I think we can agree that most of us are energetically ready to travel.
After being at home for over a year, and having to put any plans of travel to the side, most – if not all – of us are likely ready to hop on a plane as soon as it’s safe to get back to relaxing by the beach or exploring a new city.
But the more important question to ask yourself is: are you financially ready to travel? Here’s how to know.
Do you have extra money on-hand?
Over the duration of the pandemic, many Canadians saved money: eating out less, spending less on activities, and of course, saving money on flights and hotels.
According to the Conference Board of Canada two-year forecast, Canadians saved approximately 14.8 percent of their income last year, which translates into an average of $5,000 per person, on hand.
Similarly, Statistics Canada outlined that this average on-hand savings of $5,574 in 2020, compared to $479 in the previous year (average savings jumping from 1.3 percent of disposable income in 2019, to 14.9 percent in 2020).
Of course, this doesn’t account for everyone, as lower-paid workers have generally struggled the most financially during the pandemic with loss of jobs and reduced hours.
Whatever side of this you find yourself on, it’s important to take a look at your financial status, and what makes the most sense for you and your family.
Yes, the pressure and excitement of travel can make it easy to want to drop everything and book a vacation as soon as you can, but unfortunately, as a Financial Counsellor, I see that travel, more often than not, becomes synonymous with debt.
It doesn’t have to be this way
I’m not here to tell you not to travel. In fact, having the freedom to travel is one of my most important values.
However, I do believe in the importance of planning and budgeting for your next trip so that you are financially prepared for the costs of the trip and you don’t put yourself into unnecessary debt.
And by the way, this applies to everyone who travels — regardless of your income!
If you take these steps you’ll be able to actually enjoy your vacation, rather than feeling stressed about spending.
And remember that this is a guide, not a restrictive set of rules. A budget should be flexible and realistic, or you’re not going to be able to stick to it.
You need to be confident with your money management
When you’re confident with your money management, you can live your best life.
Prior to your trip, this means having a good idea of what your financial status is like so you can choose a trip that is realistic for you, while still bringing you joy.
If you don’t have enough money saved yet for the trip you really want to take, you may need to give yourself some additional buffer time to save and plan accordingly.
When you’re confident in your plan, it’s a lot easier to take the steps to get there, rather than being swayed by other expenses that pop up and risk taking you off course.
Here are 4 steps to take to set-up a better money management plan.
Budget for your trip
Figure out how much the trip will cost you so you can start to figure out a plan for saving.
- Costs of getting to and from your destination. Compare the costs of different methods of getting there, including plane, car, train, and/or bus. When you’ve decided on the form of transport, compare the pricing of different companies and any promotions that might be happening.
- The price of accommodations. Research different hotels, Airbnbs, or hostels to see what suits your desires and budget.
- The food you’ll eat when you’re there. How often will you go out to eat? What types of restaurants will you go to? Will you have a kitchen in your accommodations where you could buy groceries and make meals instead? What will all of this cost?
- The cost of getting around once you’re there. Will you need to rent a car? Take the bus? Will you be able to walk the majority of the time?
- What you’ll do to pass the time when you’re there. Do any of the activities have costs associated with them?
- How will you communicate when you’re there? Do you need to buy roaming coverage for your phone? Or an international SIM card? What are the costs associated with those packages?
Write all of this out so you can begin to form an idea of what the trip will cost you. Give yourself a little bit of a buffer so that you have some flexibility.
If you’re doing this with money you’ve already set aside for travel, ensure you stay within that budget and make modifications accordingly.
If you’re creating this without money in the bank with the intention of travelling in the future, ensure that the total can be realistically achieved within your desired timeline, without placing too much additional financial stress on your household.
Save in advance for the trip
Depending on the expected costs and your timeline (how many months are between now and when you want to leave on this trip?), you can do the math to figure out how much you’ll need to save each month to make your vacation a reality.
For example, if the total cost is expected to be $2400, and you plan on travelling a year from now, you would divide $2400/12 months. In that case, if you can save $200 a month for twelve months, by the time you’re ready to leave for your trip you’ll have all the money for your trip and won’t go into debt.
If you cannot afford $200 a month but could afford $100, then plan to save $100 a month for 24 months and travel in 24 months after you’ve saved enough.
Of course, if you already have some COVID savings allocated for travel, you can subtract that from the cost of the trip and then divide that new total, which will speed up your timeline. For example, if you have $1000 already saved, $2400-$1000 = $1400. If you can save $200 additional per month ($1400/200 = 7), you’ll be able to reach your goal in seven months rather than twelve.
Open a separate account and call it “travel”
The money you’re saving for this trip should be in a separate account from your regular checking and savings accounts so it doesn’t get spent.
Based on the savings plan you create, set up automatic payments to transfer to this account each month. When it’s happening automatically, you likely won’t even notice!
At any point, you can view your account and see how much money you have, which can be a great source of motivation.
Set a calendar alert on your phone for when you’re ready to book your trip so you know when the account is full.
Don’t put travel on your credit card
Purchase your tickets and any other expenses, ONLY when you have sufficient funds in your travel account to pay it off in full.
Saving ahead of time will save money stress after the trip is over.
Think about it: if you get back from a trip and then have to start pinching pennies to pay off your credit card (plus interest), it can really leave a sour taste in your mouth regarding travel. But if instead you come home and your trip is already fully paid off, you’re able to savour the incredible trip you had (and start saving for the next one right away)!
Make memories not debt
Travel is an incredible way to make memories, but it’s not worth it if it’s going to put you into debt.
With just a little planning and preparation pre-vacation, you can avoid the stress and overwhelm of debt, and instead just focus on having an amazing trip.
Will you be going on vacation when borders open up fully?