How to Prepare a Travel Budget (and Stick to It)

Where are you dreaming of travelling to this year? Whether you’re planning an elaborate month-long backpacking trip, a week in an all-inclusive Caribbean resort, or a camping trip across the country, a budget should be your first stop. 

A travel budget helps avoid the shock of returning home from vacation to an unexpectedly large credit card bill. By outlining your fixed and non-negotiable costs from the flexible ones ahead of time, you can return from vacation confident that your finances are under control.

Whether your vacation is in a few weeks or 12 months from now, keep reading to learn how to prepare a travel budget and stick to it.

Why a Travel Budget Matters

Often, we get swept up in the excitement of “vacation mode,” so we’re less mindful about our spending. It happens to the best of us. However, when you know how to travel on a budget, you can avoid unnecessary surprises. 

On vacation, we’re more likely to overspend than at home. We may try to justify excess vacation spending by saying, “We’re only here once,” or “They don’t have this at home.” And while that may be true, it’s important to recognize the financial trade-off. By putting in the extra effort before your travels, you can relax knowing you won’t be returning home to the stress of extra debt from impulse buys. 

How to Prepare a Travel Budget 

Preparing a travel budget is similar to preparing a household or family budget. While the line items may differ, each expense should still have a daily or total limit that you aim to stick to throughout your trip.

Follow these five steps to create an effective travel budget:

Step 1: Define Your Travel Goals

Your first step to travel on a budget is to define your travel goals. This will include your vacation location, duration, and time of year (or specific dates). All three of these factors will affect the cost of your trip. 

Start with travel goals that include a destination, location, time frame, and budget. For example:

• Visit 3 cities in Italy over 2 weeks in Spring for under $3,000
• Take a 5-7 day Caribbean cruise with the family during spring break for under $5000
• Go solo-backpacking in Europe in September with a daily budget of $150 per day (plus flights)

Step 2: Research Estimated Costs

Once you have your dream vacation in mind, it’s time to do your research and find out how much it will cost.  Your costs will vary depending on your location and trip type, but most commonly will include:

• Airfare or travel (ie, Car/gas, cabs, bus, train, plane, boat)
• Accommodations
• Food
• Activities
• Travel insurance
• Souveniers
• Added fees and taxes (ie, booking fees, airport taxes, hospitality/hotel taxes)
• Travel visas and passports
• Vehicle maintenance (if you’re taking a  road trips)
• Anything you need to purchase before your trip (luggage, packing cubes, travel-sized toiletries)

Consider asking a travel agent or using ChatGPT to explore potential expenses for your trip. 

Booking Tip: To secure the best travel deals, compare flight and accommodation options on sites like Google Flights, Hopper, Booking.com, or Kayak. 

Step 3: Identify Fixed vs. Flexible Costs

Is your dream vacation starting to cost more than you imagined back in step 1? Now is the time to understand which costs are fixed and which are flexible. This will help you learn how to travel on a budget.

Fixed costs typically include flights and accommodation (although there may be some room for negotiation or to secure deals by calling hotels directly), as well as items like visas or passports. You may have more flexibility in other spending categories, such as food, travel, and souvenirs.

If you need to save money on the flexible budget items, here are some ideas:

• If you’re going to a theme park, bring your sandwiches or snacks instead of eating park food for every meal.
• If flying your family to a nearby destination is costly, driving or carpooling can save on transportation costs.
• Instead of staying at 5-star hotels for the entire trip, consider choosing at least a few nights at more budget-friendly accommodations or an AirBnB (especially if it’s a quick overnight stop, or you don’t plan to be in the room much).  
• Travel to visit family and friends to save on accommodation and some food costs.
• Consider camping or staying outside busy urban centres or national parks to find cheaper accommodation, and often better availability. 
• Try a staycation instead.

We suggest creating a safety net in your budget for flexible costs that you can’t avoid or unexpected expenses that may occur. In many cases, a 10% contingency budget will cover this. 

Step 4: Create a Budget and Savings Plan

With your goal set and research in hand, it’s time to build your complete trip budget. Use step 3 to refine your trip plan and budget to meet your goals. 

Once your ideal trip is mapped out, it’s time to start saving! Take your total estimated cost and divide it by the number of months until your departure. This is how much you’ll need to set aside each month for your vacation. If you’re paid bi-weekly, consider setting aside a portion from each paycheck instead, which can feel more manageable.

For example, if you’re planning a trip that costs $2,000 in 12 months, you need to set aside $166 per month or ~$83 bi-weekly. 

This is how Credit Canada’s Counselling Manager, Mike Bergeron, plans his personal vacations:

“To prepare my travel budget, I use a specific goal-setting spreadsheet. This visual provides me with the true value that I need to allocate in my monthly budget to prepare for either a vacation this year or something a bit longer away.”

Step 5: Create a Day-By-Day Budget 

We’ve all been there. We get caught up in the excitement of our trip and find ourselves overspending on our budget. To help you stay on track during your trip, make a daily budget. Calculate how much you have to spend each day of your trip, including any one-time purchases, such as train passes or theme park tickets, and the days those charges will occur.

With your daily budget, you can keep a closer watch on your spending. If you find you’ve overspent that day, consider trying to spend less on the flexible costs the next day, or dip into your contingency budget.

To track spending on your trip, keep your receipts and add their totals at the end of the day. You can also use a travel spending app, such as Travel Spend, Splitwise (for splitting expenses with others), or TripCoin, to track your travel spending.  

Tips for Travelling on a Budget

Are you looking for ways to reduce your trip budget? Here are some helpful travel tips from our team to help you stretch your budget:

Save Before You Go

It’s not a great feeling to come home, relaxed from your vacation, only to have your credit card bill arrive with all your vacation overspending. When possible, save money for your trip before you go. This way, when you get that credit card statement next month, you’ve already got the money set aside to pay for it. 

If you’re travelling on unpaid leave, don’t forget your ongoing expenses, like your rent, car payment, and utilities. They won’t take a holiday just because you are.

To help you save before you go:

• Create a separate bank account for your vacation fund (this way, you won’t be tempted to use the money).
• Meal prepping can save you money on your home grocery bill (to avoid eating out). The money you save can be put into your vacation savings account.
• Participate in a no-spend challenge, where you promise yourself to avoid discretionary spending for a week, several weeks, or a month. Use the money you save for your vacation savings account.
• Set up automatic savings by depositing the desired amount into a separate savings account for your vacation.

Travel Smart, Spend Less

When and how you travel can affect your budget. To help you manage your budget, consider:

• Travelling off-season for better deals.
• Trying budget airlines.
• Travelling with carry-on luggage only when possible to save on airline baggage fees.
• An all-inclusive option if you know you typically overspend on food and drinks.
• Researching savings or discounts on activities or museums (some may have free days, first responder discounts, or senior deals).
• Mapping out your own walking tour with maps and itineraries from your favourite travel bloggers, ChatGPT, or friends' recommendations.

Avoid Common Travel Budget Traps

Have you ever been charged a different rate because you’re a tourist? Or arrived at your destination only to find there are extra costs or fees you didn’t plan for? Here’s how to stay ahead of them:

• Research local prices in advance to know what things should cost and avoid paying inflated tourist rates.
• Book accommodations and transportation directly through reputable sites to avoid hidden booking fees.
• Check for resort, cleaning, or city taxes before booking hotels or rentals. These are often excluded from the listed price.
• Read the fine print on excursions and tours. Some charge extra for things like gear rental, meals, or tips.
• Use apps or travel forums on Reddit to spot tourist traps and overpriced attractions before you go.

If you’re an impulsive buyer, consider using only cash for your daily budget and leaving your credit card locked in your hotel room. It can get all too easy to start swiping once you run out of cash.

If you want to purchase unique items on your trip, create a list before you go and stick to it as much as possible. Remember, anything you plan to buy and bring home will need space in your suitcase.

Checklist to Avoid Impulse Purchases on Vacation

Want to avoid overspending on your next trip? Ask yourself these questions before purchasing anything on your trip:

• “Is this in my budget or on my must-buy list?"
• “If this is an item to bring home, will it safely fit in my suitcase?”
• “Can I use cash to pay for this?”
• “Is this the least expensive option I can find?”
• “Is this the best value activity I can do right now?”

If you answered “no” to any of these questions, it may not be in your budget to purchase.

What to Do If You Go Over Budget

If you overspend your vacation budget, don’t panic. It’s going to be okay. Take a pause and follow these steps to get back on track. 

If you discover you’re over budget while on vacation:

• Look for ways to reduce spending on subsequent days of your trip to balance out your expenses.
• If possible, return souvenir purchases that put you over budget.
• Consider cooking for yourself or buying meals from the grocery store, instead of eating out.

If you discover you’re over budget when you get home:

• Be more frugal with your spending for the next few weeks or months until you’ve made up the difference.
• Adjust your monthly budget to identify areas where you can find savings. 
• Prioritize debt repayment so that vacation debt doesn’t hang over your head for too long.
• Consult a Credit Counsellor for assistance in adjusting your monthly budget to account for the extra spending.

Credit Canada can help support your financial recovery after your vacation. Contact us to get started.

Include A Travel Budget as Part of a Bigger Financial Plan

Even if you don’t have an upcoming trip planned, it’s helpful to set aside at least a small amount every month for your travel fund. Imagine setting aside just $100 every month for a year. This puts you $1,200 closer to your dream vacation by the end of the year. When you have extra funds or a larger trip booked, you can set aside additional money. 

While some may consider vacations a nice-to-have, the benefits of travel can be crucial to your overall well-being. The good news is that if you get creative you can customize your vacation to fit your budget. You may need to be a little frugal in the months preceding your trip, but we think it’ll be worth it!

The key to affording your dream vacation is budgeting. Start your budget with our free Budget Planner to help you monitor your travel spending. If you’d like additional information or support to create the best budget for your next vacation or trip, contact the Credit Canada team for personalized advice at 1(800)267-2272. Or, chat with Mariposa, our AI-powered debt management agent for advice when it’s most convenient for you. 

Bon voyage (and happy budgeting)!