Holidays without financial baggage

Holiday Financial Planning Tips

By Dee Chan, Financial Advisor

We all need something to look forward to and for many members of Generation X the lure of discount airfares and package deals are irresistible; others have luxury holidays high on the agenda.

And why not? We all love a holiday and what’s more, happiness, apparently, is not just in the holiday itself, but in the planning of it too.

Research conducted by Roy Morgan Research concluded that people with an overseas holiday planned are optimistic about the future. Not surprisingly, there’s a demonstrated link between optimism and health and well-being.

But it’s not just the planning; it’s how you fund your trip that has the biggest impact.

Alex and Tony are both in their mid-40s. During their annual portfolio review with us, Alex talked of their dream to visit Europe. With a hefty mortgage, they couldn’t see how they could afford such a holiday without refinancing their home.

To their surprise, we suggested they consider a savings account tailored to meet this specific goal.

These accounts are opened with a small initial sum and pay bonus interest to encourage regular deposits.

Assisted by their local travel agent the couple planned the holiday of their dreams. They paid the upfront deposit, and with our guidance, selected a suitable account to save up the balance. An agreed amount was automatically transferred from each of their salaries every fortnight to this new account.

Eighteen months later, Alex and Tony sent us a selfie taken while sipping coffee beneath the Eiffel Tower.

Saving for something upfront may be considered somewhat old-fashioned.

These days, there is a variety of options for funding the trip of a lifetime.

Some people sell assets like share portfolios or the ‘mid-life-crisis’ jet-ski that never got used.

Many others turn to credit cards or holiday loans.

Introducing holiday loans

Holiday loans are unsecured personal loans lending up to $50,000 over terms of up to seven years. They’re quick to establish and approved cash is easily accessed. Interest is calculated at personal loan rates, i.e. lower than a credit card.

Jules and Paul financed their holiday using a holiday loan and returned with some fantastic memories. They also came home to a sizeable debt.

Many returning holiday-makers experience a kind of depression known as Post-holiday blues. Seriously – you can Google it!

Post-holiday blues seems to coincide with the fading of the tan and the unwelcome arrival of loan statements.

With little incentive to save for the holiday before they left home, the couple had zero incentive to pay for it once they’d returned.

The Huffington Post suggests that to beat post-holiday blues, simply plan your next trip. Dispirited, Jules and Paul couldn’t even dream about another holiday. They were left depressed and servicing a loan that impacted their lifestyle for years to come.

Conversely, Alex and Tony returned from their big trip refreshed and debt-free.

With proof that it works, the couple drew up a new budget and savings strategy a few weeks after getting home. Having ticked Europe off the list, they’re eagerly anticipating their next adventure in South America. We’re looking forward to following their travels on Facebook!

Dee Chan is an authorised representative and credit representative of AMP Financial Planning. Blueprint Planning Pty Ltd (ABN78 097 264 554), trading as Blueprint Wealth, is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee 232 706.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.

Sources: Do holidays really make us happier? (1 August 2016) 5 simple ways to beat your post-holiday blues (Updated 6 January 2017)