Four pitfalls to avoid for a debt free summer
Some of my favourite childhood memories involved quintessential summer activities: Camping, riding my bike, playing at the park, and spending time with family and friends. After being couped up inside for the past eight months — much less 14 months due to current COVID-19 restrictions — summer can seem like a golden opportunity to relax, recharge and reconnect.
But while all of these things are essential to our mental wellbeing, all that carefree abandon and desire to make up for lost time can make it easy to overspend. Following are four pitfalls to avoid so your summer fun doesn’t end with the chill of a large bill you can’t afford.
Underestimating the total cost
Before planning that camping adventure, tropical holiday, or summertime road trip, stop to consider the costs involved and confirm they fit within your spending limit. Some of these are relatively obvious, but many are hard to estimate or easy to overlook. Be sure to consider:
- Flights,
- Car rentals,
- Accommodations,
- Meals,
- Activities or attractions,
- Taxis / public transportation,
- Exchange rates on foreign currency,
- Etc.
Researching these items ahead of time can go a long way to avoiding any big surprises after you’ve arrived. Take advantage of other peoples’ experiences via online blogs, message boards, and social media groups. It’s also a good idea to add an extra 10 percent margin for error to your budget just in case you forgot something, or prices are higher than anticipated.
The MNP Budget Tracker Spreadsheet is a great tool to help you get started.
Beware the hidden cost of ownership
Vacations that involve the purchase of property such as an RV or cabin can be even more difficult to estimate — and are often far higher than expected. For example, the cost of your annual two-week RV trip could end up costing more than an all-inclusive tropical holiday on an annualized basis.
Not only will you have to pay for food and campground charges, but also the total purchase price of the RV, maintenance, insurance, storage costs, kitchenware and linens, fuel, etc. You’ll also need a vehicle capable of towing an RV, which is sure to take on added wear and tear.
If you take on debt, your payments are likely to be locked in for anywhere from five to 20 years or more. What will you do if your income or family situation changes and you can no longer afford those payments?
With real estate there is at least a chance that it can be sold for enough to pay off your debt, but there is certainly no guarantee and now you have to factor in selling costs, the hassle of moving out, and carrying costs until the property sells. With something like an RV, it is very likely that you would not be able to sell for as much as is owing and now you have the added challenge of dealing with the creditor regarding a potential shortfall.
No limits
Of course, you’ll want to take in as many sights and delights as possible on your vacation. But if you’re not careful, this is a sure-fire way to blow your budget and take on a heaping pile of debt.
A budget is a great start, but it’s not much use if you can’t stick to it. Plus, nobody wants to be sifting through a spreadsheet on their holiday. So why not set a daily spending limit based on your budget instead?
For example, you could allocate $200 per day to cover all the costs you expect to encounter. Once you’ve reached you limit, it’s time to turn in for the day — or at least find some wallet friendly activities to do instead (card games, sit on the beach, read a good book, etc.). If you don’t spend the full allotment one day, you can carry it over to the next day.
There a few tactics you can use to keep yourself accountable and within your limit:
- Use cash only: Withdraw your spending limit first thing in the morning and stop spending when you’re out of money.
- Set a spending limit on credit or debit: Most online banking applications allow you to set and change daily withdrawal / transaction limits. It will let you know when you’ve reached your limit, but you can still change the amount in an emergency.
- Keep a running total on a piece of paper: Every time you buy something, subtract that transaction from your remaining balance for the day. When you hit zero, it’s time to stop spending.
It’s helpful to remind yourself that your spending limit isn’t about depriving yourself of the experiences you want while on vacation. It’s about enjoying every day to the fullest without suffering the lingering consequences when you return to normal life.
Filling every moment with an activity
Now that you’ve finally broken from the routine of everyday life, it’s tempting to fill every moment of it with fun and exciting activities. Unfortunately, these often come with a price tag. One way to rein in the cost is to mix free and low-cost activities in with the summer camps, tee times, and trips to the amusement parks.
Summer offers a great variety of outdoor activities that do not require an admission fee or any expensive equipment. Go for a walk, hike, or bike ride. Hit a local tennis court. Have a picnic or backyard BBQ. You can also deliberately choose to not fill every waking moment with an activity and take some time to relax and recharge your batteries instead. Stare at the clouds. Watch a sunset. Pick up a book from your local library, meditate, or take a nap.
If you think carefully, you may remember how many of your favourite childhood memories involved little more than whiling away the dog days of summer.
Set yourself up for a well-deserved summer break
Ultimately, no amount of planning can prepare you for all of life’s events. If you find yourself struggling with debt, MNP can help you get the financial fresh start you deserve. Schedule a Free Confidential Consultation to discuss your options with a Licensed Insolvency Trustee today. Together we’ll review your financial situation, discuss which strategies and solutions might work best for you and put you on the road toward a happy and carefree summer.
