Go Forth, Travel!

 

Travel doesn’t come cheap. Yes, there may be discounted airfare or accommodation but these types of offers are either last minute or you need to book way back in advance.

You don’t have to be rich to travel. It just takes planning, discipline and budgeting. You need not go far. If time and budget are limited, just set aside maybe a day or two just to unwind and clear your mind. My favourite quote, “Life is a journey, not a destination”.

So, how to ensure there is always money to go on travels? I wrote this article two years ago after a traumatic experience and posted it in this blog last month. To this very day, I am glad that whatever happened in the past, happen – it taught me many valuable lessons in life. I can now say that every year I get to travel and fulfill my inner need to wander the continent.

A few days ago, someone tweet me this link. Truly coincidental that the authors in the mentioned articles also write about travel budget in terms of five tips.

More links on planning for a holiday

• How to travel the world
• Travelworth
• Saving Money on Vacation
• Traveltips
• Startbackpacking

Life is too short for simply dreaming. Free your inner wanderer. Go forth, Travel!

Five Easy Steps for Achieving that Dream Vacation and more besides

Life lessons - once learned, never forgotten.

 

1. BREAKING DOWN FIXED EXPENSES AND VARIABLE EXPENSES.

 

 Every month the bills start rolling. Look at each bill and see if you need to pay this type of bill every month. In that case, this is your fixed expense. It can be the same amount or fluctuate month to month. Such expenses like rental or mortgage bills, utilities, insurance or car maintenance. Variable expenses are miscellaneous items like emergency hospital treatment, shopping bills for handbag, jewellery or new fridge. It is easier if you use a computer software program like Excel or Open Office Math to tabulate the total expenses for Fixed and Variable Bills. My personal preference is to write it down on a piece of paper and calculate manually. Longer process, yes, but it just reinforce the situation.

 

2. NET SAVINGS

 

 Your monthly salary less fixed and variable expenses will give you the Net Savings. This is where you can channel net savings in various ways. One way is to use some of the net savings to buy an endowment plan.

 

3. ENDOWMENT POLICY

 

 Insurance policy comes in many forms. Even if you don’t believe in insurance, an endowment policy works to your benefit. How? An endowment policy is an insurance plan and also a savings plan. Two for the price of one deal. The basic insurance coverage could be for death and permanent disability with a rider like critical illness if you wish. You will pay a premium for the first two years or so, depending on the policies taken, then the savings function kick in. Suppose you pay a monthly premium of $150. On the second anniversary, you will get a cheque of $1500 from the insurance agency. Again this depends on the endowment policy you have signed up. That is extra earning. You can go on holidays, buy a new wardrobe or whatever you wish. If you don’t need the money, leave it to grow and earn more interest.

 

4.OPEN ANOTHER BANK ACCOUNT

 

 Why do I need so many bank accounts? First, the bank account where you draw your salary is now called the Expenses Account. A separate account will allow you to save each month regularly. Once you have bought an endowment policy, re-classify this expense under fixed expense. The Net Savings will show a reduced amount but that is ok as you still have some balance. Every month, without fail, upon receiving your salary, transfer the Net Savings to your new Savings Account. Better yet, open a savings account where the bank can transfer the Net Savings automatically from your monthly salary. For the first few years, it may be better that the bank has no restriction policy in case of withdrawal. Emergency does happen. You never know if one day the fridge breaks down and you need a new one immediately. Any bonus at year end, first thing to do is transfer the bonus to the Savings Account.

 

5. NEXT YEAR OPEN ANOTHER BANK ACCOUNT

Why? Because now you are ready for the next step and it is always wise not to put all the eggs into one basket. Look at the Savings Account. By now, it has build up quite nicely. Next, open another bank account. This time, the purpose is not to withdraw any money at all from this account, if all possible. Call it your Retirement Account or Reserve Account, if you will. Banks and insurance agencies have various plan. Shop around. If you don’t want the hassle, just open another Savings Account. To avoid temptation, choose an account with a lock-in period. This usually means that should you withdraw money before the maturity date, a penalty will be charged. A two-year lock-in period may be ideal. You decide. After the maturity date, either transfer the money to the regular Savings Account or let the bank automatically renew the account for another two-year period.

 

Open as many new accounts as you wish when you have more Net Savings. This way, you never need to owe money for the credit card bills. Going on that dream vacation is guaranteed and there is always spare change for emergency.

Caught in credit cards debt

 I had a moment of reflection today, thinking back to 1992. A pivotal point in my life.

 What does a credit card represents to you? For me at that time, it was like striking lottery, financial freedom, like a validation for all the hard work. Little did I know.

 The first time I received my credit card bill, I only paid the minimum sum, usually $50. Clueless state of mind rationalizing “I have more money in the bank account by paying slowly”. No idea absolutely of the interest factor. It went on for several months. By then, I had accumulated five credit banks.

 

Can I borrow money?

If your best pal call desperately asking for money, would you have the heart to turn them away? Not me. This was someone I had known nearly 20 years and caught in a family situation not of her own making. Apparently her sister had signed on as guarantor for a friend and the friend had defaulted payment and now the creditors were after the sister. Emotions could sway all logical thoughts. Despite misgivings, I lend a few thousand dollars and wrote a cheque from an overdraft account. All these was happening while I was preparing for an overseas graduation trip to get my degree for a long-distanced course. Debt and more debt.

 

Where’s my money?

Reality knocked a few months down the road. Bills and more bills arrived. I remembered clutching four bills and staring into nothing. Friendship could be destroyed because of money. No, I haven’t heard from my friend about returning the money, till today. I was caught in a nightmare of my own making. On top of that, the mortgage must still be paid.

 

The road to recovery

One day, enlightenment happened. I had to take a hard look at my life, learn to forgive, forget maybe not, but move on with life. If anyone is facing a similar situation or had gone through the same situation, have faith, take control of the situation and not let it control you.

 

Step by step

First – accept the situation, don’t try to hide the bills.

Second - forgive yourself, it can happen to anybody. Water is cleansing – take a shower, go swimming.

Third – write down a plan.

 

Executing the plan

In 1992, there wasn’t that many financial softwares. Now, just google away. I found that calculating manually makes me feel closer to reaching a solution and it also makes the brain think harder. So there I was, using a calculator and a notebook charting how long it would take to clear all the debts.

1. On a fresh page, write down the outstanding bill of each credit card.
2. Calculate how much to pay for each credit card for that month, write down the balance rollover for next month bill.
3. Add the interest (usually 24%), that amount will be next month outstanding balance. Eg. Sept bill is $5,000, you pay $50, balance rollover is $4,950. With interest ($4950 multiply by 24%, divide by 12 months) of $99, next month bill will be $5,049 ($4950 plus $99).
4. Do the same for the other credit card bills. Work out the following months bill until there is zero balance. For each credit card, you can see how many months it will take to clear the debts.
5. Play around of making a higher payment for each month and the debts are cleared much faster. The road to recovery is within sight.

 Of course today you can use Microsoft Excel or Open Office Calc to work out the sum.

 

Other tips

Bring a sandwich for lunch, eat in not out, cut away or hide your credit card. Put a picture of your loved ones in your wallet – the first and last thing to be seen when you open the wallet. Each time you want to buy something you don’t need, think of them.

For every bad experience, there is something to be learnt. Don’t give up, learn and move on.