There’s an old saying that “Travel is the only thing you buy that makes you richer.” True enough, and you don’t always have to part with great riches to enjoy it. How can you plan for the most fulfilling and least stressful time away? Amie Burke, a Branch Manager with Meridian Credit Union in Guelph, Ont., shares her best tips.
What should Zoomers consider when putting together a budget for a vacation?
Burke: Start with the basics – when, where, how and what. So, how much time do you have to plan and what time of year are you going, which can affect costs. Where are you going? How are you getting there and getting around when you’re there? And what do you plan to do there? You have to think about the full range of travel costs, not just the obvious like flights, hotels or rentals, meals and activities. There are all kinds of other costs, from luggage fees, to roaming charges for your phone, to gifts for the kids or grandkids. It all adds up.
How do you start planning and budgeting for your dream vacation now?
Burke: It’s easier to swing a dream vacation when you have dedicated travel savings. Do some simple math. Think of your overall costs and when you’re planning to travel, then work your way back. That tells you how much you need to put away every week or month in a vacation fund. If it’s not realistic to save what you need, then you may have to push the date out. You can open a travel account that can earn you a higher rate of interest, so talk to your financial advisor. You can arrange automatic transfers. Sometimes you can actually name the fund, like Europe 2019, so that gives it emotional currency too and helps prevent you from dipping into it for other purposes.
Besides the trips you plan well in advance, you may also want to have the flexibility to jump at unexpected travel opportunities. One way to do that is by having an overall travel fund. If you come across a great last-minute deal or getaway, you can see what you have in the pot. Look also at whether your credit cards or loyalty cards offer travel rewards. That’s a great way to save. Sometimes, you might be able to cover the bulk of air and hotels. Some airlines, hotel chains, cruise lines, car rental agencies, tours and attractions offer discounts to seniors too. Check out what’s available and what you need to do to qualify. Even if senior discounts aren’t advertised, ask anyway. You have nothing to lose.
Do you need health insurance?
Burke: Your provincial or territorial insurance doesn’t usually give you anything outside Canada. Which means the government won’t cover your medical costs. So it’s important to have the right added insurance. If you have coverage or are arranging it, be sure to check exactly what it pays for. Review things like medical treatment, hospitalization, disability, any limitations or restrictions for pre-existing conditions, and emergency services. Sometimes, there are exclusions. So if you have an injury, but it happened after you were consuming alcohol, you might not be covered. Read the fine print, and bring copies of the policy with you. Besides insurance providers, your credit card might offer protection too, so contact your card issuer.
What should you do before you leave on vacation to protect yourself and your money?
Burke: Back to travel insurance, be sure to have coverage for things like flight cancellation, trip interruption and lost luggage. Let your credit card company know that you’ll be travelling, so they don’t stop transactions from going through in another country or city. Part of protecting yourself is also ensuring access to key information. So you can leave your family copies of your passport, itinerary, travel documents, insurance policy and prescriptions. As a backup, have copies of these documents on your phone.
Also, load your banking app on your phone so that you can check your accounts when you’re away and make sure there’s no unauthorized activity. To protect your property when you’re away, don’t broadcast on social media when you’re off and for how long. That’s an advertisement that there’s an empty home.
How should you pay for expenses while travelling?
Burke: Before you go, check the rates on foreign currency. Often, currency exchange stores will have better rates than the banks. Rates fluctuate. If you know you’ll be travelling to the U.S., open a U.S. account and purchase the currency when it’s advantageous to you. You can tuck it away over time. Once you’re away, have options. There are smart ways to use credit cards vs. cash. Cards are obviously more convenient, but cash is king in many places. Ideally, bring a few cards in case one doesn’t work. You may want to get a credit card especially for travel, one that perhaps has a lower limit. You’ll want to use cash for smaller daily expenses, for a couple of reasons.
One, it’s possible that not all vendors take your card. Two, you avoid escalating credit card bills with interest rates that add up.
What about keeping your money safe?
Burke: For safety’s sake, don’t carry large amounts of cash. You can always frequent foreign exchange offices and local ATMs to replenish. And don’t keep cash all in one place. You can spread your cash and cards in different places, or carry a “dummy wallet” with a bit of cash and expired cards – one that you won’t miss if you’re robbed. Another idea is get money belts and wallets with RFID block protection. That safeguards your credit cards from electronic identity theft.
How do you account for unforeseen costs in your budget?
Burke: Don’t view them as unforeseen. You want to leave room in your budget for things like spontaneous adventures, or a special shopping purchase. So giving yourself wiggle room should be part of your cost planning from the outset.
You can also add a contingency category to your budget, maybe 10%. So if you think an overall trip will be maybe $5,000, add $500 to that. This goes back to doing our research on the when, where, how and what. You may have to re-work your budget a few times to see how it all adds up. Could you save money by doing Airbnb for accommodations? Do you have the flexibility to travel off-peak? That’s a huge perk if you’re retired. Will you be eating out all the time, or do you have the amenities to prepare some meals? Can you save money by buying some travel packages up front? Think about what’s most important to you. Think carefully too about that thing you want to buy. Would you buy it if you were at home? Can you get it home easily and safely? Could you buy it at home for less? When people are on vacation and relaxed, some of their spending inhibitions come down. Recognize that.
What is the best way to handle going over-budget and what steps can you take to get your finances back in order once you return home?
Burke: If you’ve planned properly, hopefully you’re not too over-extended. If you are, forgive yourself, take a deep breath and get busy. You may have a contingency fund, where you have cash or other assets in reserve to cover the unexpected. That gives you a safety net. However, those sorts of funds should really be used for things like medical care and other emergencies, not for discretionary spending like travel. Instead, look at the quickest way to reduce your debts, with the lowest interest rate.
For instance, you can pay off your credit card bills with a line of credit, which typically has a lower rate. Then you work out a plan to pay down your line of credit. This is a learning opportunity. Examine how and why you went over budget, so you can plan better for your next trip. In general, it’s a good idea to work with a financial advisor. That advice is free too. An advisor can help you develop and refine a plan that covers your short-term and long-term needs. That includes everything from retirement savings, to your overall estate, to travel plans – so you can go away next time with peace of mind.