During the summer, my family and I take about two weeks off to travel, visit family and relax on the beach. It’s something we look forward to each and every year. Being able to take a family vacation is a great way to unwind and create new memories. It’s a time that we cherish.
A survey conducted by The Bank of Montreal found that on average, Canadians expected to spend just over $2000 on extended summer travel and long weekends. That’s a lot of money if you don’t plan your finances.
So how are we able to afford our annual summer adventures? Careful financial planning throughout the year.
Here’s how to go about it.
1. Set a Budget
Figure out how much you want to spend during your vacation. This may be based off where you want to go or how much you can realistically afford.
2. Open a Savings Account
Open a savings account specifically for the purpose of setting money aside for your vacation expenses.
Look for a high-interest account and a bank that isn’t your usual.
By having an account at a different bank, it makes it a little bit harder to access the money, thus helping to achieve your savings goal.
Tangerine is a great option for this. It’s an online bank with some of the best interest rates and no physical branch locations.
3. Determine How Much to Save Each Month
This will depend on your overall budget. Take the total amount you want to save and divide it by 12 months (or scale to fit your timeline) to get your monthly savings goal.
My family saves for a year, from summer to summer, for our vacation each year.
You may want to start saving the winter before your trip and when your vacation comes around, you zero out your account and then start over for the following year.
4. Set up an Automatic Withdrawal System
You can easily set up an automatic withdrawal system for your online savings account. Make it so the money will be withdrawn at the beginning of each month. This ensures you won’t spend the money and that once the middle and end of the month come around, you will have already forgotten about it. Out of sight, out of mind.
5. Plan for the Unexpected
Sometimes while on vacation you may encounter an unexpected large expense. This could be anything from needing to change accommodation at the last minute or having to quickly outfit your family if your luggage was lost or stolen.
To help absorb these unexpected costs you can do a couple of things.
One would be to increase your savings goal each month and build in a contingency budget into your vacation savings goal. This assures you have extra cash “just in case.”
Another way to accommodate the unexpected is to be flexible with your plans. While on vacation, you may need to eat out less or cut out a large expense such as an outing to an amusement park. Instead, look for free or less expensive activities. You can also start out with a frugal mindset.
Instead of booking a hotel right on the beach, look for accommodations that are off the water. You can even book a hotel one star down than what you were originally looking for or go camping.
With these savings principals in mind, you’ll find it easy to go on vacation each summer.
Big Ticket Items
These same principles can apply to your business if you are in need of a computer or other large item for your business. You’ll want to set up a savings plan and make sure to automatically deduct the amount each month until you reach your goal to purchase your large business expense.
Need more help in figuring out a budget for your business? Find out how to budget more effectively for your business here.