There's no need to settle for any less than your dream holiday. It might take time and discipline but you only live once, so why not shoot for the moon?
Budgeting For Your Holiday
1. Decide on where you are going and for how many days and nights.
2. Get estimated costs for transport, accommodation and attractions you want to visit. Be aware these will vary at different times of year.
3. Budget for travel insurance, some spending money and a little bit of emergency cash.
4. Using travel apps or websites, look up local prices and budget appropriately for food, drink and souvenirs.
5. Figure out how long it will take you to save what you need and plan your holiday from there.
In order to get the best deals, you may need to book flights and lodgings in advance on credit. Make sure you anticipate the cost of this credit (interest rates, fees, etc.) If it will add to your debt problems, don't book your holiday until you have saved enough money to do so. Otherwise, fit the repayment into your saving plan so you have paid off the debt before you leave.
Use Money Dashboard as your budget calculator. You can compare your monthly expenses against your monthly income and see how much you can afford to put away each month. The difference can be seen as how much you can afford to pay off of your debt each month, or if you are debt-free, how much you can afford to put away for your holiday each month.
Even if you won't be able to afford the holiday for some time, having a plan in place for it will give you something positive to anticipate, and make it easier to save up.
Set up a standing order to transfer the money you are saving from your current account to your savings so that you're not tempted to spend it. This way it will also generate some interest for you while you save.
Look out for ways in which you are over-spending. Are there regular expenses you can forgo while you save? You will have to make sacrifices in order to achieve your goals. It will be worth it when you're enjoying your dream get-away.
Keep Paying Off Debts
If you are already paying off debts, keep it up. You'll have to save up for your vacation on top of continuing with your debt repayment plan.
Ideally, you want to have paid off all your debts before considering luxuries like your dream holiday. Taking on more debt to travel is a bad idea. The thought of having it all still to pay off will get in the way of your enjoyment and having all that debt will make future holidays less likely.
Debts with higher interest rates should be paid off first. If you have a debt that will increase in interest over time, calculate how much it will cost you to pay this earlier and how much it will cost later taking into account other debt repayment interest rates to see how best to prioritise repayments. Always pay off at least the minimum repayment fee on any debt to avoid additional charges.
If you still have debts with a high rate of interest, it is best to pay these off before even starting to save for your holiday. Allowing high interest rate debt to grow is a personal finance disaster. However, if your only debts are low interest, it may be possible to adjust your repayment plan to allow for saving a regular monthly amount towards your holiday. Student loan debt, for example, tends to have low interest rates and repaying more than the monthly minimum may be able to wait.
It will depend on your other debts and your debt repayment plan may need to be adjusted, but you may be able to pay off your whole holiday by increasing the length of time you are repaying your debts or by increasing the monthly repayment amount.
Definitely book the holiday online. Use multiple price comparison websites to find the cheapest flights and places to stay. Travel agents are almost always more expensive, because they have to take into account the salary and commission paid to the agent.
If your dream holiday involves a lot of sight-seeing with a knowledgeable tour guide and making friends with other travellers, you should consider a group tour. Often these holidays are sold as package deals with transport and accommodation booked for you and an itinerary already scheduled. You may have less freedom to go your own way than if you planned the holiday yourself but you'll save money and a lot of planning time by committing to the group experience.
Time Off While Saving
If you need to get away but are still saving up, take time off without spending much money. Overnight camping trips or day-trips to the beach can be a lot of fun and a good use of vacation days without spending much money. So long as someone in your party already has the camping equipment you won't need to pay for much other than transport and food.
Try a staycation: Take time off work to just be at home watching movies in your pyjamas or visiting local museums or the botanic gardens. Or spend a few days staying with some relatives. Remember, cheap holidays in the short term allow you to put more money aside for your dream holiday next year.