How to Budget for Holiday Travel

By Paula Pant, WiserAdvisor.com

Many people start thinking about their holiday plans -- and their budget for those plans -- around October or November, just a month or two before they need to start traveling and buying gifts.

But here's a better alternative that can keep your holidays on-budget and stress-free:

Step One: Add a New Line to Your Budget

In theory, here's the best way to for the holidays:

Calculate how much you expect to spend on all holiday expenses -- from gifts to travel to meeting friends for dinner and drinks -- and divide that amount by 12 to figure out your monthly savings goal.

While you're calculating your total holiday budget, consider both the obvious things (airfare, gas, hotel) as well as the incidentals, such as meals, pet care and luggage fees. Review last years' receipts or credit card statements for an overview.

Airfare can be an especially hard expense to pin down,! since plane fare can vary widely from airline to airline and date to date). Look at the amount you spent last year, or scan this years' current ticket prices (for your intended date) and add an additional 25 percent onto the fare as a "buffer."

Step Two: Start Now

The reason we said "in theory" above is because it's too late for you to "divide by 12." Autumn is a little late in the game to start planning for this year's holidays, but don't despair -- you can still get an extra month or two of a "headstart" on your holiday savings.

Starting now, add a new line to your budget for "holiday savings" and set money aside each month for that purpose alone. Calculate your total holiday expenses, and then divide by 2 or 3, depending on how many months remain until you get hit with the bills.

Come next year, you'll have a full 12 months to master this strategy, and you'll be able to nonchalantly pat yourself on the back (along with those peo! ple who get their Christmas shopping done by July.)

Step Three: Embrace Frugality

Are you having trouble coming up with room in your ?

Look for ways you can cut back on your current spending. Can you eat out less, carpool with coworkers to cut back on gas costs, or cancel your cable TV? You could also find a new source of income, such as taking on a second job, picking up a few babysitting, yard care, freelance or consulting gigs, or selling some unwanted belongings on eBay.

Step Four: Open a New Savings Account

If you're on the ball, you should already have other savings-related lines on your budget -- such as money you're setting aside for emergency savings, your family vacation, future car-related expenses, etc.

Keep your holiday money separate from these savings so you don't accidentally dip into it before the holidays come. Open up a new savings account earmarked for the holidays so you're not tempted to touch the amount that you've saved. You can also clearly! track your progress.

Step Five: Automate It

To avoid any human error in this strategy, set up automatic transfers from your checking account to your holiday savings account at a set time every month (or every pay period).
By sending the money directly to savings, you prevent yourself from spending it on other things. You'll also reduce your own stress factor since it's one less thing you'll have to remember to do yourself.

Step Six: Reduce Your Travel Costs

To make sure you stick to the budget you set for yourself -- and maybe even have a little of that money left over for next year -- don't forget to try to find ways to reduce your overall travel costs when it's time to start planning your trip(s).

Consider booking a flight for non-peak days (for instance, try to avoid Christmas Eve or the day right before Thanksgiving). If you're traveling a short distance, consider driving or taking a train. Look for "! rideshares" or carpools, in which you can split the gas.

Use trav! el comparison sites to locate the best deals for your destination. Compare non-stop flights to flights with one layover if you don't mind killing a little time in an airport (it can save you anywhere from 20 - 60 percent). Take advantage of membership and rewards programs you belong to (or could join) to earn things like frequent flyer miles or travel discounts.

With this simple strategy, you can finally enjoy the holidays the way you're supposed to -- by spending time with friends and loved ones rather than spending time stressing over how you're going to cover the costs.

Bonus Tips: For Retired Folks

If you're , you may be living on a limited or fixed income and may not have a lot of "wiggle room" in your budget. Here are some additional tips to help you budget for holiday travel:

• Compare prices on sites like Priceline, Hipmunk and Skyscanner to see what dates have the cheapest airfare. You may have a limited income, but you a! lso have flexibility others don't. Since you don't need to worry about booking a ticket around your work schedule, you have the freedom to fly on low-demand days, which can save you a bundle.
• Call hotels to ask if they offer senior discounts.
• If you're an AARP member, you're eligible for rental car discounts and airfare discounts.

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• Air Arabia debuted in 2003 as the first low-cost carrier to service the Middle East and Northern Africa, and seven years later, remains the area's leading budget airline – despite newcomers' attempts to pilfer away budget-minded flyers. Air Arabia has stayed true to its slogan, "Pay Less Fly More," keeping fares low while still providing the safe and streamlined service that it's become so reputed for. The minds behind the award-winning company continue to brainstorm new ways to keep ahead of other budget airlines – their latest project, announced in June, will amp up service even more with a fourth hub in Amman, Jordan, offering direct flights to Europe, North Africa, and Asia]. Outside the airspace, in November 2010 the brand plans to debut its budget-friendly, 300-room Air Arabia Centro Hotel at Sharjah Airpo! rt, featuring an eatery, pool, and business center.

• Throughout its 32 years of service, this doyen of the budget carriers has enjoyed numerous accolades for its high standards of service, and in 2010 took home its sixth Skytrax "World Airline Award" in the best budget airline category (in 2008 it also earned "Best Cabin Crew" accolades). Little wonder, given Air Berlin's stance on not nickel-and-diming its passengers; offering complimentary snacks, beverages, and newspapers on-board; as well as flexible booking options that allow customers to modify flights sans the exorbitant, industry-standard change fees. For cutting-edge convenience, the MMS (Multimedia Message Service) program permits flyers to reserve a seat, check in, and have their boarding pass sent directly to their mobile phone. The airline also scores points in the family department – while many budge! t airlines leave parents feeling like they should apologize for flying with their little ones, this carrier makes a family's flight more enjoyable with amenities like cots for infants, baby bags (filled with a bottle, bib, and nappy), toys, and special childrens' dining menus – not to mention the reduced rates for children under 12.

• Born of the leading Brazilian highway transportation group, Grupo Aurea, back in '01, GOL has quickly evolved into Brazil's second-largest airline, offering up some fierce competition to current lead contender, TAM. Its modernized Boeing fleet (which operates at speeds that are 12 percent faster than similar competitor models) and super-low fare policy, has coupled well with on-board niceties like a nutritious snack menu and a smartly dressed staff (two of Brazil's most famous stylists, Gloria Coelho and Ricardo Almeida, designed the uniforms). What's more, GOL has branched out for an expanding international presence, most recently in July announcing a frequent-flyer agreement with Delta that's sure to put GOL more squarely on the radar of an American clientele.

• When JetBlue first took to the skies in 2000, it was a tiny two-line carrier connecting New York City to Buffalo and Fort Lauderdale. Ten years later, the airline's vast network and stellar reputation (it's held the highest ranking among low-cost carriers for customer satisfaction by JD Power & Associates for five straight years) have exploded on the aviation scene. Its on-board technology is what has really set JetBlue ahead of other budget airlines, with seat-back personal entertainment units that include 36 channels of DIRECTV, XM radio, and pay-per-view movies. What's more, JetBlue was the first U.S. airline (back in December of '07) to offer free in-flight e-mail and messaging for Wi-Fi-enabled laptops and BlackBerrys – a perk cherished (at long last) by both business and leisure travelers.

• Awards have been jetting towards this Australian budget airline, including its 2009 ranking as the top Australia and New Zealand carrier in the coveted Skytrax's "Best Low-Cost Airline" category. Launched in 2004, the carrier's domestic and international services stretch the globe, but not your wallet, with low fares that have been known to tumble below rates of $5 one-way (not including taxes and fees). In fact, the airline – along with sister carriers Jetstar Asia and Jetstar Pacific, all of which parent company Qantas has stakes in – is so confident in its rates, that they've put a price-beat guarantee into place for routes to and from Singapore (and other cities) that will beat any competitor airline's rates by 10 percent. Unlike many budget airlines, Jetstar Airways also offers upgrades to StarClass on! international flights, a premium seating area that's inclusive of food, drinks, and entertainment.

• Part of the namesake Indian beer empire, Kingfisher launched in 2005, emerging among a new crop of privately-owned Indian airlines that offer great service, decent food, and clean, modern planes at reasonable prices – others include SpiceJet and IndiGo; another, Jet Airways, is priced higher. Primarily serving India's rapidly growing and increasingly mobile middle class, these airlines have also transformed the average visitor's India experience, largely removing those tediously slow, if romantic, train journeys from the equation. What's more, Kingfisher finalized a contract with OneWorld in June, linking the airline to both American Airlines' and British Airways' frequent-flyer programs. Despite some financial problems (nothing new among budget airlines), Kingfisher continues to promise passengers the ! "royal treatment," offering on-demand entertainment in its red leather seats (though not in its low-fare class), complimentary gourmet Indian dishes, and a choice between business, economy, or low-fare class seating (on its domestic routes).

• If you ever hear a flight attendant tell passengers that if they "don't know how to operate a seat belt, then you probably shouldn't be allowed in public unsupervised," you're most likely flying Kulula Air. The Johannesburg-based airline is known for its sense of humor, along with its affordable rates. Started in 2001, Kulula Air has brought budget air travel to South Africa and beyond on the African continent. Named for a Zulu (the largest South African ethnic group) word meaning "light, easy, and simple," Kulula offers a full service of straightforward travel options, including car rentals, adventure outings, and even cellular phone packages. Tip: It has been rumored that wearing green onto the wildly decorated green and blue planes will get you a free Kit Kat from the comedian attendants on board (a fun perk ! compared to many budget airlines).

• Taking speed from the road to the sky, former Formula One race-car driver Niki Lauda founded quirky discount airline NIKI in 2003. Rather than cutting luxury to conserve cost, NIKI relies on quality patron perks to keep bookings booming (it seems to have worked – profits rose by 75 percent between 2008 and 2009, and NIKI added flights to six European cities to its roster in 2010). Extras include complimentary in-flight snacks that forgo the peanuts in favor of hearty sandwiches, plus entertainment options like free magazines, newspapers, TV shows, movies, and radio stations. If you'd like to spend some of the money you saved on the cheap flight, indulge in their on-board store (which hocks everything from earphones to Frisbees to Swarovski jewelry). Or, eat like royalty and upgrade your food to gourmet Demel (think minced vea! l or yellow chicken curry – a major upgrade from budget airlines' usual staples), purveyor to the Habsburg court in Vienna.

• Experience Porter (established in 2006) at its prime by flying one of its classy planes out of Toronto, its hub city and the site of a sleek departure lounge touting comfy chairs--perfect for unwinding airport stress. If you'd like to stay up and alert, indulge in a complimentary self-serve latte in a heated mug, or opt to get some work done at the business center, where passengers can surf the web with free wireless Internet. In-flight is truly refined: Sip a complimentary glass of beer or wine, stretch out with lots of legroom in the two seat-only configurations (no chance of being the cramped middleman), and enjoy it all in peace and quiet (aircrafts feature a noise and vibration suppression system to dull that flying buzz). Bonus features for those who can't commit or have busy travel schedules (and more proof ! that Porter is decidedly atypical among budget airlines): Passengers may purchase their tickets in bulk with a pre-paid "Porter Pass" of up to 100 one-way trips, or opt for a "Freedom Fare," which allows free flight changes all the way to the day you take off.

• Aboard Virgin America, innovation, aesthetics, and comfort blend seamlessly for a flight that will make you feel like a VIP whether or not you splurge for premium seating. Its ambition to "bring great service back to the skies" has inspired a forward-thinking business strategy invested in style, entertainment, and relaxation, as well as the maintenance of attractively low fares. In-flight absinthe sales and a new frequent-flyer mile link with trendy hotel chain Joie de Vivre ups the cool quotient even more, but passengers need only turn on the TV to know that this is a different kind of affordable airline: The CW's "Fly Girls" reality show (which aired in early 2010) chronicled the lives of five Virgin America flight attendants. Onboard, indigo and violet mood lighting changes throughout the flight, responding! to the time of day to help passengers relax. Expect live satellite television, 20 new pay-per-view blockbusters, more than 3,000 MP3s (plus radio and audiobooks), in-flight food ordering, gaming, and a chat function that enables seat-to-seat conversations. All photos courtesy of Wikimedia.

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