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Whatever the weather forecast says, summer is winding down, as is peak summer travel. When you return from vacation, you hope to bring a few things back to your real life: some souvenirs, a healthy tan, maybe even a more relaxed version of yourself. What you don’t want to bring back: post-vacation debt.
I believe that going into a little debt is worth a lifelong memory. That being said, a little too much “carpe diem” spending can put a major dent in your finances if you’re not careful with getting your budget back on track. If you’ve just returned from a luxurious (ready: pricey) trip, here are some tips to help you recover financially.
Review your spending
Your first step is to face the man in the mirror—or, you know, review what you spent money on during your vacation. Go through your credit card and bank statements to get a detailed breakdown. This will help you understand where your money went so you can make better decisions moving forward. Look out for extravagant activities, fancy dinners, souvenir shopping, and premium lodging that added up quickly. Here’s our guide to conducting a spending audit.
Make budget cuts
Now it’s time to look at your monthly budget and identify areas where you can cut back on spending. For example, you can eat out less, limit entertainment costs, reduce miscellaneous expenses, and pause non-essential subscriptions. Avoid drastic cuts to necessities like food and housing. The goal is to trim discretionary spending to pay off your vacation debts faster. Even small reductions of $5-10 per category will make a difference, or at least give you a feeling of control post-vacation.
The cash-stuffing method, “or envelope system,” helps turn your budgeting into a more visceral, even “gamified” experience. You have different physical envelopes for different expenses, and you stuff each envelope with a budgeted amount of cash for that month (or pay period). The key here is you can only spend money in a certain category from its designated envelope. Once the envelope is empty, that’s that for the month.
Cash-stuffing works because it forces you to be more intentional (deciding how much money gets allocated into your envelopes) and more disciplined (you can’t put more money into the envelope once it runs out).
Pay off debts aggressively
Use the extra money freed up from your budget cuts to pay down any debts accrued from your vacation as fast as possible. Pay more than the minimum payment on credit cards. If the interest rate is high, consider transferring the balance to a lower-interest card. For large debts, you may need to come up with a debt-repayment plan. Time is of the essence here; the quicker you can pay it off, the less interest you’ll pay over time.
Refocus on your savings
As the vacation debts shrink, redirect those funds toward rebuilding your emergency savings account. Having this financial cushion is essential to prevent going into debt again for unexpected costs. Aim to eventually save three to six months’ worth of living expenses. Only after topping off your savings should you redirect money toward other financial goals.
Be patient for now, and be proactive for next time
Getting back on track financially after an indulgent vacation takes time, especially if you racked up a little more debt than you realized. The worst thing you can do is simply give up and allow your vacation money habits to carry over into your real life. Instead, be kind to yourself about your less-than-ideal spending. Stick to your budget cuts and debt repayment plan, and your finances will recover.
The next time you plan a dream vacation, build your budget more responsibly from the start. Set a reasonable spending limit before you go and track your expenses along the way. Consider saving up for the trip in advance so you avoid post-trip debts; for more, here’s our guide to taking an affordable vacation.