Can you afford to travel this year? After months of lockdowns and staycations, the sky’s the limit for people like Louis Brill. He canceled three trips in 2021 because of the COVID surges, so he has money in his 2022 travel budget.
“We have five trips for this year in the planning phase,” says Brill. “We’ve basically decided there is no budget constraint.”
Brill is lucky. He’s a retired pharmacist who lives in Finksburg, Maryland, and he’s been saving his pennies for travel. The pandemic and the surprise delta variant helped him save even more.
“My wife and I desperately want to get back to traveling,” he says.
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Spending is set to soar this year
He’s not alone. Allianz’s latest Vacation Confidence Index showed that summer vacation spending hit $150 billion in 2021, a new high. “And 2022 should be even bigger,” predicts Daniel Durazo, an Allianz spokesman.
Households earning over $100,000 a year have about $1.4 trillion to spend on discretionary items such as remodeling homes, local trips, and now more long-haul destinations, according to AAA’s research.
“Americans have more discretionary funds since they did not spend much in 2020 and 2021 because of the pandemic,” explains Paula Twidale, senior vice president of travel for AAA.
But how do you figure out your travel budget for this year? And what are some of the expert strategies for building a better vacation budget? Just as the pandemic changed travel, so also has the conventional wisdom on travel budgeting.
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How to calculate your 2022 travel budget
Not everyone has an unlimited travel budget. This year, Thomas Mustac is planning a weekend trip to see one of his favorite bands, the Red Hot Chili Peppers. It’s a quick weekend trip to Hungary from where he lives in Croatia, so he’s allocated $300 for it, not including the tickets.
“I think one of the biggest budgeting mistakes is bringing exactly how much money you need,” says Mustac, who works remotely for a communications firm in Orlando. “You are risking that worst-case scenario.”
Laurel Barton is watching her budget, too. She’s making plans to travel to Europe next fall and is already looking for inexpensive plane tickets. So far, she’s had no luck. She likes to fly business class on long-haul flights, but prices keep rising.
“So the budget is blown from the start,” says Barton, a guidebook author from Forest Grove, Oregon.
That’s not stopping her from going, though.
“Our mantra is, ‘Postpone nothing,'” she says.
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There are ways to figure out what you can afford. The personal finance company Quicken offers a free Vacation Budget Calculator on its site. Add your travel expenses and the number of people, and it comes up with a total and per-day vacation cost. The calculator is useful for remembering items that are easy to overlook, like ground transportation and travel insurance.
But experts and travelers tell me the best way to determine how much to budget for your 2022 vacation is to look at past trips. How much did you budget for those? How much did you actually spend?
Expert advice for travel budgeting next year
“The first thing you need to consider with your 2022 travel budget is the potential increase in fares and hotel rates,” says Baruch Silvermann, a financial expert and CEO of The Smart Investor newsletter. “As domestic travelers returned to air travel, fares increased.” In 2022, that could also happen with hotels and international fares. Silvermann recommends booking early, when prices are relatively low, to avoid going over budget.
Another tip: Add some padding to your travel budget. Jeffrey Zhou, an experienced traveler who runs a financial services company, says having a little extra in the vacation budget can keep you out of trouble when things go wrong.
“Plan for the worst-case scenario,” he advises. “Put enough money aside so that you could easily buy an extra plane ticket for each person you’re traveling with. For most domestic budgets, this would be about $300 per person.”
Actually, it’s better to overestimate your expenses for 2022, according to Silvana Frappier, owner of North Star Destinations, a full-service travel agency in Boston. Most travelers don’t think about the law of supply and demand.
“Travel has changed, and with more demand for safety and restrictions, prices will be higher,” she says.
But whatever you do, make sure you have a budget. Even open-ended trips should have some kind of plan, according to experienced travelers.
Ahmed Mir, the managing editor of a beverage website, is planning a tour of Southeast Asia this year but hasn’t decided where to go yet.
“I’m budgeting about $5,000 for the travel, not including the airfares,” he says. “I think this is a pretty reasonable amount, given that exchange rates against the dollar are generally favorable, so my budget will probably allow me to travel in comfort.”
Whether you’re going away for weeks or just a weekend, having a travel budget is more important than ever. With widespread price rises, it’s also more challenging than ever. Setting a budget and sticking to it won’t be easy. Might as well get started now.
Tips for better travel budgeting
Start with a number, then pick a destination. That’s the advice of budgeting blogger Guadalupe Sanchez. Calculate how much you can put aside, then choose where to go. “Start saving at least nine months before you plan to travel, and keep all your savings in a specific bank account,” she advises. Separating the financial goal from the destination keeps you from deciding to go anyway because you’ve become emotionally attached to going somewhere.
Remember all the extras. And there are lots of them when you’re on vacation. They include meals, tips, gifts and other incidentals. “If you budget $15,000 for a trip to Italy, and your package costs $14,900, do you still have enough spending money once you arrive?,” says Stephanie Goldberg-Glazer, owner of Live Well, Travel Often, a boutique travel agency.
Don’t take a vacation you can’t afford. For some, it’s not a question of where they should go, but if they should go. Chuck Czajka, CEO of Macro Money Concepts, a financial advisory firm in Stuart, Florida, says you shouldn’t even think about taking a vacation unless you have 50% of your current annual salary saved. “This doesn’t mean you can’t take mini-trips or weekend getaways. It only means you can’t take a trip you can’t afford,” he adds.