There are two questions everyone asks when they start to plan a summer vacation. The first question is, “Where are we going to go?” This is followed immediately by the second question, “How are we going to pay for it?”
If you’ve found yourself asking these questions, the good news is that you have several options when it comes to financing your summer vacation. However, some of these options are better than others.
Set a Financial Goal
Your first and best option to finance your summer vacation is to save up for it in advance. This option has a lot of advantages over other ways of paying for your vacation. You won’t have to pay interest on a loan, for instance, and you also won’t have to face the drudgery of making payments months after your vacation is over.
The best way to save up for your vacation is to make it a SMART financial goal. In other words, your goal should be:
- Specific–how much will your vacation plans cost?
- Measurable–how will you track your progress toward achieving those goals?
- Attainable–do you know how you’ll get the money to fund your vacation plans?
- Realistic–is it possible for you to achieve this goal?
- Time-Bound–when would you like to have money saved for your vacation?
For instance, if you’d like to spend a week going kayaking in northern Minnesota, you’ll want to create a vacation budget that shows you how much money you’ll need to travel up north, as well as the money you’ll need to invest in camping supplies and food. You don’t need to come up with an exact number, but you should at least come up with a good estimate. You should also set a date for your trip so you know when you’ll need to achieve your goal.
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Get a Personal Line of Credit
As previously mentioned, borrowing money for a vacation has some disadvantages over saving money for your trip in advance. However, there are times when you might need to borrow money in order to make your vacation possible. Maybe you had to dip into your vacation fund to take care of an emergency, or maybe inflation meant you had to divert some of your vacation money to essentials, like food or gasoline.
If you’re looking to borrow money to fund your vacation, your best bet is to get a personal line of credit. This will give you access to a pool of that you can use as much or as little of as you need, and you’ll only have to pay interest on the money you borrow. A lot of money-savvy vacationers take out a personal line of credit before they leave on vacation, not just to cover costs their savings won’t allow, but also as a way to deal with any unexpected expenses arising from an emergency or a spontaneous change of plans.
Use a Rewards Credit Card
Using a credit card to finance your summer vacation does have some advantages, like being able to track what you spent money on during vacation giving you more security than if you were paying in cash. On the other hand, it does come with higher interest rates than personal loans or personal lines of credit, so if you want to use your credit card to pay for your summer vacation you should consider how much money you want to put on it and how you'll pay off the balance.
You may also want to consider getting a rewards credit card and earning points for all the purchase you make. This will help you earn back some of the money you spent. It’s worth pointing out that you can even use a rewards credit card if you have money set aside for your trip—just use the money you have saved to pay off each purchase and you’ll get the rewards points without having to pay interest on your outstanding balance.
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Get a Personal Loan
Personal loans have some advantages over credit cards. They have a lower interest rate, for one thing, and because you get all the money up front, you're much less likely to overspend. Having said that, you do have to have a plan in place to repay your loan, similar to the way you would a personal line of credit or a credit card. You'll also have to know beforehand just how much you need to borrow for your vacation and have a plan in place if you happen to need more money.
Finance Your Summer Vacation With First Alliance Credit Union
Summer vacations require a lot of money, but fortunately there are a few ways to finance them. The best way is to save for your vacation in advance, but if you need to borrow money you might want to look into taking out a personal line of credit, using a rewards credit card or taking out a loan if absolutely necessary.
If you’re looking to fund your summer vacation, become a First Alliance Credit Union member today. In addition to saving money in our traditional savings accounts or club accounts, you can also get a uChoose rewards credit card, open a personal line of credit or get a personal loan.