Fueling Your Wanderlust Tips for Starting a Travel Fund
4 minute read
September 5, 2017


I almost always have a serious case of wanderlust. I can be gone for weeks at a time, come home for a month, and be ready for the next adventure.

While not everyone travels as frequently as I do, many people still like to travel. Whether it’s the occasional four-day getaway, or a longer vacation every year or two, trying to meet the costs of travel can be challenging.

So, how do you pay for travel? Many people will tell you to save up for your trips, and this is good advice. However, you don’t have to do it the old way of saving for one trip at a time with a traditional savings account.

If you have the risk tolerance for it, it can make sense to start a travel fund using a taxable investment account.

Using a Taxable Investment Account

I use a taxable investment account for my own travel fund. I like it because it has the potential to build more value faster than a traditional savings account. In fact, my travel fund usually returns right around 5% to 6% annually, as compared to a savings account that might return 1% — if I’m lucky.

My travel fund includes a mix of stock and bond ETFs, with bonds accounting for close to 30% of the asset allocation. So, it’s not quite as volatile as investing only in stocks, but it provides a higher return than I would see with a savings account. It means my travel fund grows faster, and I can use it to go on more trips.

Another reason I like using a taxable investment account is the fact that it’s possible to turn your vacation into a tax deduction. One of the downsides to using a taxable investment account for your travel fund is the fact that you could lose some of your account’s value. If the market drops, then you go negative. However, if you do end up selling at a loss, you can take a tax deduction for it in some cases.

I’ve built my travel fund up to the point where even if I sell some shares at a loss, I still have capital left in my account. The idea behind the travel fund is to have the capital available to you when you want it. As you build your fund, you are likely to have enough capital to still go on your trip. You just get the added bonus of a tax deduction if you sell at a loss.

The flip side, though, is that you have to be prepared to pay capital gains taxes if you sell for a higher value. When I started, I held off tapping my travel fund for a year and a day. When you wait, you are set up to pay long-term capital gains, which are taxed at a lower rate than short-term capital gains. My first trip paid for with the travel fund was short and inexpensive to help me avoid dipping into newer funds. Now that I’ve been using my travel fund for a few years, just about everything I sell to pay for a trip qualifies for long-term gains.

Automatic Investment Plan

When you get ready to start a travel fund, it’s important to plan for consistency. Decide how much you can set aside each month for your fund, and set it up with automatic investing. This way, you don’t have to remember to add money. Set it up as a goal, and let it grow. Just make sure you have the risk tolerance for it. This method doesn’t work for everyone since the possibility of loss can weigh on some people.

Over time, as you earn more money, you can adjust your automatic investment plan to reflect your travel goals. It can take some time to establish the fund, but once it gets going, and as long as you keep adding to it, the fund can be a way to help you enjoy regular travel without having to start over again each time you plan a trip.

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