5 simple tips to create a savings action plan for your next vacation
Have you ever dreamt of going away and explore new horizons but afraid of getting even more broke than you actually are? Have you ever thought of all your possibility to make your trip financially safe, secure and more enjoyable? Money concerns should not be a factor in deciding to take on a trip or not as long as you plan ahead. In this article, I will put the emphasis on how to save more money in order for you to travel and limit the use of your credit card by introducing to you 5 simple and easy tips that everyone should follow.
Psst: This blog post is written by the hubby, a banker. Let's see his advice to put our vacation savings plan on action!
1 - Find your destination and set up a budget
Before even taking any real financial action, you should choose a destination that will fit with your vacation plan but also your finances. If you are on a tight budget, avoid costly destinations. Once your next adventure has been picked, the next step is to set up a budget! And do not try to underestimate your future expenses during your trip to make you feel better! The budget exercise is essential for you for your planning in order not to end up in debts and to give you an idea of how much you need to save ahead. Budgets must include items such as flight tickets, food, accommodations, transportation, activities... If you are at the beginning of the process in deciding what you will do during your next adventure and need to estimate some costs, it is always better to overestimate that cost and plan ahead! If you end up by paying less than planned, well, more money for you in your vacation savings account!
2 - Establish your time horizon
Time is key. Haven't you ever heard your banker telling you that time is the most important thing in investments? Well, this rule also applies when saving for your next adventure. The earlier you plan to set some money aside, the easier (and less painful) it will be to build up your savings. Also, should you decide to go on a more expensive trip or simply to spend more during your getaway, time will allow you to put more money at work.
3 - Establish a strategy
It is rare enough that travellers have all the money they need at the time they are planning their trip. Therefore, you need a strategy (or a plan) that you must put in place and stick to it! For example, why not put aside 10% of your payroll every 2 weeks in a savings account? A creative way to save more money would be to put a smaller amount aside every paycheck. Obviously, it is always easier and more manageable to save a small amount more frequently than trying to save a larger amount at once. It is like giving you a salary every two weeks after paying all your other (less funny) expenses.
4 - Use up all the tax benefit savings accounts
Governments sometimes help us... Indeed, saving your money in a non-taxable investment account (such as a TFSA in Canada or a Roth IRA in the U.S.) is very helpful in earning some extra dollars. The principle of these accounts is very simple: every dollar you are making on your money that you have put at work is free of tax. Meaning, you can withdraw your money, keep your gains, and not pay a dime to the government. Pretty cool indeed.
5 - Look for safe, simple and cheap investments
When savings money in your vacation fund, you better try to get that extra dollar. Try to invest in assets that are easily manageable, flexible and not too risky. Regular savings accounts are sometimes overlooked by many because of their low returns and they are right. Look for investments with a short-term horizon (safe assets) combined with very low fees (get that extra dollar) that you can easily sell (flexible).
Are you ready to save money now for your next big adventure?
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