze something in between gigs. That just increases the cost of the vacation even further.

I'm work in edu/gov't so have the opposite problem - HR is on my back for having way too much leave saved.
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Re: Vacation cost rule of thumb

Postby Bob's not my name » Wed Sep 04, 2013 8:26 pm

2% of gross
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