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“How much should I budget for vacation?”, is a question I get asked all the time. This post is going to breakdown how to build a travel budget and help you determine how much you will need to budget for your next trip; discussing each category in depth. We’re crunching numbers today. 

Keep reading till the end for answers to many questions as it relates to the typical cost of vacationing and more.

As for making your budget stretch further, in part 5 of this series, I will be sharing how to reduce these costs during your travels so stay tuned for that.

I will share proven tips I use on every trip to keep the costs low and me traveling longer, or at the very least, being able to avoid tourist traps and experience places at a fair price. 


How I plan my travels

Setting a rough-draft budget for my trip is always step 1. I start with a ballpark number before anything has been planned.

I’ve traveled enough to know how much I typically spend on vacation, but that comes with practice. Unless you have a hard number then you should be flexible on where you go. 

If you have some wiggle room and time to save then start with a ballpark number. 

For the sake of demonstration, I will be assuming you are backpacking Europe for one month (30 days) on a $5,000 budget. 

If you’re curious how much the average person spends on vacations per year, then read until the end. After you worked through building your own budget, you can compare and see where you fall.


Psst. . . Looking for more budget travel tips? Check out my Cent$ of Adventure series.

how to create a travel budget

How to Create A Travel Budget

We are now ready to dive into the travel budget categories. I’m showing how to create a travel budget!

If you have no idea how much to budget for vacation then keep reading and be sure to watch the video above.

If by the end you still have any questions, feel free to leave a comment so I can gladly answer them. 

Food & Drink – 24%

Food and drink is allocated 24% of your budget. Now, this may seem crazy high but honestly, it’s not.

When you have to purchase every meal you eat multiple times a day this amount adds up.

Even more so if you’re a foodie traveler or someone who enjoys experiencing the bar scene in new places.

That’s why I put a large amount of money towards this category.

On the flip side, this also the most flexible expense because you can choose where you eat and how much you drink.

If you’re really looking to save you can cook at your hostel or eat at food markets over dine-in restaurants. 

Flights – 20% 

This is for your main long-haul flight, round-trip flight to and from home.

I’m not talking about flights taken during your trip. That falls into a different category which will come later. 

This is also a flexible category if you take advantage of travel hacking.

I will be releasing a post and video on this topic; explaining how I earned free travel. I recently flew business class on Singapore Airlines and only paid the taxes on the ticket. That’s travel hacking for you.

There are a ton of resources online too. I love the Points Guy and Penny Hoarder. Those are the two places I got started.

If you simply cannot wait then my favorite travel rewards credit cards are Citi Premier and Chase Sapphire Reserve. These both give you 1:1 transfer to either Star Alliance or One World airlines.

Another way to save on flights would be to purchase a round-the-world ticket. This would only be beneficial to long-term travelers who are looking to travel for at least 3 months. 

So how does this golden airline ticket work?

You first need to know about two airline alliances – Star Alliance and One World.

These are multiple carriers who formed an alliance and share seats. A round-the-world ticket would be booked with one alliance. Meaning if you book with Singapore Airlines (One World) you can only fly their partners.

There is are a few caveats to this. You would need to read the terms for each airline alliance round-the-world tickets. I’ve linked them below

Should you get free flights using air miles then take this 20% and apply it to a category of your choice (i.e. nicer accommodation, activities) or extend the duration of your trip.

This is a huuuge chunk of change that could go along way. 

Lodging – 15%

Lodging should be 15% of your budget.

There are a few ways to make this cheaper and that is dependent on how many people you’re traveling with and when you are going.

If you’re splitting the cost between multiple people then obviously you will spend less per night. The same can be said for when you book.

For example, New Year’s Eve in New York City is going to have extremely high lodging rates compared to a quiet weekend in the fall.

The only time it’s not beneficial to be traveling with a partner as far as splitting the costs goes are hostels. You pay per bed.

If you’re rocking a 5000 budget for one month in Europe that puts your lodging at $25/day. That could be even less if you stay in hostels, split hotel rooms/Airbnb, Couchsurf.

I have a post on creative tips to get cheaper accommodation. If you are open to crazy possibilities then check it out.


YOU MIGHT ALSO LIKE: 5 Creative Ways to Get Cheap Accommodation



how much to save for a trip

Transportation – 14%

This is where you include your rail passes, flights between countries and local transportation.

Transportation expenses can be cut down easily be spending more time in fewer places.

If you are bouncing around every couple of days you will quickly overspend in this category.

If that’s the case I would lower the food & beverage budget and try to get cheaper/free flights to put towards this fund.

You can also walk, rent a bike or split cab fares with someone.

Another option would be to book more days to save (I.e. local public transportation).

Most metro passes have deals that lower the cost with the more days you buy. Similar to Disneyland tickets. The more days the cheaper the daily cost is.

If you plan to park it for a while in any city you will want to do this as opposed to purchasing single-ride fares.

Research the costs beforehand by visiting the transit website for the city you will be visiting. Many of them share their rates. You don’t have to pre-pay for this, just budget for it. 

Activities & Tours – 12%

The worst is putting all your money towards getting to the destination, and when you get there, you are what I call hotel poor meaning you’re too broke to leave your hotel and experience all the city has to offer. 

Generally, what I do is mix my travel itinerary with a combination of free attractions, mid-range (I.e. museums) attraction and one or two big tours depending on the duration of my trip.

Every place is different.

In Tokyo, we spent a lof on admission tickets compared to somewhere like Paris that has a ton of monuments free to see.

Shopping & Souvenirs – 5%

I don’t do a lot of shopping in countries, nor do I buy expensive souvenirs.

The extent of my shopping involves buying a magnet for my mom and small trinkets for my sister. That’s about the extent of my souvenirs.

The only time I regretted not buying a souvenir was on our recent trip to Kobe, Japan when we visited the sake distilleries. * Sad face * That sake was so good, yet we wouldn’t have been able to fit it in our luggage so only the memories remain.

I usually travel with limited room in my luggage. As a result, I don’t allocate a high amount to this category.

Pictures are my souvenirs. 

Pre-trip – 5%

Last week I discussed what pre-travel expenses are; many of which are unexpected and how to prepare yourself for them. 

I highly recommend you watch the video above (pt. 1 of the series).

Oh, and subscribe if you’re not already.

I would love your support in growing the Youtube Channel to 1,000 subscribers!!

Any-who, when you’re determining how much to budget for vacation you need to be mindful of pre-travel expenses.

Many underestimate these costs, especially when it comes to specialty gear (I.e. winter essentials for Iceland) and health.

However, you won’t have this problem because you will be well informed on what the unexpected costs and you’re going to budget for them, 5% 🙂

Miscellaneous – 5%

You can call this your contingency/emergency fund for when you really need it. Not the unexpected pre-travel but the unexpected things that happen during your trip like needing to withdrawal more cash than you thought and have to pay ATM fees.

If you’re at the end of your trip and still haven’t dipped into this fund then I say go wild or put it towards future trips. The possibilities are endless!


Bucket List Budget

Snag your FREE Bucket List Budget and Travel Planner. This planner includes: travel budget breakdown, savings tracker, checklists, and itinerary templates. 

how much should I save for vacation

How Much Should I Budget for Vacation?

It’s difficult to give an exact amount because we all have different levels of income. Without getting too off-topic…

When it comes to budgeting a general rule of personal finance is that 50% of your net income is for fixed expenses (i.e. home, auto, cell, groceries), 30% is discretionary income aka fun money, and 20% is for saving and paying off debt. This is your amount after health and retirement have been deducted assuming you work for a company that offers these benefits.

If you don’t have debt then 20% of your income can go towards traveling or at least part of it can. You can also cut down on your fun money from 30% and throw more towards your travel fund.

So when you’re asking yourself, “how much should I budget for vacation?”, let this be a starting point. You can tweak it to your unique situation.

For example, say you make $60,000 a year in the USA. After taxes, health insurance, and retirement your net take-home income is $39,000. You have no debt so that means you can allocate $7,800 (20%) a year towards spending on vacation(s).

How Much Does the Average Person Spend on Vacation?

This is a guesstimate for me given on how much I spend per year on travel.

You can say I am what you call a frequent traveler meaning I travel every couple of months. My travel spending ranges on average $6000-10,000 per year.

Last year it was closer to the $6,000 range and a huge reason for that was because I went on a few press trips and/or got some gifted experiences. However, most of my travels are self-funded.

I would love to visit and share more places with you as Seeking Neverland grows but until then, I’m crunching the numbers just like you.

So how much does the average person spend?

Given what I told you, I would divide that by 3 and guess the average person spends around $2,000 a year on vacations.

Now that you know how the budget breaks down and have a general idea of how much to budget for vacation, next is to determine when you can go. How much time do you need to save?

In my next post, I’ll be sharing simple ways you can quickly grow your travel fund. I will be sharing some side hustle ideas and tactics I’ve used to help me save. These are the same things I did to save over $14,000 in 8 months for a one year move to Prague, so I think I have some valuable information you will appreciate.


Psst. . . Looking for more budget travel tips? Check out my Cent$ of Adventure series.

What are some ways you saved money on lodging? Share your tips in the comments below!

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how to budget for vacation