How do I budget for a holiday properly?

Holiday budgets fail because people cost the bookable parts and treat everything else as incidental. Food, local transport and activities are usually the largest categories after accommodation, and they are the ones nobody writes down.

What you'll need

• A spreadsheet or notes app (optional)
• Rough daily costs for the destination (optional)

Step by step

1. List every category, not just flights and accommodation.Transport to and from the airport, transfers, food, drinks, activities, insurance, data roaming, tips, souvenirs, parking, and pet or house care at home.
2. Research a realistic daily spend for the destination.Food and drink costs vary enormously between countries. A daily figure multiplied by the days is more accurate than guessing a total.
3. Budget for the days either side.Airport parking, an early taxi, meals in transit, a night near the airport. These are consistently forgotten and add up.
4. Include travel insurance and buy it when you book.It covers cancellation from the moment of purchase, which is the point of buying it early rather than at departure.
5. Add a contingency of 10-15%.Something always comes up. A budget with no slack becomes a credit card balance.
6. Set up a separate holiday savings pot and pay into it monthly.Divide the total by the months available. It turns a large one-off cost into a manageable monthly one.
7. Decide on a spending approach before you go.A daily allowance, or a total for the trip. Deciding in advance prevents the last-day realisation that the budget went days ago.
8. Track spending lightly while away.A quick daily note. Not to restrict the holiday, but so the return home is not a shock.

Tips

• Book the flights and accommodation, then set the spending money aside separately. Money left in the current account gets spent before you travel.
• All-inclusive is not automatically cheaper, but it does make the budget predictable, which is worth something in itself.
• Check whether your travel insurance is already provided by a bank account or credit card. Many people pay twice.

Common mistakes

• Budgeting only for flights and accommodation — Food, activities and local transport frequently add half again to the total, and they are the categories nobody writes down.
• Buying travel insurance at the last minute — It covers cancellation from the moment of purchase. Bought at departure, that entire protection has been wasted.
• Leaving the spending money in the current account — It gets absorbed into normal spending before the trip. A separate pot is what protects it.

Questions people ask