How to save for holiday spending
Preempting holiday spending
Summer is nearly over and many of us have already been on our holiday this year. You've relaxed, eaten, explored new cultures and probably spent a decent whack of cash whilst doing so. When spending money on holiday it doesn't always feel real. Holding foreign currency can sometimes feel like you've got a wad of Monopoly money that you're free to splurge as you see fit. But where did that money come from?
When it comes to holiday spending money many people don't give it much thought. They visit the currency exchange or go online and buy the requisite money on a credit card, paying the balance off in a months time. Alternatively they go into savings to buy the currency. Some people use credit cards abroad in order to cover those large transactions.
How did you get your holiday spending money?
The problem is that no planning or much thought has gone into your holiday spending. This tends to result in holiday spending being a big spike in your normal income and outgoings each year. Occasionally this can actually result in cash flow issues. If you casually spent on a credit card abroad, you may not actually earn enough in the following month to pay it off, nor have enough cash on savings to cover the deficit.
Holiday spending preparation
I have a different strategy when it comes to preparing for holiday spending. Rather than rely on current income or cash for holiday money, I start preparing for my next holiday spending money immediately after I've been on holiday the previous time.
I budget a set amount each month for holiday spending and I physically put this to one site. Every month I take £200 from my current account into a separate savings account. Over the course of a year this very quickly builds. I use it to pay for the holiday itself but also for spending money when I get there. It add some discipline as well whilst I'm away so that I cannot simply splurge on absolutely anything. However I can treat myself guilt free, knowing that the money is available.
The holiday savings isn't the only cash that I rely on. If I'm away for a period of two weeks, in theory that's two weeks worth of my normal monthly spending that I have available whilst I'm away. I normally allocate myself about £600 in spending each month and put the rest into savings. Going away for two weeks would allow me to put an additional £300 onto a credit card whilst I'm away.
With good preparation we can remove the surprise and potentially guilty spending resulting from holidays by physically saving for your vacation in advance and calculating what amount of regular income should support your holiday entertainment!
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