How to save for your vacation by next Summer
27 Jul 2018 | Back to Blog
The hottest part of the summer is usually the time we start to daydream about being elsewhere. It’s also the time many of us take vacations from work. However, unless our year-or-two-ago selves had planned and been saving consistently towards that summer vacation, chances are, it’s too late to achieve our vacation goals for this year. If you planned and saved, we wish you a happy vacay. For the rest of us, there’s still good news: next year is well within reach.
The first thing you need is a vacation goal. Decide from now what the objective for your summer vacation will be and what you want to accomplish over the next year. Will you be going abroad or opting for a staycation? Will it be you, yourself and you or will you be making a splash with the whole family? How long will you be staying and what kinds of activities do you want to get involved with while you’re there? These questions will help you think through the experience you’d like to have, but they’ll also help you get your mind around the expenses involved.
Next you’ll want to figure out the cost. For international travel, check online for the cost of airfare. For local travel, find out the costs for Knutsford Express tickets or a full service plus a tank of gas, depending on whether you’ll be driven or driving. Be sure to include food, day-to-day travel, supplies and the additional costs for any tours or other mini adventures you’ll be going on. Once you’ve determined how much money will be needed to fund your vacation based on today’s prices, make the following adjustments:
- Add something for expected inflation
- Add something for the expected depreciation in our local currency
- Add some more since inflation is just an average of the movement of prices and the price of your vacation may move by more
Now that you have a budget, you’ll need to figure out how to come up with the funds. How much of your income are you willing or able to regularly put aside towards this goal? You’ll also need a strategy that combines saving and investment to achieve your vacation goal. Your strategy should be based on your income and should involve an investment component. A Unit Trust fund is ideal, because it allows you to regularly set aside funds while giving you the benefits of compound interest.
If you have a steady income, for instance, a monthly salary deduction might be the best option – set it and forget it. If your income is lumpy, you will have to be more diligent about ensuring you set those funds aside when you have inflows.
Decide how aggressive you want to be with your investment choices. Through VM Wealth’s Unit Trust funds, you can invest in stocks, bonds and real estate. Stocks allow you to set aside less of your income because of their potential for faster growth, but there is more risk involved, as you are more likely to face losses. Steady income investments such as bonds and real estate grow at a slower rate, but with more certainty.
The beauty of Unit Trust funds is that they’re diversified, which helps to reduce the risk factor, whichever instrument you choose. Chat with a Wealth Advisor to determine the mix of funds that will match your vacation plan as well your risk appetite.
After that, mark your calendar and remember to schedule the necessary time off from work. Then go forth and execute your plan.
Next summer, while you’re enjoying your vacation, send us a postcard 🙂