Butter a baking dish. I use a 9 x 13" pan.
In a sauce pan, place all ingredients except vanilla.
Place over medium heat, stirring until all ingredients are melted and combined.
Continue cooking over medium to medium low heat until mixture boils. Stir every few minutes to avoid scorching.
If using a candy thermometer, boil until temperature reaches 245 degrees.
If not using a candy thermometer, begin testing caramel in a glass of cold water after 5 minutes of boiling. Drop a small amount of boiling caramel into a glass of cold water. Test caramel with fingers. It should retain its shape and not flatten out, but should still be soft.
Remove caramel from heat. Stir in vanilla.
Immediately pour caramel into prepared pan.
When caramel has cooled, remove from pan. Slice into strips and then into individual pieces. Wrap each piece of caramel in a piece of waxed paper.