The 8% Rule of Vacation Planning

I’ve long made the case that vacations are invaluable because of the many unsurpassable emotional, physical, mental, familial and even spiritual benefits that can be gained from them.

 But this is the real world, and we all face very real limitations. There are limits on how much money we can spend, how much time we can take off from work, how far we’re willing to travel, what kind of activities we are willing or able engage in, and how far we’re prepared to venture outside our comfort zones?

Since this is a big time of year for both financial and vacation planning, it’s worth looking at how you can get the invaluable benefits of a great vacation within whatever real world limitations you face.

First, the question is not whether you can afford to take a vacation this year, but whether you can afford not to take some kind of vacation. You don’t have to be rich to travel for leisure purposes. But you do need to understand that no matter how much money you make, a vacation is not a want, it’s a need. 

A good rule of thumb, especially for middle-income families and those of even more modest means, is that you should spend about 8% of your annual income on leisure travel. Call it the 8% rule.

So, if your family’s income is $150,000, you should plan on spending around $12,000 to refresh you mind, body and spirit. With an average of 3 vacations per year that would be $3,000 to $4,000 per vacation. You may be thinking “I can’t get much of a vacation experience for “just” $4,000.” Boy, are you in for a surprise!

 That’s enough to get you a full trans-Atlantic crossing for two - in a balcony cabin – or a European Cruise aboard one of the classically elegant, yet modern “Queens” of the Cunard line; the 2,700-passenger Queen Mary 2, the 2,100-passenger Queen Elizabeth, or the 2,000- passenger Queen Victoria.

A week-long Rome-to-Venice sailing around the Italian peninsula in August in a very nice Verandah cabin aboard the sophisticated but relaxed Westerdam of the Holland America fleet costs just less than $2,000 per person. That leaves enough money leftover for some serious shopping or fascinating shore excursions along the beautiful Dalmation coast of the Adriatic Sea.  

So, how do you decide what you’ll do for vacation this year? Here are few basic and practical steps for planning a great vacation experience.

1.    List places you’d like to go and/or experiences you would like to have (mountains vs. beach, resort vs. cruise, camping vs. hotels, etc.). It’s okay to include some “dream” places that you know are out of your financial reach today, but be sure to include some that you think you can afford, and even some you know that will cost less than what you can afford.

2.    Set your budget for this year’s vacation. Multiply your income by 0.08 (or some other percentage of your income that you’re comfortable spending on leisure travel). Narrow the field of vacation destinations for this year accordingly. Save your list for future years’ consideration.

3.    Do your research. Visit websites of major travel providers like cruise companies, resorts, airlines and hotel chains. Check out the websites of tourism organizations and major destinations. Call or visit a travel agency focused on leisure travel. Determine what best fits your budget and schedule and what gets you (and others going with you) most excited.

4.    Save your money. Build you vacation into your weekly/monthly/annual budget so the money will be there to take the vacation you need (remember, your vacation is a need, not a merely want).

5.    Enjoy your trip. Because you’ve done a thorough job of vacation planning, you can relax and enjoy all it has to offer without worrying about the cost or the details.

See you onboard.