How Much to Spend on Holidays Per Year

Budgeting for Annual Holidays

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Introduction:

Holidays, like weddings, can be a bit of a sensitive topic. On the one hand, what holidays a person should take is completely subjective. We all have our own preferences, different work and family responsibilities to adhere to, and different budgets. 

On the other hand, many suggest simple rules of thumb to dictate how much one should budget for holidays each year. After all, it’s important to make sure that you’re taking enough rest and spending enough time with your family, whether that’s actually by taking a trip abroad or simply spending a weekend with family or driving an hour or two down the road. 

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Factors Influencing Holiday Budget: What to Consider

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There is plenty to unpack here! A few things to consider - 

1. Type of trip: are you thinking of a city break? Beach trip? Or backpacking? The former probably means dinners out and museums, whereas the latter can be done with hostels and ramen.
2. Who are you traveling with? Partner, children, family? How many people do you need to budget for?
3. Long haul or short haul? And of course, economy, business or first
4. Length of trip - well, obviously
5. Add ons - is there a museum you particularly want to see? Or an experience? Are you bringing extra luggage?

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Average Holiday Spending: How Much Do People Spend Annually?

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The average planned spend in Britain on holidays abroad in 2024 is £1,690, down 20% from a planned spend of £2,115 in 2023. While that speaks for the wider macroeconomic circumstances we find ourselves in, it also says that we like to spend money on going abroad! Particularly when you consider the proliferation of low-cost flights in recent years.

The most common country that they visit is Spain, with a total spend of £12.6bn in 2023.  

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Setting Your Holiday Budget: Tips and Strategies

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The country that costs the most to spend time in is Switzerland, with the highest average daily spend for Brits abroad, at £155, in 2023. Your requirements will vary depending on what type of trip you’re taking, but you should of course aim to budget meals every day - half or full board accommodation is a good way of cutting this down if you so wish.

Airbnbs, while often cheaper than hotels, provide no food and will thus require you to either eat out every meal, or to do a full food shop like you would at home, which for some, reduced the appeal. 

What we find is that they tend to make sense for larger groups where you would have to book multiple rooms - this falls massively when booking a larger property on Airbnb and splitting it between you all.

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Luxury vs. Budget Holidays: Finding the Right Balance

Everyone has a completely different opinion on whether they want to, or even can afford to take more luxury holidays. In fact, we even have different opinions on what luxury actually is. In general, as with most things, there are diminishing marginal benefits to expensive travel. 

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What do we mean by this? 

Well, for not much more money, you can dramatically improve quality at the low end. A £300 hotel will be far nicer than a £150 hotel. However, as you move further up the scale, the added benefit becomes smaller and smaller. Is a £2500 hotel room much better than a £1500 one? 

It’s therefore important to work out what you value in a trip, and how much to allocate towards the little luxuries as compared to the things you are prepared to compromise on.

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Saving for Your Holiday: Practical Tips and Tricks

One tactic that works particularly well is to set up a savings pot well in advance. Many neo-banks like Monzo provide good facilities for this. You can contribute to them monthly well in advance, or even create a joint pot with friends to hold each other accountable.

The advantages of this are that it provides accountability, means that you’re only contributing a set amount of your income towards the trip, and not taking out debt or really spending beyond your means. You can also really get a feel for what sort of sacrifices you’re making on a personal level and understand the tradeoffs of spending money on the holiday rather than elsewhere.

The disadvantage is that you will have to think pretty far in advance! You may have to start planning your holiday budget over a year in advance to be able to have a good saving runway for it.

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Family Holidays: Budgeting for a Group Trip

Of course, family holidays are a little more complicated (and expensive!). You might be splitting the cost with your spouse if you don’t share your finances, or taking it out of a couples account if you do. Remember, you can also use Strabo to manage your finances as a couple.

As we mentioned above, it might be more cost-effective to rent out one larger property than several hotel rooms - cooking for yourself also allows you to lower the cost of dinner every night. Some cities or sights do family passes, so think about that too.

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Solo Travel: How to Plan and Budget for One

Budgeting for one is much easier! However, it can also be more expensive as you don’t get to take advantage of sharing a room or food, and lowering the cost per person. You can, however, set the parameters for the trip to exactly how you want them, and stay in exactly the level of luxury (or lack thereof) that you desire.

This could either make the trip cheaper or more expensive, depending on your preferences, but it allows you to be more flexible and make ad-hoc decisions rather than planning out the minutiae.

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Unexpected Expenses: How to Prepare Financially

As with any financial plan, you want to leave enough headroom to be able to deal with any unexpected costs that arise. What if you miss your flight? Or something goes wrong with your airbnb or hotel? Or your suitcase goes missing? Can you deal with these?

Of course, it goes without saying that you should take out travel insurance to mitigate the effects of any of these, but the knock-on effects can still be damaging to a sensitive budget if you’re not careful. We personally like to add another 10-20% on top of every budget we make for unexpected circumstances, but your mileage may vary.

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Using Credit and Reward Points to Fund Your Holidays

One great way of getting more enjoyment and better experiences from your holidays is to use credit and reward points. American Express is the most well known way of doing this, with a specific British Airways credit card and other bonuses, but there are plenty. 

This way, you can use your spending throughout the year to build up points, and use these on flight upgrades, hotel discounts or other perks. 

Often, booking your flights or travel arrangements directly through the credit card provider can yield extra benefits.

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Tools and Apps to Help You Budget for Holidays

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1. Strabo. Of course, the most important tool you can use to manage your finances, holidays aside, is Strabo. Check how liquid your portfolio is, manage your income vs your outgoings and see what impact a one-off expenditure can have on your investment portfolio. You can even forecast its effect on our Life Event forecast.
2. TUI. The travel agent has put together a handy budget calculator to work out how much you might need to spend on your holiday. 
3. TravelBudget. Specifically designed for travel budgeting, this tool helps you plan and track expenses for your trips. It includes customizable budget categories, currency conversion, and expense tracking.
4. Trail Wallet. An app created by travelers for travelers, focusing on simplicity and ease of use in managing travel expenses. It includes daily budget tracking, currency conversion, and expense categorization.
5. Expensify. Originally developed for business expense management, Expensify can also be used to track personal travel expenses. It includes receipt scanning, automatic expense categorization, and expense reports.

Conclusion: How to Stick to Your Budget

By far and away the most important thing to do is to decide what your plan is at the outset, and stick to it. If you decide that you want to stick to the 10% of take home pay as holiday rule, choose that from the outset, put aside your contributions for a year and then take the trip! Holidays hold different importance for different people.

We’re sure it’s not too difficult to persuade you to go away, but in a personal finance world where people are always being pushed towards more saving and investing than having fun, it’s important to remember why we’re saving. If you can’t use your money to spend time with friends and family, what’s the point in having it!

So save hard, be sensible with your savings but remember to have some fun along the way too. And if you can put some of your flight costs onto credit card points, even better.

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