GIVEN THE RISING COST of living, including the increase in taxes, you may have already scaled down your vacation plans for this year. Vacations can be expensive. However, with some extra planning, even the best of vacations for you may be significantly reduced in cost.
There are two major aspects – planning to provide the funds needed to pay for the vacation, and planning how to conserve the cost of the vacation within that spending budget. This article focuses on how to source the cash, preferably without incurring further debt.
Summer 2015 vacation time is already here, so let us consider the saving options for 2016. In looking ahead, with less take-home pay, you can already estimate that saving towards that vacation time will be much lower. Instead of tossing out all your dream vacation plans, here are seven approaches to keeping your dreams alive, expanded even.
1. The first recommended option is to set up a separate credit union account for your vacation saving fund. A credit union savings account is recommended because such accounts tend to bear higher saving interest rates than a commercial bank. Then commit a comfortable part of each month’s savings to go to this account automatically.
2. Consider the monthly saving to this account is say, only $50 or $100. Avoid being immediately dismayed that you will likely not be able to afford to visit your relatives overseas next year. In every setback, there is opportunity; this can be yours to discover real vacation value. So, in such a case, start early to consider spending the 2016 vacation period frugally while looking towards accumulating savings enough to take a more elaborate vacation the following year or if necessary three or four years ahead.
Beforehand
3. Then, be bold and consider how much you need for your dream vacation: a visit to the Holy Land; a “back-to-Africa” visit; perhaps a trip to Paris, the Orient or a Mediterranean cruise. If your dream vacation is part of your life plan, smart planning involves saving beforehand for this desire of your heart. Most people cannot see how such trips are at all possible.
4. Next consider how soon you may reach your vacation saving goal. For example: $100 saved monthly at a five per cent annually compounded interest rate will raise $2 636 after two years; $200 saved monthly at the same rate will yield $5 273. Saving over a two-year period may bring your vacation trips back as an every-other-year option rather than eliminating it totally.
5. Similarly, most people aspire to take that dream trip some time in their life. Why not plan your dream trip for a milestone marker in your life? For example, saving $50 per month over a ten-year period at the same five per cent compounded annually will yield $7 831; raising the savings level to $100 will double the accumulated funds to $15 662. You can adapt these examples arithmetically for any multiple of $50 to see how much you can accumulate over a ten-year period.
Saving funds
6. Using the phenomena of compounded interest you can expand your vacation saving funds. It is hoped that watching your fund grow over time will also expand your motivation to live more frugally and add the savings towards reaching your desired vacation fund goal even sooner than you would normally expect.
7. Finally, the major reason vacation trips are expensive is that most arrangements are not planned and researched long enough in advance. So, whilst undertaking this longer term saving, there is time to research and plan your trip in ways that can reduce costs. That will be the topic of the next article.
• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.