Posted by Cindy Wilson.
Your leisure time is valuable—so it’s important to take a strategic approach when planning your vacations.
This summer I’ll be taking my horse trailer to Central California—not exactly a fancy hotel but it does have all the essentials (couch, stove, toilet). As investments go, it was big: $60k for the truck and $40k for the trailer. But considering how many times I’ve actually used it since shelling out four years ago—foregoing weekend getaways involving expensive flights and hotels—I can see it will eventually pay for itself, and then some.
A good financial plan factors in fun
Some financial advisors discourage certain types of luxury purchases or extravagant vacation plans. But when, during an advice session, an avid aviator asks me if a $100,000 puddle-jumper is too much of an extravagance for, you know, a non- millionaire, I try to find out if flying means as much to him as horse riding does to me. Do his eyes light up? That’s usually a good sign that it’s more than a passing whim, and worthy of investment.
Whatever your favorite pastime, be realistic about the number of years you can expect to pursue it. For me, horses are a lifelong passion that only gets stronger with the years. Also, be honest with yourself about how many years you’ll be fit and healthy enough to pursue your hobbies. $10,000 of hiking gear may not be the wisest investment if you’re 80—but then again, if you have the spare cash, why not live it up!
3 tips for financing your vacation
If you’re into a more traditional getaway (the kind that doesn’t involve cleaning up horse manure!) here are some tips for your consideration:
- Pick a budget—or not. Some people need to have their vacation expenditure mapped out, down to the last dollar: Not necessarily because they are control freaks but because planning is part of the pleasure. Others find a fixed budget too restrictive. Full disclosure: I’ve never been a fan of meticulously mapped-out itineraries, the kind of hour-by-hour schedules that are followed with military precision. Not only are jam-packed itineraries exhausting, akin to the regimented workday, but a trip planned in advance usually follows some well-trodden path—areas frequented by many tourists and therefore charging a premium for an inauthentic experience. The best city trips I’ve experienced were led by a local rather than a tour guide, involving hotels and spots discovered serendipitously en route rather than planned ahead.
- Make a saving schedule. If you’re planning for an upcoming vacation, look at your calendar and figure out how much you can skim off your paycheck each month to prepare for it. Then set up automatic direct debits for that amount into another account, your “vacation fund.” You can come up with a more specific plan once you have a sense of the total funds available. If you have a set vacation plan and/or budget in mind, figure out how many months it would take to save the sum you’ve budgeted for the trip. If you’re more flexible, choose a ballpark target to aim towards. Of course, those months of saving might require some “frugaling.”
- Choose an investment vehicle. If you have a fixed target, and are dead-set on keeping your principal intact, you’ll need to take a conservative approach, like saving for a car or the down payment on a house. You’ll want to make sure your money is there when you need it (hopefully with a little interest added on). If your goal is to save, say, $2,000 by July, and you aren’t flexible about that amount (you’ve already decided on hotel and daily spending money), what kind of financial product might be appropriate? A regular savings account may offer no real growth, but there’s no risk either—and if you open one with your bank it will be easy to set up automatic transfers from your checking account. If you’re like me and decide to merely base your vacation spending on whatever you happen to have saved by July, you may be comfortable with a more aggressive investing strategy, keeping in mind that you may also lose money.
Vacationing costs a lot of money, but it can be worth it for the memories alone. That’s why taking time out should be factored into your long-term financial plans—treated every bit as seriously as your more mundane budgeting goals. It was this realization that led me to invest in a horse trailer—and my advice to anyone else with a passion, be it hiking, medieval architecture or silent meditation—is to think about how you can invest in a future of following it.