ScoreCard Research Kevin Mack - The Penny Hoarder

If you’ve ever been to Disney World, the Grand Canyon, the National Mall or any other big tourist destination, you’ve probably seen the vacation meltdown. Three or four days into the trip, someone in the family has had enough: there’s pouting, screaming and the dreaded threat of “I refuse to take another step until I get a nap.”

In my observation, this is usually either a preschool-aged kid, or a dad.

Let’s face it, vacations can be stressful. Between bad weather, cranky kids, days of driving and lots of crowds, there’s a lot that can get under your skin.

For many families, paying for the vacation can be the most stressful part. Do you want to go on vacation without having to worry about how you’re going to pay for it? Do you want to sleep easy knowing that the vacation is already paid for? Are you still paying off the credit card from last year’s vacation? Then consider vacation savings plans.

What are Vacation Savings Plans?

When my wife and I took a trip to Alaska for a friend’s wedding, we only had one savings account for all our needs. After getting home and adding up the receipts, I was surprised at how much the trip had cost -- we were enjoying ourselves so much, I didn’t realize how far we had gone over our budget. It wasn’t a nice surprise to come home to!

To prevent this situation on our next trip, I came up with the idea of the vacation savings account. Here’s how it works:

As part of your monthly budget, decide how much you want to save for vacations. Either pick an amount to deduct from each paycheck and save that, or decide how much you’d like to spend annually and divide by your pay interval (monthly, weekly or bi-weekly) to get your target amount.

Create a separate savings account for your vacation fund. There are a bunch of great online banks, but one of my favorites is Chase because they’re offering Penny Hoarder readers a $250 bonus when you open a new checking account.

After putting money away for retirement (you are saving for retirement, aren’t you?) and your other monthly savings, put the dedicated amount in the account and watch your money grow.

Pay yourself first by setting up an automatic transfer from the account your paycheck goes into -- this way, you won’t be tempted to spend this money on something else.

Use Your Vacation Savings Plans to Budget Your Trip

When it’s time for you to plan your next vacation, you’ll know exactly how much you can spend -- the amount that’s in your vacation account.

Budget your vacation just like you do your household budget (you do have a household budget, don’t you?). Use trip planning sites for your destination to help you plan what to budget for hotels, food, airfare and other needs.

Once you have a rough idea of what you can afford, fine tune it. After you book airfare and hotels, replace your estimates with the actual costs (don’t forget tax and baggage fees) and use the estimates from the trip planning sites to set aside money for food.

If you are driving, estimate gas costs for your trip. After you’ve done all this, decide whether you want to set some of the money aside for souvenirs.

My wife and I put $100 each per paycheck into our account, and after 10 months we had $2,000 put away. When we decided to take our son to Disney World for the first time, we already had a budget to work with. After crunching all the numbers, we discovered that we had enough left over to upgrade to a nicer hotel room!

Make the Most of Your Vacation Savings Plans: A Case Study

To make the most out of your vacation savings account, do your research. You should always be looking for the best travel deals and insider tips on how to save money and time on vacation.

The couple of hours I spent online preparing for our recent trip to Disney World paid off bigtime.

We were able to save hours waiting in lines because I learned touring strategies from some local bloggers. Yourfirstvisit.net has some great infographics comparing weather, crowds, seasonal rates and even hurricane activity to help you choose the right time of year to visit.

Josh at easywdw.com breaks down crowd levels at each of the four Walt Disney World theme parks to help you choose which park to go to on each day of your visit. He posts his recommendations about eight months in advance, usually within a few days of Disney officially releasing the park hours.

These time savings helped us see more of the park and enjoy our time there rather than standing in line all day.

Additionally, we saved a lot of money shopping between available deals. Mousesavers.com posts constant updates as the company releases a variety of new promotions: seasonal offers, free dining offers (here’s a great article to help you decide whether a room discount or free dining will save you more money), AAA discounts, AARP discounts, military discounts and more. Booking through a travel agent can also get you a great deal.

I compared the Florida resident discount with the military rate and determined that the military deal would save me more money.

Bringing a Dream Vacation Within Reach

Once I saw how well the vacation savings account strategy worked for our Disney trip, I was ready to take it to the next level. My wife has always wanted to go to New Zealand, which seemed like an unreachable goal until I changed my attitude.

Rather than convincing myself we couldn’t afford it, I sat down and tried to figure out how I could afford it. If we saved $167 a month, at the end of five years we would have $10,000 saved. That’s the vacation of a lifetime and I don’t have to worry about how I’m going to afford it.

Your Turn: Have you used a vacation savings account to help plan a trip?

Kevin Mack is a freelance writer/blogger from Jacksonville, FL. You can check out his blog at www.portofdisembarkation.com

What if I told you that the key to reaching your financial goals and living your dream lifestyle is to use a budget?

I know what you’re thinking: You probably associate budgets with your friend who lost his job and never gets to do anything fun anymore. But budgets aren’t just for when times get tough.

Using a budget in your everyday life can help you attain your goals and minimize your stress. It may not be a flashy tactic or a particularly sexy strategy, but a budget is a tool for lifestyle design.

Here’s a step-by-step guide for putting together a budget that helps you use the money you have toward reading your goals and creating the lifestyle you want.

1. Use Tools to Make Budgeting Easier

I can already hear your first objection, but don’t worry, you don’t have to save all of your receipts and do a bunch of math by hand. It’s nearly 2015; we have apps for that. Some good options are Mint, Moneywiz, HomeBudget with Sync and Learnvest.

Of course, you can still manage your finances by hand or use a spreadsheet on your computer if you prefer, but if you want to make it as easy and as accurate as possible, use technology to do some of the work for you. Most large banks and many small ones will track your spending and can generate reports to show you how much you spend in a given category in a given month. I’ll show you how to make the most of these programs later, but for now let’s focus on the big picture.

2. Create an Income and Expense Report

First, figure out how much money you have coming in. This is easy if you have a full-time, salaried job. If you are paid by commission, work hourly or have some other kind of irregular income (like freelancing), use an average of the last several months to get a rough idea. Remember to include other sources of income like a side hustle and rental income in this total.

Next, start deducting your fixed expenses, like your mortgage or rent, car payment and insurance costs. Some of these expenses will be variable: When I lived in Spokane, WA and the January temperatures were below zero, my electricity bills were much higher in the winter. Now that I live in southern Georgia, my summer bills are higher, thanks to average highs in the 90s. Make sure you take these kinds of considerations into account. While your grocery bill isn’t the same every month, you can probably estimate it within $20 or so. Find a number that works for your family and adjust as necessary.

Once you’ve covered the necessities, you might wonder where the rest of your money is going. Figure out what other expenses you’ve missed, such as debt repayment, dining out, shopping, retirement planning, cable/Internet service, etc. If you’ve used an app, your expenses should already be organized into categories, but otherwise you’ll need to check your credit card statements, your online bank account and your checkbook to make sure you’ve hit all your categories. For a great list of common bills (and strategies to lower them), check out this post on Lifehacker.

3. Figure Out What Your Goals Cost

This is the fun part: Imagine your dream lifestyle. Maybe you want to go out every Friday night, or retire when you’re 50 (or younger). Perhaps you want to pay off your student loans or buy a house.

Whatever you want out of life, write it down and figure out how much it will cost. Tim Ferriss of The 4-Hour Work Week calls this “dreamlining.”

4. Prioritize Your Expenses and Goals

Next, get your priorities in order -- literally. Write them down in order from most to least important to get an idea of where you want your money to go.

You might not get your priorities right the first time, and that’s ok. It’s challenging to choose one option over another, and if the first list doesn’t work well, you can always rework it. I’m not suggesting you derail your goals, only that you make sure you aren’t placing your priorities above those of your family or trying to enforce total austerity. Work to find a balance between “fun” and “responsible” spending.

5. Compare Your Priorities and Goals to Your Spending Habits

Compare your dreamline and your priority list to your expense report. Do they match up well, or are there huge discrepancies?

Hopefully you don’t have any surprises -- “What do you mean I’ve been spending $150 a month on lattes when my number-one goal is to pay off my student loans?” If you see any areas where your spending is out of line with your goals, now’s the time to fix it by outlining a new budget that directs more of your income to your top priorities.

For example, if you want to retire early but aren’t maxing out your Roth IRA or 401(k), consider where that money is going instead. However, if you like buying a new car every few years and plan on working until you are 70, your spending and saving habits should reflect that choice.

My family likes to travel, so I built a vacation savings account into my budget. Maybe you’re a big football fan and you want season tickets. By saving all year long, you can breathe easy when you pay cash for them. If you’d like to pay off a ton of debt, prioritize attacking the debt over other expenditures.

Remember, it isn’t about putting money where a supposed expert tells you to. When your behavior doesn’t reflect your goals and ideals, it creates stress. Psychologists call this cognitive dissonance and it can wreck your happiness. If you live on a budget designed by someone else, you will be unhappy, but if you align your spending and saving to your own goals, then you will live your ideal life (at least financially).

6. Automate Your Budget

Automating the budgeting process helps you focus on your priorities by sending the money where it needs to go before you have the chance to blow it on an impulse. Here’s a system you could try, from personal finance author Ramit Sethi.

To help you keep track of everything, link your bank accounts to a budgeting app like Mint (most of the top budget apps function similarly). Create budget categories with spending limits, and tell the app how to classify different transactions. Mint will show you how much you’ve spent in a given category this month and alert you when you approach or exceed a limit you’ve defined.

Automating your payments isn’t a perfect solution, but it can help take some of the time and effort out of managing your budget.

7. Give Your Budget a Critical Review

Check over your plan for your spending and saving. Does it make sense? Did you cover all your bases?

What if you follow all of these steps and find there isn’t enough money to cover all your priorities and goals? You’ve got two options at this point: Earn more or spend less.

While frugality can help you make the most of the money you already have, the bigger potential is in adding to your income. Check out the many ways to earn more money covered on The Penny Hoarder for inspiration.

Think of your income as a vehicle and your budget as a map. People who earn a lot, like NFL players, all have really fast vehicles -- but since studies have shown that 78% of them file for bankruptcy within five years of retirement, it doesn’t look like they have much of a map.

Your goal is to get to your destination by the shortest possible route, and that’s where your map comes in. If you switch to a faster car (by getting a raise or starting a side business), you’ll be able to take a more scenic route.

Keep an eye on your plan as your goals and life change. Earning a raise, losing a job, getting married, having kids, starting a business -- each of these life changes requires you to review and recalibrate your budget to stay on track to meet your goals and live your life.

Using a budget may not be a new or fancy tactic, but it’s a smart one. Try looking at yours as a tool to help you design the life you want, and see if it helps “being on a budget” feel a little more appealing.

Your Turn: How do you use a budget to help you meet your financial goals?

Kevin Mack is a freelance writer and blogger from Jacksonville, FL.