Summer Spending: A No-Surprises Approach To Planning
With summer vacation season upon us, many are gearing up to spend big. We know that lots of our clients are planning to spend extra on things like childcare now that school is letting out, fun trips and getaways with family and friends, attending local events, and hosting dinner on warm evenings. No matter the plan, it’s easy for these costs to add up quickly - and worst of all, we know it’s easy to unexpectedly exceed your budget. However, with some smart planning, you can have an amazing summer while keeping your spending predictable. This week, we wanted to share some of our favorite tips for a no-surprises approach to summer spending:
Before You Start
The first question to ask yourself is, “do I have an annual budget for these categories?”. We recommend starting here, and ensuring that you have a spending plan for things like vacation, childcare, and a social/fun budget. Work with your financial planner to figure out what the right amounts are for these categories, and then divide the annual amount by 12 to work out your monthly budget. Many people find that they need to calibrate these amounts, either by consciously underspending the budget some months to save for summer, or by re-weighting the monthly budget to allocate more funds at certain times of the year. Whichever approach you choose, make sure that your summertime decisions don’t exceed your annual spending plan!
Planning Ahead
With your annual and/or monthly budget in hand, you can begin to get a handle on what your summer expenses are going to look like at a high level. List out your childcare needs, the trips you want to take, the events you plan to attend, and how much additional fun budget might be needed month to month for the longer days and spontaneous plans. Next, you can move onto budget estimation. How much will these things cost? In your list of potential travel destinations, don’t forget to think about transportation, lodging, food, activities, etc. Tally up a rough total cost for each trip option. This exercise allows you to plan ahead, but also ensure that your ideas fit your summer budget.
We recommend using a spreadsheet like the one below to organize your thoughts. You can create multiple rows per month if needed, and fill out the price in each relevant column to come up with the total cost:
How To Determine Your Budget Limit
This will be different for everyone, but in general, we recommend that most people aim for your total summer travel and fun costs to be no more than 10-15% of your take-home income for those months. Add up your estimated trip expenses and compare the total to your travel budget amount. Remember that you may need to adjust trips, travel styles, or timelines to stay on budget. You may also need to skip travel and fun in other months of the year to afford bigger expenses during the summer - we like thinking flexibly about these figures and coming up with creative ways to stay under budget for the year.
Remember that certain core living expenses tend to balloon in the summer (childcare or enrollment in camps and activities, grocery bills, pool or community center memberships, etc.), and we highly recommend working with your financial planner to account for this in the annual budget. Since these expenses tend to be more predictable than travel and fun, it should be easier to account for them on an annual basis. Additionally, having a set budget can help you choose exactly which form of childcare, which camp or activity to pick; you should know exactly what you can and can’t afford, making the decisions require less mental effort overall.
Tips For Staying Under Budget
Once you’ve done the high-level planning, you can start tweaking your ideas and looking for ways to save. Here are some of our favorite suggestions to do so:
Find Affordable Transportation
Look for deals on rental cars and flights by being flexible on dates/times and booking early. Consider road trips if driving is cheaper than flying. Take advantage of discounted weekly/monthly passes for public transit in cities you're visiting. Summer can be a great time to use your airline miles and companion passes, for those of you who accrue those throughout the year.
Lodging on a Budget
Similar to transportation, being flexible on your dates and timing can save you a lot of money on lodging. Thinking of going somewhere in early or late summer? See if you can book for the weeks just before or after peak season/prices. Rather than hotels, look at vacation home rentals like Air BnBs, which are often cheaper for longer stays, especially for families and larger groups. Although, if you do have hotel points saved up, this can be a great time to use them. For even bigger savings, hostels or renting a room in someone’s house can provide very low-cost shared accommodation, which is sometimes perfect for solo travelers. Traditional tent camping is a timeless classic, but car-camping has recently become a popular and slightly more glamorous way to adventure around, and there are plenty of affordable ways to do this.
Saving on Food
Eating out can be very expensive, especially in popular tourist areas. Booking accommodations with kitchen access can save you a ton by allowing you to cook some meals yourself. These savings get bigger with the size of your family or group. If you are staying at a hotel or house with no kitchen, you can look for places with free breakfast included. We also recommend seeking out more affordable local eateries rather than always dining at tourist traps. Remember that your vacation budget should be separate from your monthly budget for dining out at home, but also that this is an area where tradeoffs can occur (e.g., you might cook meals at home for all of June if you want to eat out more nights on your trip that same month).
Lower Activity Costs
Take advantage of free tours, parks, museums, beaches, hiking trails, and other low/no-cost activities. For pricier attractions, look for discounted passes, city tourist cards, and research free admission hours or days. If you’re the kind of person that needs help figuring out where to go and what to do, we’d also encourage you to reach out to a vacation planner, like our friends at Peridot Travel, who specialize in creating wonderful experiences around the globe. These services can also help you stay within budget if you provide that figure to them.
Additional Tips For International Trips
There are a few things that we always remind our clients about for trips abroad (these are all listed in our previous travel blog, but we’ll briefly mention them here too):
Make sure you are using a credit or debit card with no international fees. You should also warn your bank about your travel to avoid card locks for suspected fraud.
Keep your receipts and in particular, make sure you request VAT refund receipts. This offers a significant discount on your shopping.
Be mindful of low-friction spending opportunities - QR codes, tap-to-pay, crowded areas with overpriced food and souvenirs, are all ways that we can easily find ourselves spending more and mindlessly. Think twice in these situations about whether the purchase is really worth it.
Finally, Don’t Forget To Reflect!
With some strategic budgeting and cost-saving tactics, you can definitely make the most of your summer spending without going overboard. Remember to take some time at the end of each month to reflect on your spending and budget and make sure that things are going as planned. Use these reflection points to make future adjustments as needed, or celebrate under-spending (we often recommend putting the remainder in your high-yield savings and buffering your emergency fund!). Don’t be afraid to change things up if certain plans didn’t go well on your last trip. Could you spend more and make key aspects of your next trip more convenient? On the flipside, can you identify ways to better avoid mindless spending? Asking these types of questions will help you feel more confident over time.
Hopefully this blog has been a useful read to help you eliminate unwanted financial surprises this season. Wishing all of our readers a warm and sunny summer ahead, filled with lots of beautiful memories and fun!
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.