On average, Americans spends around 10% of their annual income on vacations. Many people find themselves with a debt that is hanging around their neck for months after they return from foreign climbs. Add the cost of holiday and birthday celebrations to the financial expenditure list and pretty soon all of the fun can get sucked out of what should be happy times.
When money disappears and panic makes an entrance
The truth is that it’s easy to get carried away when you are planning a trip, or a special occasion. Human beings are naturally excitable and high excitement levels often mess with levels of reasoning. Buying three pairs of new shoes may not be the best idea when there are twenty more pairs at home in the closet, but you are travelling overseas, so you need to look your best, right? You get the picture; financial common sense tends to fly right out the window when vacations, birthdays and holidays come around.
You only need to see that almost 20% of total retail sales in the US occur during the lead-up to Christmas and you know how easily people spend large amounts of money at times of celebration and enjoyment. Even a simple visit from Santa can put you in serious debt, if you let it.
Keeping the fun in your life by taking care of finances
The single most important way to keep panic at bay when you are paying for a trip, presents or celebrations is to ALWAYS THINK TWICE. Give yourself time to decide whether the expense is really worth it and, more importantly, whether you can actually afford it. Time does not mean five minutes either; it means sleep on the decision, check your finances and make a note of the pros and cons. Spontaneity is all very well, but if it lands you in debt, it’s not so great.
Taking care of your finances may not seem like a whole lot of fun, but you will be glad you did when your neighbor is complaining about not having a life due to vacation debt and you are still able to afford date nights and trips to the movies with the kids. There are some tips that help when you are making financial decisions.
- Use a reputable tool to sync your financial accounts so that you can keep track of all your credits and debts in one place.
- Make spending decisions when you are in the best position to do so. If you are using copious amount of caffeine to keep you awake after a busy day, you are probably not going to make the most sound choices.
- Never make assumptions. Just because that friend of a friend owes you $200 does not mean you are going to get it back when promised. It may also be worth asking yourself if lending the money in the first place is a good move. Have you never watched Judge Judy?
- Keep pressure away when you are budgeting. Kids today are tech and fashion savvy. If you have kids, of any age, around when you are managing your money you are more likely to subjected to “outside interference”.
- Look for ways to save money when you shop online. This could be anything from getting discounted deals and offers through to accessing free gift cards to use at various retailers.
Invest all year to prevent the money shortage
Be honest, are you one of those people who looks at the calendar randomly and realizes that it’s only four weeks from holiday season, a special birthday or a vacation and you have about $50 saved at best. It’s actually pretty easy to find yourself in this situation.
Life gets expensive when you add up all your daily living costs and you do not want to miss out on watching the game at the bar or regular tanning sessions. The trick is to invest at the same time as you spend. This may mean that you reduce the amount you spend throughout the year but at least you will not fly into a mad panic when your entire family is due for Thanksgiving dinner and you are pushed to even afford a decent turkey. So, what are your investment options:
- A standard savings account.
At a basic level, you should have a savings account that enables you to put a set amount of money away on a regular basis. You should aim to save around 15% of your income. Remember that these savings are for emergencies as well and not just the good stuff in life. You may be able to cope with rainy days from your everyday finances but monsoons take a little more money to deal with.
You may be a little wary of investing in shares, but if you check out reliable investment advice from experts such as Modest Money, you can limit your risks. However, it’s worth remembering that no investment of this type is guaranteed to be a success; gains can be significant but so can losses.
- Fixed income investment
This investment option is generally more steady than equities, but the gains are usually not as large. You get returns with interest on a regular basis. If you want to start investing seriously, it’s a good idea to have stocks as part of your portfolio. Take a look at online advice before you decide what investments to make.
- Forex trading
Trading on the foreign exchange is something that you can do with very little upfront investment. However, the risks can be high and you need to be prepared to research currency news and be aware of how the situation in different countries is affecting their currency exchange rates. You can make money from Forex trading but it’s not a quick win situation.
By choosing an investment option that is suited to you it’s possible to build up enough cash to ward off the panic of paying for vacations, birthdays and holiday celebrations. However, it’s still important to be wise with your budgeting. There is no point investing carefully if you waste the money that you invest, and any gains that you make, on random purchases and end up stranded at the airport because you missed your free transfer and you cannot afford the cab fare.