Should you be funding a vacation right now? Good question.
We say yes. We say yes, specifically, because we know you work hard. In fact, a vacation is one of our favorite ways to spend our hard earned money intentionally. This is of course with the disclaimer that you can fund it out of your monthly budget! With that in mind, let’s dive into the how.
One of the best pieces of financial advice we give is to:
Fund your future instead of paying for your past.
This is an important concept that applies to every job your money does, but especially to your vacations! Your option is either to save a little at a time in order to afford your upcoming vacation {FUND THE FUTURE} or to be paying for it on credit (and with interest) for months and years afterward {PAYING FOR THE PAST}.
Not having a budget causes stress & anxiety every time you spend money on vacation.
Sometimes folks go on vacations and they are stressed about each purchase, each meal, each bill. In their mind, the dollars are ringing up and they don’t really know how they are going to afford it when they get home. This person isn’t much fun during the vacation because they’re stressed. The family with this vacationer may not have as much fun either as they’re worried about whether the super-sized meal they order will set our money-stressed person off. The family then returns home with a bill racked up that they’ll be paying off for another year.
You don’t want to come back with two weeks’ worth of memories and two years’ worth of debt.
Becky Frost, Education Manager for Experian Consumer Services.
Having a budget allows for freedom to spend and not worry!
Contrast that with the family that goes on a vacation knowing that all they have to do is enjoy themselves. They’ve made a plan, they’ve funded the plan and all they’ve got to do is show up and enjoy the vacation they’ve worked so hard for. When they get back from vacation, they start dreaming about and setting aside money for the next one! In this way, we can see how it’s possible to fund the future or pay for the past.
Related: 3 Simple Steps to Reset Your Finances This Year
It’s not hard to plan and budget for a vacation!
When advising clients on funding a vacation, we tell them to create a plan for the cost and then set up a sinking fund. A sinking fund is kind of like a savings account, but with a specific purchase. A sinking fund pays for the big expenses in life we know are coming but we don’t want to go into debt to afford such as vacations, Christmas, new HVAC systems or even a new car. In order to set up your sinking fund, take your big expense and divide it by 12, the number of months in the year, and then you set exactly that amount aside in a special savings account. That savings account is earmarked specifically for this event. If you being this practice you’ll be in good company: 45% of folks factor their vacations in their annual budgets. Don’t be part of the 55%!
Paying as you go for a vacation is a fun way to build up to the moment.
We also sometimes advise clients to “cash-flow” a vacation. For example, you might set aside enough money in your budget in one month to purchase airfare. The next month you might cash flow lodging. Next up you might purchase your venue/entertainment reservations. The month after that, you might purchase your food package. Finally, you’ll set aside how much cash you imagine you’ll need to comfortably get through the vacation. In this way, you pay a little bit for the vacation each month and you build excitement too!
Related: Why & How You Should Be Using Cash
Either way you choose, you’ll be able to go and enjoy your vacation and bring back only memories rather than debt and stress.
This is a little preview of what we do. We help clients create a budget & payoff debt. If you want help applying these concepts to your daily life, habits and goals then fill out the form linked below and we’ll be in touch. We would love to work together!
Ideal Balance is The Life Coaching Facility in Navarre, Florida that focuses on Fitness, Family & Finance. We help our clients create the discipline & habits they need to strip off what’s holding them back from living the life God created them to live. We work with clients in 1-on-1 sessions in person, virtually and in small groups. We offer life coaching, financial coaching, health coaching. We also offer personal training and home organization locally here in Navarre, Florida. Fill out the information below if you’re interested in our help and we will contact you.
Leave a Reply