Happy 2020! A new year and new decade have officially arrived. Like most people, I have goals for this year a.k.a. New Year’s resolutions. One of my biggest goals is to save more money.
The first quarter of a new decade is the perfect time to get your finances in order. Here are 5 easy steps to save money for your next getaway.
1. Find Out how much you spend each month.
Before you can decide how much you can afford to put away each month, you need to figure out how much you’re spending. How much of your paycheck goes to essential expenses (e.g. rent and groceries) vs. items you want, but may not need (e.g. clothes and happy hour)?
There are a number of apps that connect to your bank account and credit cards, tracking and analyzing your spending. Mint and Digit are two popular ones.
If you’re like me and feel uncomfortable connecting your bank account to a third-party app, you can manually track your spending. I use Wallet by BudgetBakers on my phone to keep track of my spending on the go.
2. Make a Budget.
Now that you know how much you’re spending and what you’re buying, you can create a budget. A budget is simply a plan for how you will allocate your money each month. As mentioned in my How to Travel More Often post, your travel fund should be a part of your budget. I allocate 15% of each paycheck to my travel fund.
There are a wealth of online resources to teach you how to budget. In addition to the apps I mentioned above, You Need a Budget is another great tool I recently discovered. YNAB has paid budgeting software, as well as free webinars on their Facebook page. I really like their first rule of budgeting: Decide what you love. When you set goals based on the things you enjoy spending money on, saving becomes a lot more rewarding.
3. open a separate travel account.
You’ve put aside some money for your vacation later this year. Congrats! Now you need to resist the temptation to use the money for something else, like new boots. Opening a separate bank account is the perfect solution.
I recommend choosing a bank with a high interest rate and no debit card. You can collect interest as you save, while also decreasing the ease with which you can withdraw money. I use Ally, an online savings bank, for my travel fund. The interest rate is 15% higher than the national average. Having a separate travel account has enabled me to book cheap flights on the spot.
4. Set up automatic transfers.
Set it and forget it! The best way to ensure you stay on target with your savings goals is to set up automatic transfers. This is a popular feature of Digit. The app calculates how much you can afford to save and automatically transfers that amount on a daily basis.
Using automatic transfers removes one more item from your to-do list. Your travel fund will have grown before you know it. As an added bonus, you’ll be less tempted to save less and spend more.
5. get creative with your savings.
If hearing the word savings puts you to sleep, it’s time to get creative with how you save! Set a goal with a deadline, like a birthday trip to Bali in May, and find fun ways to fund your vacation. There are a ton of savings charts online, from storing spare change to saving every $5 bill you receive.
The Penny Hoarder has tons of unconventional ways to make extra cash, from taking surveys online to the best cash back apps. Another great resource is The Thought Card, which focuses on making travel a key part of your financial strategy.
Let me know how your savings journey progresses!
2 thoughts on “5 Steps for Saving Money for Travel”
Great piece! Thanks for the tips! I’m looking in Ally now.
Thanks! I’m glad you enjoyed it. Ally is coming out with new buckets so you can can create subcategories within one savings account. I’m excited to try it out.