Taking a vacation is essential to being able to perform well the rest of the year. But not at any cost.
If taking a break allows you to recharge your batteries, this should not be to the detriment of our finances or create debt. Indeed, this pleasant week off could well turn into a burden that you will drag around for months if you used your credit card to treat yourself to it and you have not repaid the balance complete thereafter. With interest rates usually around 20%, we will therefore pay twice for these few days of rest…
How to escape the debt trap? Carl Vignola, private banker, TD Wealth Management, has some concrete tips for better organizing your finances in preparation for those well-deserved annual holidays.
Budget
To budget well, you must first plan well. “Often, the difficulty lies in the fact that we have miscalculated the expenses related to a trip. As a result, a host of unforeseen costs are added to the bill,” notes Carl Vignola.
This is why he recommends carrying out a rigorous pre-planning exercise.
A good starting point is to know what you would spend if you stayed at home, on groceries, going out, dining out, transportation, etc., for example $1,000 per week for your family. You probably already have in the bank the money you would need to live at home for one or two weeks. In this case, you could simply devote this budget to your vacation. In addition, if your leave is planned in August, you still have a few weeks to accumulate the rest of the necessary amount.
Don’t forget to plan the little extras likely to increase the bill on site (activities, various purchases, etc.).
To make your task easier, do not hesitate to use the budget applications offered by most banking institutions.
Leverage your points
Another good tip: use the points accumulated with your credit cards. “Several of them offer travel discounts, for example. So now is a good time to take inventory of the points you have accumulated and determine the best way to use them,” says Carl Vignola.
You could use it to buy a plane ticket or pay part of it, treat yourself to one or more nights at a hotel, have access to promotions with travel partners, etc. Don’t let your points sleep!
“Some cards also award a large number of points as a sign-up bonus, which can equate to a good amount. But be careful, this strategy is only valid if you repay the full balance each month so as not to have to pay interest charges,” advises Carl Vignola.
Many also provide travel insurance or insurance for rental vehicles, which reduces expenses.
Other ways to save
To make your vacation cost less, evaluate different scenarios. For example, is it absolutely necessary to go abroad? A trip to Quebec could be just as satisfying. Remember: the memories we keep are generally related to the people and times we experience, not necessarily the places.
Also carefully evaluate when you leave, because some periods are more expensive than others, the famous “construction holidays” in particular, and school holidays in general. If you must fly, be aware that flights with a stopover are generally less expensive than direct flights.
To reduce costs, renting accommodation instead of a hotel room is also a good option, because then you can prepare meals at home instead of eating them at a restaurant. Better yet, to share expenses, rent larger accommodation or chalet to several families.
Final advice: put artificial intelligence to work for you. Thanks to free tools like ChatGPT for example, you can ask questions like “Where can I go on vacation with a budget of $4,000 for a family of four?”, or even “What is the cheapest destination in Europe this summer?”, etc. “This allows us to do an initial sorting and gather valuable information. We can then refine the research and find out about the best activities to do there, where to eat cheaply, etc.,” concludes Carl Vignola.
ADVICE:
· To avoid going into debt, ideally, you set aside money in advance for your vacation in a separate bank account. We start by assessing the required amount, then divide this by the number of months remaining before departure, and save the required amount each month. At the end of the process, you will have the money you need without having to use your credit cards!
· Automatic monthly transfers to a separate account are a great way to save systematically without thinking about it. This method applies to the vacation budget, but also to any other project (renovation, down payment for the purchase of a house, etc.).
