Rule for vacation spending

I’m new to YNAB and although I’ve had to fresh start a few times, it seems to work very well with the way we budget and save. This isn’t exactly app related. However I’m curious if others have a certain formula they use to determine how much is the max to spend on vacation?

I’ve been listening to Dave Ramsey for years (but not following every single thing). We have no debt other than a mortgage, fully fund retirement, and save for kid’s college. We do have one credit card paid in full several times monthly. Vacations are always funded through prepayment and cash envelopes but over the last several years, we seem to be spending more each year. 

Any thoughts?

Amanda

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  • For me, Vacation is just another priority to insert in the hierarchy of demands on my money. My budget, my priorities -- not some book/expert who has completely different values and says no more than X%.

    Given the gradual increase, it would appear that you may be realizing that vacationing is more important to you than in the past. (Possibly additional income is also facilitating that?) If you look at things that are NOT being funded (or whose timelines are being pushed back), are they more important than the enjoyment you get from vacationing? If so, then that's a problem. If not, then you're doing everything RIGHT by aligning your spending to YOUR priorities.

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    • Annieland
    • YNABbing every day since 2009!
    • Annieland
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    1000% what dakinemaui said.  YNAB is about assigning priorities, while still budgeting and spending within what you can afford.  

    But I know what you're saying, and my vacation category has been an issue for me in the past too.  There was one year I just cancelled my annual vacation because I decided to make getting a month ahead a priority and I had fallen behind.  Since I've been using YNAB a long time, I have a lot of historical data.  What I started doing last year, was budgeting the average amount spent each month.  I'm not quite sure how long it will be sustainable, but I'm trying to stick to it until I can't anymore.  For me, it's keeping things realistic on what I actually spend and not just what I hope to spend.  I still aggressively try to save as much money as possible on any travel, but this way I'm looking  my actual spending in the face each month.

    If you have your historical spending trend information in other places you could try to calculate your average expenditures, and how much they've increased year over year, and make a decision on if you want to slightly raise or lower your target spending for this year.  Then set target date spending goal and fund it each month, or a specific amount to save each month.

    However you do it, it's about YOU and YOUR family and what YOU value.  Don't let anyone else dictate what that should be.

    Like 2
  • I also agree with dakinemaui here. It's all about priorities, and I'd be hesitant to listen to someone on the internet who says: "I have a hard and fast rule that you should not be spending more than X% of your income on vacations!"

    Out of curiosity, about what percentage of your annual take-home income do you typically spend on vacations? And, do you think this is high and want to reduce it, or are you wondering if you can or should spend even more?

    If your only debt is your mortgage and you are fully funding your retirement and child's college expenses, it sounds like you are doing a lot right already.

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  • Thanks to all that have replied.  Last year we spent 9% of our take home income on vacation. I don’t feel like anything else has suffered because of vacation.  I just wanted to make sure I’m being smart with our money and not over doing it. Vacation is important to me because I think we make a ton of memories during this time and as an oncology nurse I know this time together is more important than a bigger house or nicer cars.  
     

    Amanda 

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  • Also someone asked if I am wishing to spend more on vacation. This varies depending on where we go but the budget is usually $7000-9000. I don’t expect to go above that.

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  • Getting control said:
    I just wanted to make sure I’m being smart with our money and not over doing it.

    Coming back full circle, "being smart" mean achieving your goals, both short and long-term. If you feel like you're making acceptable progress toward everything, then keep on doing what you're doing. It's a good "problem" to have: extra money can be used to accelerate or increase scope of one or more existing goals or even add something new.

    Since retirement can be funded in various ways (401k, IRA, Roth IRA, HSA, maybe more?), you might verify your statement of "fully fund retirement" is accurate. If you still have left over money, evaluate the impact of retiring earlier.

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    • dakinemaui 

      I’m saying fully funded retirement based on Dave Ramseys version of 15%. My husband contributes 15% from his paycheck into the company 401k.  I have 6% from my pay go to 401k and I put 9% into a Roth.  Should we do something different?  I am open to all suggestions. 

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      • jenmas
      • jenmas
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      Getting control you can each contribute $19,500 to your 401(k) and $6k to IRA (Roth vs. trad is dependent on income levels). Plus over age of 50 you can also do catch up contributions. That’s fully funding retirement as far as I’m concerned. 

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    • jenmas 

      That’s good to know. This is the perfect time of the year to review our totals for the previous year.  We can increase those contributions.  I misunderstood how much I could contribute between the two. 

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      • jenmas
      • jenmas
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      Getting control - You need to consider what your costs will be in retirement. Medical costs will likely be exponentially higher. Commuting costs will be less. Hopefully you'll be done supporting the kids. Ideally the mortgage will be paid off so you just have running costs like utilities, insurance, maintenance, and property taxes. One metric that is often used is annual expenses x 25 is the amount that you need to retire because this will allow you to withdraw at a rate of 4% so the funds should last as long as you do.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
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      jenmas ... assuming a 30 year retirement based on the worst case return on investments during any 30 year period that had been measurable.

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  • dakinemaui said:
    Since retirement can be funded in various ways (401k, IRA, Roth IRA, HSA, maybe more?), you might verify your statement of "fully fund retirement" is accurate. If you still have left over money, evaluate the impact of retiring earlier.

     I agree. If the vacations are your priority, then I say go for it. But in addition to maxing out 401(k)s, IRAs, HSAs, are you doing any taxable investing?

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    • jenmas 

      We are not doing any taxable investing. Maybe that should be the next priority or should we focus on the house? Current balance is $76000.  Our May 2020 vacation is about 75% funded already so there will be available funds to get working on investing.  Our income increased by $45000 several years ago but our expenses (house, cars, monthly bills)  haven’t changed much except for vacations. I guess that’s what made me start thinking about this category.  I appreciate your input. 

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      • jenmas
      • jenmas
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      Getting control I personally wouldn’t prioritize paying off a mortgage early over taxable investing, but that’s me. 

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    • jenmas 

      My husband feels the same way because we could make more off investments versus the interest on the house. 

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  • Getting control said:
    I’m saying fully funded retirement based on Dave Ramseys version of 15%.

    You should probably get a little more precise about your retirement goals. When (at what age) would you like to retire? What kind of lifestyle do you want to have in retirement?

    Once you clarify your retirement goals, you work backwards to figure out whether that 15% savings rate is going to achieve those goals. If it's too low, then perhaps you really are spending too much on vacations (or other things). Or maybe those retirement goals are too ambitious, and would require sacrifices that you're unwilling to make. That's fine too. Your life, your priorities.


     

    Like 1
    • bret 

      Great suggestion. It’s hard to know if I’m on track if I don’t look at where I’m trying to go.  I’m learning a lot on these boards already.  

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  • jenmas said:
    I personally wouldn’t prioritize paying off a mortgage early over taxable investing, but that’s me. 

     Agreed, but it also depends on the interest rate. At 76k, a refinance may not be possible even if rates are lower than your current rate.

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