Skip to main content
Scripbox Logo

How much should you spend on your holiday?

A family vacation is a time to relax, enjoy, and spend quality time with your loved ones. However, not budgeting for it isn’t great for your finances. Here are some guidelines to make sure that all goes according to plan.

There are financial thumb rules for most of your expenditures – up to 25 percent of income for home EMIs or first-year salary rule for taking education loans. 

However, there is no thumb rule for how much to spend on your vacation. 

A family vacation is a time to relax, enjoy, and spend quality time with your loved ones. However, not budgeting for it isn’t great for your finances. Here are some  guidelines to make sure that all goes according to plan.

Remember the 50-30-20 rule

The popular 50-30-20 rule to household budgeting urges you to allocate 50 percent of your post-tax income towards your ‘needs’, 30 percent towards your ‘wants’ and the rest for savings. 

Fifty percent of your budget goes towards meeting necessities like utilities, groceries, debt repayment, or home rent. These expenses are mostly fixed.

All your travel-related expenses are part of discretionary expenditure and are essentially your ‘wants’. So, ensure your travel budget fits into the overall limit of 30 percent (of your income) earmarked for all your discretionary expenses including those on dine-outs and movies. If need be, cut on unnecessary entertainment expenses to pad up the travel budget. 

About 20 percent of your earnings should be invested to achieve your financial goals. 

On an average, a domestic vacation could costs about Rs 6,000 a day for a family of two. If you are travelling abroad, it could be two to four times more. Of course, the cost varies widely based on your preferences, proximity to the destination and if you are choosing a tour operator or not.

Make a cost estimate

Make a rough estimate of the cost of airfare, hotel, transportation, food, entertainment, and site-seeing costs, guides, and souvenirs. 

On an average, a domestic vacation could costs about Rs 6,000 a day for a family of two. If you are travelling abroad, it could be two to four times more. Of course, the cost varies widely based on your preferences, proximity to the destination and if you are choosing a tour operator or not.

*including flight tickets

Source: Travel Websites

How much to allocate for vacationing?

As per financial experts, you can earmark anywhere from 5%-10% of your income towards vacations. For instance, if you are getting a salary credit of Rs 12 lakh every year into your bank account, budget about Rs 60,000-Rs 1.2 Lakhs a year for annual vacationing. 

Based on above cost estimates, you can look at earmarking 10-20 days of domestic vacationing or five days of international holidaying.

If you have debt, look towards curtailing the holiday expenses to the minimum. 

Helpful levers

If you want to vacation for more days - like most millennials - reduce the vacation costs. It could be reduced by staying at budget hotels, travelling to nearby locations and by cutting down on international travel. For instance, a large family can book a single bungalow at Airbnb and save on multiple hotel room bookings. 

If budget is a constraint, travel for fewer days or postpone your vacation in order to get more time (and money).

Hunt for Bargains

Plan early; it helps in getting the best rates from hotels and on flight tickets. You can also stretch your money by eliciting low-cost recommendations from friends who have visited before or from social media, travel blogs and websites.

Also consider travelling during off-seasons, when discounts and freebies are more common. 

Start a fund

One should bump up the emergency fund before travelling and make it a point to not use it for travel-related expenses under any circumstances. 

Ideally, one should start a vacation fund, whereby they allocate a portion of income every month into a liquid fund. 

Takeaway

You can spend anywhere between 5-10% of your take-home salary on vacations. Calibrate the travel budget based on the type of stay, location, and duration. However, don’t ever compromise on investing. 

 

Our Most Popular Categories

Achieve all your financial goals with Scripbox. Start Now