Overdid your holiday spending? How to get back on track

Last week, I went on holiday to Copenhagen and seemingly forgot the budgeting part of my brain on my bedside table (along with my phone charger).

This made for a great time, as I sipped glasses of chardonnay, found quite a few souvenirs to bring home, and tried every pastry I could get my hands on. That is, until my bank helpfully sent me a spending summary of my trip on the train back from London Stansted with a cheerful ping. Five days of pastries were suddenly making me feel a bit sick.

My first instinct was to swipe away the notification and keep living in blissful ignorance, but I knew at some point I'd need to grit my teeth and open my account. I had spent more than the holiday budget I had planned, and now, I have a bit of work to do to get myself back on track.

I’m not the first person to overspend on a holiday, and I certainly won’t be the last. The key is getting back on course, and it doesn’t have to mean miserable months ahead. Here are a few steps that can help.

Face the facts, leave the guilt

When we know we’ve slipped up, it’s much easier to try and forget about the problem than face it head on. But when it comes to your finances, the best thing you can do is be honest with yourself.

Usually, when you’re trying to cut down spending, it makes sense to go through what you spend on quite meticulously to reduce costs. But if this is a case of overspending on a holiday rather than constantly blowing past your budget, it’s worth recognising that your spending on holiday is likely irregular and it probably won’t help to dwell too much. I usually would not be purchasing a £15 pint (I know).

You don’t need to assess every purchase, just get a figure for how much you overspent by, so you know what you need to rebuild. Having good habits over time is usually more helpful than a once-in-blue-moon splurge.

Where did the extra spend come from?

If you overspent, it’s likely that money either came from savings or was put on a credit card. If it was put on a credit card, you’ll want to be careful that you don’t start to accumulate interest. Double check the rules for your credit card and if you can, pay off any amount that would start to accrue interest if it was left unpaid. If you have other savings, using those to pay off any balance could be a smart move if the interest rate on your credit card is steep. You can look at 0% balance transfer credit cards to move the debt over and give yourself more time to pay off if you need, but the options will depend on your credit score and you’ll need to read the fine print.

Rebuilding your savings

If you’ve eaten into your savings instead, there are two approaches you can take: accept that you’ll need to build back up for a bit longer or pinch a few extra pennies to put your savings back on track sooner. Using an ISA calculator can make this decision a lot easier by helping you estimate how long it will take to reach your savings goal with each of these methods, by using the amount you have invested, your average investment growth rate, and how much you contribute.

For example, let’s say you have a goal of reaching £10,000 in your savings, and typically put £100 each month in your Stocks and shares ISA. You were getting close to your goal, with a balance of £8,000. If your investments grew by 5% annually after fees, you’d have reached your goal in two years. But on your holiday, you spent an extra £800 from that pot.

With £100 investments, you’d be looking at three years to get to the £10,000 mark. If instead you siphoned off an extra £25 each month from your spending, and put it in your ISA, you could get yourself back on the two-year track.

Neither of these methods are necessarily right or wrong, but it’s helpful to know the options.

Cutting back

If you do choose to save a little extra to get your savings back up to where you left them, you’ll need to have a look through your budget to see where there’s wiggle room. If you only need to adjust for a short period, you might consider cutting a dinner or two out for making something at home. Just a handful of these swaps might be able to cancel out any extra spend. You can also look to ‘plug the leaks’ by going through the subscriptions adding to the bank account drain. Citizen’s Advice has estimated that Brits spend a total of £688,000,000 on unused subscriptions in a year.

For those that need to make a bigger adjustment, it may help to work backwards. Begin with your monthly income and subtract any necessary costs like mortgage or rent and bills. Take out the amount you’d ideally like to save and see where that leaves you. Can cutting a certain budget area, like the entertainment category, help you, or do you need to scrape a bit off of each part of your budget? Figure out the method that feels most realistic for you. For me, it’ll mean a few less trips to M&S for a while and inviting my friends over for wine night instead of trying out the new spot down the street.