Calculating The True Cost Of Your Vacations

by Mike Holman

Everyone loves a nice vacation – whether it involves driving a short distance to visit family for a couple of days or flying to the other side of the globe to go snowboarding.  The big problem with vacations however is the cost – most of us have budgets that are limited in some way and we want to get the best value for our vacation dollar.   Nobody wants to go into debt for a vacation.

Is it better to do a 3 week trip to Europe once every 2 years or go on 1 or 2 more modest vacations per year?

One trick which I have done in the past when trying to determine the costs of a trip is to figure out the “net” cost of the vacation.  Everyone knows that when you go on a trip that there will be quite a few costs such as airfare, gasoline, rentals (cars, accomodation), food, tourist attractions etc.  What some people don’t realize is that when they leave their normal life for a while that they are also saving some money which should be subtracted from the cost of your vacation.

Go on vacation and save money?  I don’t think so!

It’s true – and I’ll give you an example.  If your family normally spends $200 per week on groceries and household items then if you go on vacation for 1 week you will save $200 on groceries and household items.  When you calculate how much a trip is going to cost (or has already cost) you should factor in these “savings” to get the net amount of the trip.

For example if a family goes on a vacation and spends $2000, most people would to say the trip cost $2,000.  But if they factor in money that they didn’t spend when at home (let’s say $400) then the trip only cost a net amount of $1,600 which is significantly less.

Obviously you would need to have a very frugal trip to have an overall net saving by going on vacation but if the trip is reasonably modest then netting out your “normal” expenses could make the trip quite cheap.

Why do this?

One reason is that you like to know exactly how much things cost – I have always calculated the net costs for big trips and it makes me feel better to know that a trip was a bit cheaper than the gross costs.

Another good reason is that if you are trying to make decisions about future vacations, it’s good to have the proper cost information to make an informed decision.

Lastly – it might allow you do longer or more expensive vacations.  If you budget $2,500 for a trip and don’t subtract the $500 you would normally spend during that time then you will actually end up spending $2,000.  This isn’t a bad thing but it’s better to make that choice ahead of time.

How to do it?

Add up your expenses that result from you being at home.  Food, some utilities, gasoline, commuting expenses are good examples.
Don’t include any fixed costs – things like car insurance are going to happen even if you don’t use your car.  You don’t have to be exact with your figures – estimates are fine.

Some factors to think about

The two biggest factors which will influence the effectiveness of this “accounting” are:
1)  Daily cost of trip – The more expensive the trip then the less the “netting” will have an effect.  If you are spending $5,000/week in Hawaii then the fact that you are saving $350éweek by not being at home isn’t going to be all that significant.
2)  Daily costs of “nettable” home expenses – If your regular daily expenses are very low then removing them from the vacation cost won’t be as significant as it will for someone who eats out a lot and burns a lot of cash on a regular basis.

In the example noted in the first paragraph it’s likely that the cost of a 3 week trip to Europe won’t be reduced by a whole lot by netting the home expenses so it will still be an expensive trip.  However, if the alternative trips are cheap enough (the 2 weeks per year trips) then it’s possible that the cheaper trips might be very cheap in comparison to the Europe trip after netting.

This is significant because it the decision between doing shorter more expensive trips or longer cheaper trips (or more cheaper trips) might point more towards doing the cheaper trips since you will get a lot more bang for your buck especially after netting the costs.  Most people who are working don’t have a lot of vacation so for them – netting out the expenses will just let them budget more accurately for their trips.  People who have more time for vacations ie teachers, retirees can use this method to decide between the higher budget short trip or lower budget longer trip.

Summary

When going on vacation, subtract any expenses which you would normally incur while living at home but that won’t occur if  you are away.  This could alter your thinking on the type and length of trips you take.

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