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July 17th, 2013

FINANCIAL PLANNING FOR YOUR VACATION

 

Vacations are often perceived as a budget killer, but they do not have to be. If a week at Disney World or a jaunt to a classy beach resort is already on the radar, you’re probably looking at a serious expenditure and careful, long term planning would have gone into making this a reality. However, many families face the possibility of going into debt while taking the much anticipated holiday.

To the uninitiated, the first rule of thumb for planning a vacation is to prepare a budget and identify the expenses so you are aware how much you are spending – From booking reservations to toothbrushes and medicine, everything adds up. Make a checklist of all of the financial needs if the vacation is overseas (airfare, car expenses, hotel, sightseeing etc). Will this vacation be a family outing or will it be you and your significant other? Next, factor in when you will be going. In three months? Next year? Answering these questions will help you allocate time and money in the most efficient way while on vacation. 

These will help you to determine how much you will need to put aside from your paycheque each month. For those already caught in the vacation vortex, carefully look for ways to save: Should we eat out or cook? Hire a taxi or use public transportation? Just inject a little frugality into the process so you don’t spend all year catching up.

A good way to start preparing for a vacation would be to allocate a percentage of your income towards it. How?  By investing a fixed sum over a period of time and putting away small sums out of every paycheck.  That’s a sensible approach because it means committing yourself to investing a fixed amount of your salary every month toward the vacation. You can easily have this auto-deducted from your paycheck via a standing order every week and deposited into a new account that you have set up.
While small contributions may not seem impressive at first glance, they enable investors to get into the habit of saving and can make a big difference in your preparations.

Now that you know how much you will need to save for your vacation, put it in an investment that provides easy access to your funds, keeps the principal safe and provides a rate of return appropriate for such a level of risk and easy access. Consider making regular subscriptions into the TT Income Fund which allows you consistent returns on your investment as well as easy access to your funds.

Vacation provides an ideal opportunity to teach children the value of money.  They are eager to make money and parents can capitalize on their energy.  For the odd jobs around the house, parents can consider paying a small stipend and encourage them to save.  One way to get children interested in investing and saving is by introducing them to mutual funds and the significance of diversification or not putting all your eggs in one basket.

The UTC’s Growth and Income Fund is a great way to show children the value of investing for the long term where the fund is invested in shares of local companies trading on the stock exchange, government and government guaranteed bonds, short term securities and foreign investments. Children would learn to spread their risk over a plethora of investments and reduce the adverse impact of any single investment on investment portfolio.

Remind your children that setting goals is fundamental to learning the value of money and saving.  Every item children ask their parents to buy them during the vacation can become the object of a goal-setting session.  Children can also be introduced to the value of saving versus spending.

What children need to know is that when they open an account at the Unit Trust, their money goes to buying units in the fund where the opportunity exists for the value of the fund to increase, thereby increasing the value of each unit.  This whole exercise will help children appreciate life-long financial principles.

It’s one thing to budget and plan a family vacation and fill up photo albums and Facebook with warm memories that will be cherished for a lifetime. It is quite another have a nightmarish excursion everyone hopes to erase from their memories. So be careful and plan as assiduously as you can.