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Managing Your Money
Plan to enjoy a debt-free vacation this summer
The best part of your dream vacation? Memories that’ll last a lifetime. The worst part? Paying for that short time-out over what seems like a lifetime. That’s the trouble with a plastic holiday – it’s the gift to yourself that keeps on “giving” to your credit card company month after high-interest month.
So why not stow that credit card and pay for your holiday with real money – cash you’ve saved for that precise purpose? And while you’re at it, why not get the rest of your financial life in order, too? That may sound like a tough task – but, when you take it in easy steps, you can take control of your spending, ramp up your savings, even start an investment program and enjoy a debt-free, guilt-free vacation. Here’s how:
Budget for now and later
The key word is budget. You’ll want to set up a realistic budget that encompasses both your short- and long-term priorities. Begin by making a list of your financial goals: The longer-term ones like buying a home, having a family, enjoying a comfortable retirement; and your more immediate goals like that dream vacation. Use your list to develop a budget that will free up cash for your current needs and generate the savings you need to invest for the future.
Build your budget from the basics
Whether you work through it with a pencil and paper or use one of the software budgeting programs currently available, your basic budget-building steps will be the same:
Calculate your monthly income. In one column, list your income sources and amounts – include salary, overtime, bonuses, commission, pension income and all investment income from stocks, bonds, real estate, alimony or child support. Then subtract income tax and other “source” deductions like EI and CPP.
Calculate your monthly expenses. In a second column, list all your expenses – include mortgage or rent payments, property taxes, utilities, loan payments, private health insurance, car lease payments, car and house insurance, parking fees, public transportation, dry cleaning, gifts, clothing, groceries, child care, restaurant meals, charitable donations, life insurance, entertainment, and money you put aside each month for savings or investments, such as RSP contributions. Then average your expenses over three months to account for variations in your spending patterns.
Add it all up. Then subtract your expenses from your income. If you have money left over, that’s good – you can use it as extra savings which you can invest. If you don’t have anything left (or not enough), use your budget information to reduce your spending by making one more column. List what you’d prefer to spend in each expense category – but be realistic: some expenses can’t be cut and by cutting others too deeply you run the risk of big-time budget breakdown.
Practice monthly maintenance. Your budget is like a car – to keep it running at peak efficiency, it’ll need a tune-up every so often. Keep an eye on your financial performance. Make spending adjustments as necessary to stay on track with your objectives, or even to increase your cash available for savings and investment as you earn and learn more.
Be a budget bulldog and you’ll not only be taking a debt-free holiday before you know it, you’ll also be traveling down the right road to financial independence. A travel advisor can help you pick a dream vacation destination; a financial advisor can help make sure you reach the financial destination of your dreams.
This column, written and published by Investors Group Financial Services Inc., 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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