After all bills and spending we have £850 left - £200 each play money and £450 "savings".
So £5400 a year. From this then comes £500 for Christmas, £2400 actual savings and emergencies and then £3000 yearly for holidays.
I scower the internet for cheapest locations, dates, flights etc. Then check out the area reviews etc. And make sure it sounds like we'd enjoy it. I book everything independently rather than through a travel agent. I try to get at least two holidays for that budget.
Most recently we did a week out of season in the algarve for £175 each b&b including flights, transfers, insurance and what not. Total cost including spending money £850 as we mainly just did picnics on the beach, indoor swims, long walks, reading. A few little meals out.
Every now and again we will have a year where there is a big expense (replace car, replace fridge, house repair) that we may decide to use holiday money for instead so that the savings pot is actually saved and not always spent on emergencies. In this way we manage to pretty much keep on top of all the unexpecteds and have a small savings balance always on the go and still enjoy holidays.
Anything left over from the holiday allowance gets rolled over into the next years so that we can look at doing something fancier / more expensive as a treat.