Vacation planning means budget planning
As summer starts, if you’re like me, you’re already looking forward to that vacation that’s been booked since it was cold and windy earlier in the year. The kids are out of school, there is more pressure to entertain, and the kids' activities are kicking into high gear.
Many people decide to go on a trip in the summer for a fun, action-packed, memory-inducing experience for everyone. Some fly to the Bahamas, some drive down the east coast, and some even decide to hit the slopes (all California and Florida people).
In this article, we explore how to vacation within your budget correctly and still affordably create those lasting memories.
Vacation Fund
One of the best ways to budget for a vacation is to set up a vacation sinking fund. Many times, and more recently, people have been setting up a brokerage account for their various sinking fund needs. A brokerage account is an investment savings account or a non-retirement investment account.
For those with short-term goals – like going on vacation, there is no better time to set this up. Interest rates are astronomical, which means that the Schwab Money Market is paying 4.93% (as of the writing of this article on 6/28/2023). The Schwab Money Market pays dividends monthly, which means you would get free money on the 15th of every month. To learn more about a money market fund and how it differs from a money market account, check out this video from our Chief Operating Officer.
If you are like many other families who go on vacation annually, it is a good idea to set up a recurring transfer every week or every month into the account. That way, you will prioritize saving for it, and it will be out of sight and out of mind. Once this money starts to be saved rather than spent, it becomes much easier to have the funds available for family experiences. It takes personal spending discipline out of the equation and deposits it into your vacation fund.
Vacation funds are an excellent way to save for this and the following years’ vacations. It allows you to be personally responsible for all the money you will spend on a vacation. It also personifies how hard you worked to earn this bucket of money that is allowing you to take this vacation in the first place.
Daily Cash Limit
Once you’re on vacation, another challenge begins. For example, you are in a beach town, and next to the hotel/condo/Apartment/home you are staying in, there is a pizza shop, ice cream shop, or souvenir shop within walking distance. At the same time, your kids are 1 inch from your ear shouting, “Let’s go get some ice cream!” (Or pizza, or knick-knacks, etc.).
Introducing a daily spending limit is the best way to avoid overspending your vacation money, going into debt, or spending money you don’t have. Not only have you spent a few thousand dollars to get to your vacation location, but now that you’re there, more money will be spent daily on food, dessert, activities, etc. Planning your activities and daily spending limits ahead of time will make for smooth sailing on vacation (pun intended for some vacationers).
Conclusion
It is essential to understand that vacations are meant for relaxing and good times, so one should never feel the need to hold back or count every nickel spent. I am advising those who plan to travel to be mindful of what they have and intend to spend to be in the same financial place they were before they went on vacation.
The power of speaking with your advisor
As mentioned, everyone has different goals and timelines with their money, so it is important to speak to a Financial Advisor about your specific needs and goals. Please get in touch with one of the Financial Advisors here at Whitaker-Myers Wealth Managers; we would be happy to help you!
AVOIDING VACATION DEBT
June 29, 2023
Drew Hodgson
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