Travel: Planning for a debt-free vacation – you can do it!

A terrific vacation is a timeout from the cares of life. A brief period of fun, renewal, adventure, travel, or tranquility. Whatever your vacation dream might be, it can end with post-vacation bills. That's a wake-up call nobody wants – and it's one you can avoid.

Wouldn't it be great to come home to reasonable credit card balances and maybe even lower the costs for your holiday in the first place? You can do it – here's how.

Save before you go

The best vacation plan is to leave for your holiday with an “afford as you go” strategy so that you don't have to use credit for your travel, accommodation, and expenses. That way you won't face any big, long-term, high-interest, bills when you return. Where does this “extra” cash come from? There's nothing magical about it. This is money you already have but don't realize it. The key is to set it aside before it gets chewed up in the cost of daily living – and you can do that by…

Paying yourself first

This is one of the best savings strategies there is – whether you're saving for a vacation or retirement, or anything else, for that matter. And it's simple: When you set aside a portion of your weekly or monthly pay as soon as it comes in, you won't immediately spend it, you're unlikely to miss it, and your vacation nest egg will grow steadily.

You can pay yourself first by saving a fixed-dollar amount or a percentage of your income – say, 3% - each pay period. You choose the amount that you can most comfortably afford.

Make the most of your savings

Don't leave your money in a low-interest bank account. As your savings start to build, move some into investments that generate higher rates of return, such as:

Money Market Mutual Funds that earn competitive returns can be usually redeemed in a matter of days and, depending on the fund, may even allow chequing privileges. If you're planning a trip down south, some money market funds even allow you to save in U.S. dollars, which can reduce your exchange risk.
Guaranteed Investment Certificates (GICs) or Term Deposits which can be a good choice if your vacation is a long way off and you can commit your cash for a longer term. By locking in your money for a fixed period, you could earn a higher interest rate.
Government Savings Bonds which are often cashable at any time, and can be purchased only within a limited period each year. Your employer may offer an automatic deduction program for the purchase of Government Savings Bonds – another automatic pay-yourself-first strategy that could work for you.

Reduce your vacation costs

By saving before your vacation, you can also save on your vacation. For example, you can pay cash for your travel tickets or use cash to take advantage of “last-minute” travel bargains. You can also purchase traveller's cheques before your trip or use automated teller machines during your holiday instead of pulling out high-interest credit cards.

Your financial advisor can help you make the most of a pay-yourself-first strategy that meets your vacation-saving and other financial goals.

(Submitted by Damon Smith, Investors Group Financial Services Inc. For more information call 888.335.1362).

This column, written and published by Investors Group Financial Services Inc. (in Quebec – a financial services firm), is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.

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