How much to spend on vacations

These "percentage of income" approaches to budgeting have never made sense to me. If you earn $12,000/year, you might be able to afford to spend only 1% of your income on a vacation. If you earn $120,000/year, you should be able to afford a much higher percentage.

A better approach might be to set aside all your fixed monthly expenses (rent/mortgage, car payments, taxes, etc.), your necessities (food, transportation), and your savings goals, and then see what's left over for things like vacations and other leisure activities.

In actual practice, my approach is to pick a destination or activity for my vacation and just save up for it until I can afford to go.

My approach is to set a fixed percentage of income and given that I have 4 weeks of vacation/year see what I can afford so that the money will cover all 4 weeks.
The percentage approach may cover a wide range of income bases. For example, 4 weeks in Hawaii may cost as little as $4k or as much as $40k or more.

brad said:

A better approach might be to set aside all your fixed monthly expenses (rent/mortgage, car payments, taxes, etc.), your necessities (food, transportation), and your savings goals, and then see what's left over for things like vacations and other leisure activities.

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Actually I'm using the percentage approach for all those as well. That determines what kind of house I can afford or what kind of car I can drive. For food I have a fixed amount but in the budget I put a percentage that will cover that. The savings/investments are a percentage as well (based on that I determined how many years before financial freedom/retirement).

I'm also not sure that percentage numbers are appropriate for vacations. I will say that although my wife and I are extremely frugal, vacations are the one area that we are willing to occasionally splurge on. France is our favorite destination. We would rather forgo eating out all the time and having the latest fashions or the latest model vehicle so we can travel.

osc said:

How much should one spend on vacations each year as percent of after-tax income?
I am planning about 10%/year which is about a third of what I'm planning for investing. That covers only about 4 weeks/year as I unfortunately still have to work in a corporate job.
I'm curious how much of after-tax income you are planning for vacation.

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Interesting -- I use fixed amounts for pretty much all of my budgeting. (Assigning a percentage of after-tax income to, say, entertainment would imply that I want said entertainment to scale proportionally to my earnings, which isn't necessarily the case. I've gone on vacations for under $2k which were just as fun as vacations costing me around $6k.)


K.

Eleven months of the year we keep very good track of our expenses and spending and prepay our mortgage. The month of vacation is just that VACATION.

We do not worry about the expense of vacations because we deserve it.

osc said:

The savings/investments are a percentage as well (based on that I determined how many years before financial freedom/retirement).

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I'm assuming you will adjust those percentages over time, right? Because as your income grows, you can save/invest a higher portion of your income than you do now. 20 years ago I was only able to save about 5% of my after-tax income. Now I'm saving/investing somewhere around 50%, because I earn a lot more. I've met people who save 70% of their income; it's not that hard in theory: you just have to earn a lot and be frugal.

How much should one spend on vacations each year as percent of after-tax income?
I think your question, as stated, is pretty meaningless. It's entirely dependent on lifestyle choices and economic circumstances. How much "should" you spend on cars? clothes? entertainment? Alcohol? It's really a question of how much do you personally want to be able to spend on vacations in order to be satisfied with your quality of life.

OhGreatGuru said:

It's entirely dependent on lifestyle choices and economic circumstances.

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Yes, I was curious about the lifestyle choices of other people.

brad said:

I'm assuming you will adjust those percentages over time, right? Because as your income grows, you can save/invest a higher portion of your income than you do now. 20 years ago I was only able to save about 5% of my after-tax income. Now I'm saving/investing somewhere around 50%, because I earn a lot more. I've met people who save 70% of their income; it's not that hard in theory: you just have to earn a lot and be frugal.

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I was saving 0% only a few years ago. I am not planning to change the percentages except lower the percentage for fixed items (like food, clothes, utilities) and equally increase all the other categories (like mtg, investments, vacation, electronics/pc - yes, I have a category for that, lol). I don't expect any substantial increases in my income in the future.
I ran a few scenarios, and investing 50% instead of 30% would only bring me 3 additional years of financial freedom in the future. I considered a better choice to allocate the lower percentage (30%) to investments and allocate 10% to vacations and 10% to other items that would improve life now. I am curious if other people spend less or more than myself on vacations. If you make your budget with absolute values, maybe the ratio between amount spend on vacations and amount allocated to savings/investments would be interesting for comparison purposes.

I've never thought of vacation spending as a percentage of my income before. But, after doing the math I learned that I allocate a maximum of $2000/year which is 5% of my net income. Although I don't feel poor I know that my income is miniscule compared to most of the members of this forum.

I have never calculated the percentage of net income that I spend on vacations. Mentally, I would have a hard time spending more than $5000 on a vacation. But I see a certain amount of vacation spending as an investment in my health and wellbeing. The situation gets complicated because some years ago I purchased a fraction of a vacation property. In one sense, that's an investment in real estate. And when I look at the difference between what I currently spend on vacations and what I might have spent if I had not purchased that property, I reckon I am saving at least $5000 per year.

We're a frugal sort, by and large.

Like others have mentioned, we shut of the taps for a lot of the "cash-leak" spending that does a lot of people in (no morning coffees and muffins at the drive-in). This frees up more for travel, which is something we do value. This way, our overall annual burn rate is modest, and we've made concious decisions on where we want to spend the money.

osc said:

Yes, I was curious about the lifestyle choices of other people.

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We've been to 3 exotic locales in the last 4 years, for an average of 2 weeks each. Average cost per trip was just under $5000.

But, I think that's the end of the big ones for now. Perhaps only a $1000 annual sojourn to Florida from here on. The times, they are a-changin'.

I would find this hard to quantify, because my husband has an insane amount of air miles and hotel points which we use to travel on. We generally have first-class vacations, yet spend only hundreds of dollars.