If you’re looking for a simpler way to figure out how much you’ll have to spend for vacation annually, a common rule of thumb is 5% to 10% of your net (after taxes and other withholdings) income. For an earner with net income of $40,000 per year, that’s $2,000 to $4,000 to spend on vacation, which can either be one big splurge or multiple more modest trips. Some consumers value travel more than others and may opt to spend more of their income, while perhaps saving on other “want” items at home like fewer restaurant meals or less expensive clothes.
Whichever guideline you choose to set a budget, you should never go into debt to pay for a vacation. Only commit to spending the money that you have in a checking or savings account and if you pay for travel expenses with a credit card, make sure that you’re able to pay the bill in full when it comes due. The stress of accumulating debt, not to mention interest rates that can exceed 20%, will quickly offset the fun and relaxation of going on vacation to begin with and can add hundreds of dollars to the cost.