How To Fund Your Next Holiday

Funding a holiday can be difficult. We at MoneyBuddy have come up with some options to consider when organising those finances for your next trip overseas.


  1. Self funded savings
  2. A holiday loan
  3. Credit card

Self Funded Savings

Working out your holiday costs in advance will make saving for your holiday much easier and attainable. Important costs to calculate in advance include:

  • Airfare
  • Visa and passport fees
  • Travel insurance
  • Holiday transport
  • Accommodation
  • Food costs
  • Overseas phone call charges
  • Entertainment costs
  • Extra emergency money

Get your budget sorted and stick to it!

The best way to save for a holiday, without getting swamped in debts is to have a highly regulated budget, and stick to it! Know how much you spend in a week, what your weekly income is, and what is left over after you have paid your bills or rent. Then you can work out what your weekly savings will be.

Try getting public transport to work instead of driving; this can save you that hefty weekly petrol bill. Also attempt to cut back your weekly grocery list to include only the bare necessities; this will save you a surprising amount over the course of a month.

You can also forgoe aspects of your social life to increase the amount you can save for your holiday. Social activities can be really expensive. Why spend $200 a fortnight on a big night out when you could top up your holiday funds, and stay overseas longer, or afford a better hotel.

Other ways to cut back on spending and increase savings is to reduce your takeaway lunches, shopping sprees and entertainment costs. Having a movie night at your house with a home-cooked meal as opposed to seeing a movie at the cinema and eating at a restaurant is a great way to cut back on spending and increase your holiday savings.

When saving, consider an account that gains interest, like a term deposit account or savings account. Resist the temptation to access this money once you have deposited it into the interest earning account. Accessing the money will result in the loss of interest earned for that month. The difference can be in the thousands over a period of a year or more. By the time you leave for your holiday you could have gained a substantial amount just in interest. This money could be invaluable if you underestimated something in your budget or just decide to go shopping or indulge at an expensive restaurant when overseas.

Get into the habit of putting a minimum amount into your savings each payday. Set an automatic transfer that occurs each pay period for convenience and increase the amount depending on your paycheck or disposable income for that week. But keep above the minimum amount you set for yourself!

Pros

  • No credit card debts to pay off once you arrive home from holidays
  • Self-satisfaction and peace of mind, knowing the whole holiday has been paid for
  • Most of these tips can be used for savings in general, not just for holidays. Get in the routine!
  • No hidden costs, remember you don’t pay interest when spending your own money

Cons

  • It can take some time to gather the savings needed for a decent holiday
  • Your money isn’t insured against theft or loss automatically

Holiday Loan

Another way to fund that overseas trip is a holiday loan. This is basically just a personal loan that is spent on a holiday. If you need a holiday loan to fund your trip away make sure you are able and willing to pay off the loan for an extended period of time before committing. Holiday loans usually take at least 1 year to repay. You need to ask yourself, is it worth it?

When applying for a holiday loan you will have the option of a fixed or variable interest rate.  A fixed rate will not change during the term of the loan.You will know exactly what your repayments are each period. A variable rate will change depending on factors including, market conditions, commercial decisons made by banks and The Reserve Bank’s cash rate. The variable interest rate could change dramatically during the course of the loan.

Pros

  • You do not need to put your holiday plans on hold because of a lack of funds
  • You can choose a fixed or variable interest rate depending on your repayment preferences

Cons

  • You will be paying back your holiday for a year or more after you return.
  • The interest you pay will be high
  • Many personal loans do not allow for early repayments, meaning you have to pay the loan back over the full life of the  loan, incurring the interest over this period also
  • The total amount you pay back will be significantly higher than the cost of the holiday
  • Failure to meet repayments will have a negative impact on your credit rating and could be harmful in the future

Credit Cards

Credit cards can be a great way to fund a holiday. Using a credit card will require much less hassle and time than applying for a holiday loan.  The option of a credit card is perfect for people who can consistently pay their credit card balance back on time, without incurring interest.

Another benefit of using a credit card is that travelers may be able to access rewards programs offered by banks, while on holiday. This can include cheap flights, accomodation and food. To utilise this option without getting hit with high interest costs, be aware of when your balance is due and what your interest rate is once the balance is outstanding.

Pros

  • Easier application process than applying for a loan
  • Access to rewards programs
  • If you pay the holiday back in time, you will not incur any interest

Cons

  • If the interest free period expires, the cost of your holiday will increase greatly!
  • You could be paying back your holiday for a long time
  • Your credit rating could be impacted, if repayments are not made on time

These three options are tailored to suit different people. Factors such as personality, income, attitude towards money and timing around travel plans will shape which option is best for you!

Compare credit options and find more information on holiday loans or credit cards.

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