Before taking that trip, consult your piggybank

WHETHER he’s strolling along a quay in Paris or mountain biking through rural China, Thomas Donahue likes seeing the world — and he wants to see more of it every year.

What Donahue doesn’t like, however, is the trail of credit card bills that can take months to pay off after a trip abroad.

Indeed, paying for that $3,000 cruise through the Panama Canal or a $7,000 grand tour of Europe remains a challenge for many households, personal finance experts say, but careful planning and disciplined spending habits can take the edge off a hefty outlay.

Donahue and his wife, Cynthia, have the simplest of solutions: Save before you go. Early in their marriage, the couple set aside $100 a month to fund travel.

“It has grown over the years to several hundred dollars a month, and I now put in work bonuses,� said Donahue, who works for a television broadcast equipment maker in Melbourne, Fla. The funds are channeled into a money-market account that remains untouched until it’s time to buy the tickets.

The Donahues are a textbook example of how people should plan for an expensive vacation, said Jill Allagood, a certified financial planner at Tarbox Group in Newport Beach.

“You don’t want to be on your vacation and worrying about how you are going to pay off every penny,� Allagood said. “You will be more relaxed and have a better time if it is all saved beforehand.�

The first step is to price out the type of trip you want to take, “so that you have some real numbers to talk about,� says Judy Martindale, a former travel agent who is now a financial planner in San Luis Obispo.

Then analyze your fixed spending items such as the mortgage, car payments, insurance, food, gasoline, utility bills and taxes. “See what’s left and look to see where you can cut back on discretionary expenses,� Martindale said.

Martindale agrees that it’s best to have the money in hand, but she’s not entirely averse to financing part of a vacation, or even all, depending on a family’s overall level of debt. But financing a trip adds to its overall expense because of the interest charges, she said. Martindale particularly warns against tapping into home equity to finance a vacation.

“The purpose of money is to support your life, and if you want to use it to build great memories, go ahead,� Martindale said. “But you have to remember there is a balance between great memories and prudence.�

Stewart Chiron, who operates the Cruiseguy.com advice website, said that some cruise lines experimented with no-interest payment promotions in recent years. But the deals never caught on.

“There was a big downside,� Chiron said. “You would go on a seven-day cruise and would find yourself paying it off a year later and that became a negative.�

Allagood thinks financing the bulk of a vacation is a sign that someone is living beyond his means.

The exception is a short-term transaction, where an individual finances a booking, knowing that he will be getting a work bonus, tax refund or some other windfall in the near term that will allow him to quickly cover the debt.

Donahue said would-be travelers also should work the other side of the equation: Trim the expense of travel. “We do shop for bargain airfares … and for bargain accommodations,� he said.