As this summer came to a close, my wife and I decided to increase our vacation fund. We’ve thought about doing this for a couple years and decided now is the right time. were a few really big life reasons for doing this, which I’ll get into later in the post.
What is a Vacation Fund?
A vacation fund is a set amount of money set aside every month for trips, travel, vacations, or whatever you want to call it. We use the generic term “vacation”, but it can mean something as little as a weekend trip or something bigger like a couple weeks away.
It’s something we’ve made a priority and an account that we regularly contribute to just like our emergency savings and investments.
Related: 5 Simple Steps to Taking a Guilt-Free Vacation
Why Contribute to a Vacation Fund?
Taking breaks, trips, vacations, etc. is an important part of life. You’ve got to slow things down now and then and replenish the juices. Trying to go-go-go is a recipe for burnout.
On the less serious side, it’s fun and life should have some fun in it. Otherwise, what’s the point?
Where Does the Money Come From?
Much like saving and investing, money for a vacation fund comes from automating your monthly income. For example, a two-parent household making $9,000 per month might automate $500 per month to a vacation fund.
That’s $6,000 per year for trips and other fun things. As income rises, that number can go up (or even start higher for people who highly value travel and experiences).
Five Reasons We Increased Our Vacation Fund
Over the years, my wife and I have increased our vacation fund. We recently increased it by a larger amount than normal, here are the five main reasons why.
Number 1: Life is Short
The first reason we increased our vacation fund is pretty simple. Life is short. We all hope to live long into our 90’s or even 100’s, but you never know. It’s important to live for the now in addition to saving and investing for the future.
Nobody has a predetermined end date to their life. Tomorrow is not guaranteed so we have to do the things that matter now. Balance that out with paying yourself first, investing, and saving-and you’ll have a really good shot at being able to live for the now and invest for your future.
Number 2: Inflation
Inflation has hit hard. It was estimated to be in the eight to nine percent range but for many travel costs like flights, hotels, short-term rentals, fuel, etc. those costs were significantly higher. In some cases they were 20 percent plus.
As a result, we’ve had to increase our vacation fund by more than we would have otherwise. For example, we took a trip a few years ago to Austin, Texas for one month. We stayed in an Airbnb for the trip in a nice neighborhood for a total cost of around $3,000.
An almost identical trip a couple of years later cost over $4,000. Same town, same neighborhood, similar experiences, and the cost was about $1,000 higher. Which is a significant percentage.
Without saving more in our vacation fund, we wouldn’t be able to afford the same trips we were able to take just a few years ago.
Number 3: Budget Was Too Tight
Especially with inflation, my wife and I realized our travel budget was just too tight. What worked a couple years ago was no longer working so we had to increase the budget. The rate at which we were saving for trips was unsustainable so it demanded an increase in savings.
Things like this happen in personal finance all the time. It’s an imperfect world so people will overestimate, underestimate, and sometimes get the costs right. The best thing to do is pay attention and make adjustments as needed.
So don’t worry if your vacation allocations are fluid–they’re supposed to be. In addition to inflation, there are other variables like:
- Your tastes in travel
- Where you’re going that year
- New additions to the family (like a family of three becoming a family of four or five)
- Kids leaving the house for college or work and no longer going on every trip
As these life events happen, the travel budget will naturally need to be adjusted.
Number 4: Ahead of Many Long-Term Financial Goals
The fourth reason we decided to increase our vacation fund is that we’re a little ahead of some of our long-term financial goals. We haven’t met all our goals, and we’re not satisfied staying put, but we’ve made enough progress where we feel like we can slow down a little bit.
We realize this may increase the time it takes to reach full financial independence but if we can make the road to that independence more enjoyable, we’re going to take that path.
Listening to many who have achieved FIRE, one of their biggest regrets is that they moved too quickly towards that goal. That meant saving too much, not taking enough trips and just generally rushing things.
After reaching financial independence, many realized they should have enjoyed the journey more. That’s something we want to prevent from happening, even if it’s at the expense of reaching complete financial independence a year or two later.
Number 5: Can’t Recapture This Time in Our Life
The last reason we increased our vacation fund is really the big picture item similar to life is short. There’s a reality that time is short and you can’t re-capture certain moments and times of your life.
For example, the look on our girls’ faces when they travel to a new place is a moment that can never be replicated. They won’t have that same look of marvel at 18 as they do now at younger ages.
They also won’t want to try out new playgrounds as they get older, run around the campsite, or stare out the window at new places. These are all moments we need to enjoy now because you can’t capture lightning in a bottle.
Conclusion
I realize that a lot of personal finance is geeking out with spreadsheets. And I get why–things like return on investment, opportunity cost, automating, etc. are all really important things to build long-term wealth.
There’s also an element of personal finance that’s very important, and that’s why I wrote this post. There are times when it’s important to reassess and adjust our spending and saving habits. It’s really easy to go down a pathway like the FIRE movement and forget about the “now.”
Spreadsheets and projections are really important and I’ll continue to use them. The “now” is what life is really about though, and we all have to remember that.
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Wish I had done this when my girls were growing up. Oh we went places for sure but when the family returned home we realized we had spent too much. Without a proper vacation fund, we had to scrimp upon return
Happens to a lot of people for sure.
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