3 investment strategies that will help you afford (and enjoy) that dream vacation

We often treat vacations as a kind of free time outside of our normal lives. When we’re traveling, we feel free to ignore finances, schedules, and the low cholesterol diet the doctor recommended. After all, travel is supposed to be fun, relaxing, delicious, and enriching.

The best way to make sure your travel goes off without a hitch is to plan ahead, in the same way you plan your investments. Here’s how to treat your travel plans like an investment—and get more out of your time away.

Investment strategy 1: automatic transfers

Very few of us travel as much as we’d like. While logistics, timing, and family care needs all contribute to the lack of stamps in our passports, lack of money is a major barrier to travel. The 2024 State of Travel report by Going found that 25% of respondents cited money as their biggest travel obstacle.

In many cases, frustrated travelers may be facing a similar problem as the 41% of Americans who have access to a 401(k) plan at work but do not contribute: they may be trying to set money aside once all their bills are paid.

This is why it’s smart to set up automatic transfers, even if you don’t have specific plans for travel or retirement. Just as an automatic contribution to your 401(k) with every paycheck will slowly and steadily grow your nest egg, an automated transfer of money into a travel savings account will help you afford the amazing trip you haven’t even considered yet.

Even if you can’t afford to contribute much to either your retirement or travel fund, you can set up a transfer amount you won’t miss, no matter how little it is. An amount as little as $20 per paycheck will add up over time.

Investment strategy 2: leave wiggle room in your timetable

In my 20s, I consistently scheduled the latest possible flight home from a trip, even if I had work or school the next day (or even the same day, on a couple of memorable occasions). This kind of trip planning was an attempt to maximize my time on vacation and was based on the (very wrong) assumption that everything would be on time.

This travel strategy is a little like carving your retirement date in stone. Things work out fine if everything goes according to expectations—but cancelled flights and ill-timed market downturns have a nasty habit of rearing their ugly heads at the worst possible time.

You will always benefit if you plan for a little chaos when it comes to travel and retirement timing. Putting together a vacation itinerary and a transition to retirement that relies on everything working perfectly is a recipe for stress and overspending. Make sure you always leave a little room for the unexpected, and you’re much less likely to get stuck working in retirement, or worse, sleeping on the floor of the Denver airport.

Also, if you’re like me, you often end a vacation feeling as if you need a mini-vacation to recover. I’ve learned that building an extra day or two between the end of the official vacation and return to work sustains those getaway vibes.

Investment strategy 3: calculate your risk tolerance

Some travelers are happy to forgo any kind of trip insurance before flying abroad or heading out on a multistate road trip. They don’t feel the need to add on the rental car insurance, protect themselves from an unanticipated trip cancellation, or have a policy in place in case they get sick while far away from home. These travelers fly close to the sun and just plan to eat any losses that might result.

But travel insurance is the kind of policy that always sounds like an upsell, no matter how beneficial it might be. So how do you know if you really need travel insurance?

Luckily, the investing framework for risk tolerance can help you figure out your travel insurance needs. The following questions can help you figure out your travel risk tolerance, so you can decide whether or not you need insurance for an upcoming trip:

• Do you or a loved one have any health problems?
• Do any of your other insurance policies or credit cards cover travel hazards?
• Are there any hazards that are likely to affect your destination?
• Can you afford the cost of cancelling and rebooking your trip?

Your emotional response to the answers to these questions can help you determine if you’re willing to risk a trip without coverage.

Invest in travel this year

To get the most out of your vacations, remember that travel is an investment, just like retirement. Set up an automatic transfer into a savings account to pay for future travel expenses, just like the automated contributions to your 401(k). Give yourself wiggle room within your travel itinerary and retirement plans, so that you are not reliant on everything going perfectly. And take a page from the world of investing and figure out your travel risk tolerance to help you determine your need for travel insurance.