Tag: Travel

And now, I Replenish the Sinking Fund!

Last month, I went on my first post-pandemic overseas trip. It wasn’t cheap. However, travel is one of my spending priorities so I have a sinking fund to pay for it.

It was my first trip to the Netherlands, with a very short stop in Belgium. I traveled with a dear friend of long acquaintance, who had suggested this trip the fall of last year. After months of blue-sky ideas, we settled on a river cruise since we’d both wanted to do one. And that river cruise was followed by 3 days in Amsterdam. The trip was amazing: canal tours, chocolate-making, stroopwafels, the Red Light District, Keukenhof Gardens! There simply wasn’t enough time to do everything that was on offer in the amazing city that is Amsterdam. Trust me when I say that we made the most of our available time.

First things first. You should know is that I spent every nickel of my travel sinking account:

  • I used some of the money to upgrade my airline seat, and those extra 4 inches of room were well worth the splurge. (Shout-out to another dear friend who’d made the suggestion to upgrade!)
  • Purchasing an all-inclusive tourist app prior to leaving home was a fabulous use of funds! That app allowed for free transportation on buses, trams, and the metro within the city. It also gave us free entry to many cool museums and various other tourist spots.
  • I also had the funds to book a more expensive hotel very close to all the things we wanted to see and do. Had we stayed elsewhere, precious time would’ve been wasted on commuting from one location to another. As it was, we were able to walk to almost all the places on our itinerary. The spectacular Vondelpark was a stone’s throw from our accommocations and the stunning Rijkmuseum was only a 10-minute walk away.
  • During our river cruise, we realized that the Hague was only an hour away from Amsterdam by train so, without any consideration as to cost, we made a last minute decision to visit the city of Peace and Justice too.
  • My souvenir knapsack came back stuffed with chocolates, magnets, tulip bulbs, cheese, stroopwafels, and books.

My travel sinking fund allowed me to say “Yes!” to everything I wanted to do, eat, taste, see, and buy. Again, I spent every single nickel of that fund on this trip… And I felt absolutely no guilt in doing so! The money was earmarked for this purpose. I spend freely when I travel because there’s no guarantee that I will ever pass that way again. I don’t want to come home with any regrets or thinking “I should have <insert missed opportunity here to do what I wanted> while I was there.”

Looking back, I can say that this was one of the very best trips that I’ve ever taken.

So, now that I’m home, it’s time to replenish the travel sinking fund. I want to go somewhere new in 2025, and I don’t want to come home with debt. Where I want to go hasn’t yet been decided, but I’m thinking that I’d like to travel in April or May of next year. Destination is very important, but there’s a high chance that I’ll change my mind about what I want to do next year. Scotland had been on the list for 2020, but those plans were destroyed when the world shut down. I haven’t been to Asia yet so it might be nice to go there. Japan has always intrigued me, and I’ve heard many wonderful things about Vietnam. There’s also this culinary course combined with local tours that’s also available in regions of Italy that I haven’t visited yet… So many options!

Determining where I want to go isn’t the main driver here. There’s a good chance that the destination will change a few times. Nope, my first task is to figure out how much to save from each paycheque going forward. If I save too little, then I can’t do my 2025 trip the way I want to without incurring credit card debt. That’s a no-go for me. Literally! I’d rather stay home that pay interest to a credit card company for my trip.

And if I save too much for travel, then my other financial priorities will be short-changed. I don’t want to do that either.

First things first, I’ve considered the size of my paycheque and I’ve figured out how it has to be allocated amongst all of my financial priorities. Long-time readers will know that I have sinking funds for property taxes and insurance premiums – the unsexy, necessary expenses of adulthood. Sadly, they take priority over travel so they have to be funded first. There are also some landscaping projects around my house that are slated for 2024. Gardening has become a hobby of mine and I want more perennials around my home. The kind of plants I want to buy are not particularly cheap, so I need to budget for them. I’m also still a fan of live theatre and those subscriptions don’t pay for themselves.

Thankfully, I’m debt-free. I managed to pay cash for my latest vehicle. Student loans and mortgage debt have been in my rearview mirror for a very long time. As such, I don’t have to have send money to creditors every month. While I use credit cards, the balances are paid in full every single month. A good portion of my former debt payments is put towards travel every time I get paid. (The rest of those payments has already been re-directed towards building my emergency fund and investing for my retirement.)

Even though I spend a lot of time talking about the future, I recognize that money is also meant to be spent to bring us some joy today. The Care and Feeding of Future You is incredibly important. That’s why you should be investing a good portion of every paycheque for long-term growth. When your paycheque stops, your investment portfolio should be ready to take over.

However, taking care of Present Day You is also a serious responsibility. You should be able to do some of the things that you really, really, really want to do now without going into monstrously expensive credit card debt to do so. And that’s why I advocate for sinking funds. Setting aside the money first means that you don’t burden yourself with debt while still getting to do what you want.

Figure out your priorities, then create sinking funds for each of them. When the money is in the fund, spend it as intended without any guilt whatsoever. When you get home, replenish your fund so that you can get down to the business of turning your next dream into a reality.

Sinking Funds – Key to Winning With Money!

Spring has finally sprung! We are nearly halfway through 2022, so it’s time to start doing some financial forecasting for 2023. What big expenses do you have to pay for in first six months of next year? And have you set up your sinking funds to pay for them?

While it’s important to live in the present, it’s also prudent to plan for the future. How you’ll spend your money is definitely one of the things that you should be planning well in advance. After all, there’s a fairly good chance that your dreams and goals for your life have some kind of financial component. If you’re frittering your money away on stuff that doesn’t matter to you, then where will you find the money to pay for the things that you really & truly want?

My financial life got immeasurably better when I started using sinking funds, aka: planned spending. Doing so meant that I was saving money for the most important stuff first. When I was younger, I decided that I wanted to have money already set aside for the big, major expenses that come up every year. In my case, those expenses included property taxes and insurance premiums. I had to pay for these necessities even though I didn’t particularly enjoy them. And they were very expensive – several thousand dollars a year. By having sinking funds in place, I didn’t have to scramble to pay my taxes or go into debt to make sure I was covered in case something happened to my car or property.

Please don’t misunderstand me. There are other major expenses that definitely fall into life’s goals and dreams category. For me, travel is a huge spending category. One of my dreams is to visit as many places as I can while it’s still physically comfortable for me to do so. In the Before Times, I was fortunate enough to visit Europe several times and had been planning my first trip to Asia. Then the pandemic hit and my travel plans went on hiatus. That doesn’t mean that I don’t have a sinking fund in place for travel. Au contraire! When I feel comfortable doing so, I’m heading back to the airport and going somewhere. Flights and travel haven’t gotten any cheaper in the last 12 months. Demand for travel is high right now thanks to all the pent-up demand. I’m confident that it will settle again. At that point, I’ll be roaming the world on the money that’s been set aside in my travel account.

How to Start a Sinking Fund

My first step to starting a sinking fund was to track my expenses. I wanted to know where every nickel was going so I could project how much I’d need the following year to cover big annual expenses. My next step was to divided next year’s anticipated expense by the number of paycheques until that expense would be due. The resulting amount was the amount that would go to my sinking fund.

For example, if my insurance premiums are $2600 per year, then I save $100 per paycheque for the following year’s premium payment. (I’m not a fan of monthly debits and prefer to pay my premium in one lump-sum.) When the following year rolls around, I’ll have $2600 waiting to pay the invoice.

It’s no secret that I’m a huge proponent of automatic transfers. I rely on them to put money into my sinking funds and to re-fill the funds as necessary. Over the years, I’ve learned the following tidbit about myself. If the money is available to me, then I will spend it… and generally on things that aren’t that important to me. However, sinking funds remove this option from me. I can only spend what’s leftover after the automatic transfers have gone through!

Another little tidbit I’ve learned about myself is that it’s best if my sinking funds are in another banking institution. While I use my chequing account daily, I access the sinking funds way less often. There’s no need for me to see those dollars just sitting there. It’s best for me that they be squirrelled away so that I’m not tempted to spend them.

Goals, Dreams & Fun Stuff!

Winning with money also means that you have sinking funds in place for your wants too! After I’d successfully set up sinking funds for the un-sexy stuff, I created a few for the non-necessities of life. The things that normally threw a wrench in my budget involved fun: birthday parties, holidays, anniversaries, invitations to concerts, etc…. I want to participate in these things with my family and friends. Money is sometimes a part of those celebrations, whether it involves a present, travel, tickets, contribution to a group gift or whatever. Sometimes fun is free. Other times, it involves money. When it does, I need to have some on hand so I can say “Yes, I’ll be there!” without worrying about cost.

When you have the money, make sure that some of it is going towards your goals and dreams. You shouldn’t feel bad for wanting to achieving what your heart really wants. Maybe it’s a weekend at a creative writing workshop. Perhaps you’ve always wanted to take horseback riding lessons. Some of you might want to take culinary courses in various cuisines. Whatever it is, it’s important to you and you should try to make it your reality. You know best what would make your heart sing. I’m just here to encourage-prod-nudge you into creating a sinking fund so that you improve your odds of making those goals and dreams come true!

Know Thyself

One of the keys to getting what you want from your money is knowing who you are. The very first step to getting what you want is identifying it. There is no way around it – you must know thyself.

Are you a person who buys something because everyone else buys it? Or are you saving up for something that may only be magical to you? Do you care about others’ opinions on how you spend your money? Are you a person who can live with the consequences of your choices?

Be very honest with yourself about how you want to use your money. Some people want to use it to impress others. Then there are those who use it to control or manipulate the people around them. A good number of people use their money to alleviate suffering in the world. And there are some who want to hoard money in an effort to build security for themselves.

What do you want from your money?

As the years roll by, my perspective on money is changing. I’ve always been a saver, a very good saver. And when I first learned about the FIRE movement, my goal was to one day save 50% of my income – maybe even 70%! However, as I approached this arbitrary yet magical allocation, I started to seriously consider the impact saving that much money would have on my desired lifestyle.

Thanks to several money mistakes, saving 50% wouldn’t allow me to retire in my 40s…which would have been awesome, since I’m long past the ability to retire in my 30s. I suppose if I were willing to commit to very reduced standard of living, I could retire in my 40s… But I know myself. I don’t want to retire and hope that nothing goes so wrong that I have to return to work. I want to be done with working once I retire. Saving 50% wouldn’t get me there. Even saving 70% wouldn’t give me the kind of retirement cash flow that I want.

So I stopped chasing that arbitrary goal and crunched my numbers. Saving a solid chunk of my paycheque would allow me to retire in my early 50s. And I’d have a little extra jingle in my pockets to enjoy the journey. Speaking of the journey, travel has always been one of my favourite things. The “extra money” that wasn’t squirrelled away allowed me to travel overseas. Before the pandemic hit, I was fortunate enough to visit Italy, Spain, and Ireland. Had I been saving 50% of my paycheque, those trips wouldn’t have been possible… and they also wouldn’t have been possible after retirement because my retirement cash flow would not be enough to pay for them.

See… I know myself. And I know that I don’t want to be a penny-pincher during my retirement. I won’t be keeping tigers on a gold leash, nor skipping across the globe to spend equal time in my 4 homes. However, I will have the flexibility to do more international trips, to make renovations to my home, to replace the appliances as needed.

What I also know is that if I had been smarter sooner, I would have made different choices. There’s no sense regretting my choices because I don’t have a time machine to go back and change them.

Knowing myself means that I’ve made peace with the following truth: I don’t use a budget. My money-management system does not involve very many categories. The only ones I have are: retirement, short-term goals, charity, and Everything Else. I’m a huge fan of using automation to ensure that my first three categories are funded. My paycheque hits my account – my automatic transfers are triggered – I spend whatever’s leftover in my chequing account. The leftover money has to last me until the next payday. I can spend it however I want, on whatever I want, secure in the knowledge that the priorities most important to me are being funded.

Your choices need not please everyone else.

Thankfully, I’ve reached the stage in life where I don’t require a popular vote to feel good about my financial decisions. When I was younger, it bothered me that my friends’ financial priorities didn’t align with mine. I intensely disliked being told that I was “saving too much money.” When others blithely told me “you can afford it”, I would bite my tongue so very hard in order to not lash out in anger. How dare someone else tell me how to spend my money?

I’ve since learned to let those comments roll off my back. Their priorities are not mine. And their hearts were probably in the right place. They honestly believed that their spending habits, which obviously made them happy, would make me happy too. And I’m sure I drove them nuts talking about retirement and investing and saving. Those were the things that made me happy. Over time, I learned to only talk about money with friends who are also interested in investing and retirement planning. Again, knowing myself has led me to find like-minded people who encourage and support me when it comes to pursuing my financial goals.

Know thyself. What is it that you want your money to do for you? Once you’ve answered that question, the next question is whether your money is actually being put towards achieving those goals. Finally, what changes do you need to make to align your spending with your financial goals?

Start Planning Today…

A new decade starts 11 days from today. What do you want to accomplish next year? Which dreams are most important to you?

The key to getting things done is to start planning today. Time waits for no one, and not a single one of us is promised tomorrow.

Sure, there are those rare instances where you fall ass-backwards into exactly what you want. Those instances are few and far between, so they don’t make for a good use of your time, energy, and focus. It’s better that you figure out what you want, then start planning today so that you can get it.

Maybe you’re like I was 5 years ago. At the time, I was sick and tired of being someone who had never been to Europe. It seemed like everyone I knew had been overseas and I’d somehow missed the memo. Know what I did? I created a sinking fund for my travels. I made it a goal to get over to Europe. In the past five years, I’ve been to Italy, Spain & Ireland.

It’s now a burr under my saddle that I haven’t seen the cherry blossoms in Japan. I’m going to start planning today on how to move this particular Bucket List item from the “Hope to Do One Day” column to the “Did It & Loved It” column.

  • Goal? See the cherry blossoms in full bloom in Japan.
  • When? Before 2025.
  • How? Save money from every paycheque in my Travel Sinking Fund.

Sinking Funds are an Excellent Tool

Travel might not be your jam. It’s not for everyone – I get that. However, I’d be willing to bet dollars to donuts that there is something you’d like to have bought, seen, done, experienced by this time next year.

More likely than not, there’s a good chance that it’s going to cost you a bit of money.

Introducing…sinking funds! They’re a magnificent tool to help you fund your dreams, whatever those might be.

Imagine for a moment that you want to take a $500 cooking class next September. If you don’t have $500 kicking around with nothing better to do, then set up a sinking fund. This is going to be a savings account where you stash money every month until you have the $500 you need to pay for your class. There’s 8 months between now and the start of September, so you’ll need to stash away $62.50 per month. Or you can decide to stash away $100 per month for 5 months, or $250 for two months… I think you understand my meaning.

Once the sinking fund contains enough money for you to cash flow your particular goal, you can re-direct that monthly/bi-weekly/weekly savings amount towards something else.

There’s no limit to how many sinking funds you can have going at once. If you’re fortunate enough to have the extra disposable income, then you can fund more than one goal at a time.

What if you can’t think of something you really, really, really want? Well, in that case, you should still have a sinking fund that you’re filling with cash. You can call it your Dream Fund, or your When I Figure Out What I Really Want Fund. The point is to have the money in place so that you can cash flow whatever your heart eventually desires.

Automatic Payments are also an Excellent Tool

Maybe your goal for 2020 isn’t to buy anything. Perhaps you’re in debt and you simply want out.

If this is the case, sinking funds aren’t the tool for you. There’s no sense paying additional interest on your debt while money builds in a savings account. That’s a foolproof way of ensuring that you pay way more interest than necessary to your creditors. We definitely do not want that!

Let’s say that you want to pay down atleast $2500 against your debt. It doesn’t matter if it’s credit cards, a vehicle, student loans, whatever. I want you to set up an automatic payment that sends money directly to your debt every single month.

Pay attention to the following because this where the steak stars to sizzle. This automatic payment is over and above your minimum monthly payment. You’ll get out of debt way, way faster by making extra payments than you will by paying the minimum amount owed.

By paying the minimum amount owed, you’re guaranteeing that you’ll pay the maximum amount of interest to your creditors. If you can avoid doing that, then avoid doing that. Pay as little interest as you can to your creditors and keep your money for the things that make you happiest.

A New Year, A New Decade, A New You?

I’m never been one for New Year’s resolutions. To my mind, if a resolution is going to improve your life, then you should implement that resolution today. Waiting until some arbitrary date in the future always seemed counter-productive to me. Why keep doing less-than-optimal things in your life simply because of a date on the calendar?

That said, I know that many people imbue January 1 with a whole lot of importance. So I urge you to start planning today so that you improve your odds of making your dreams come true.

Have Money, Will Travel!

Last week, I was fortunate enough to travel to Ireland for the very first time. And I loved it! The Emerald Isle is gorgeous, from its rolling green hills to its beautiful canals to the innumerable cows & sheep & horses to be seen from the motorways. The people are warm and friendly, cheerful and welcoming. I learned so much about the history of this country and the perseverance of its people. I saw a cultural performance consisting of Irish dancing and traditional musical instruments. I ate dinner in a castle and enjoyed an evening of poetry. I visited the Cliffs of Moher, the production floor of the House of Waterford Crystal, and a genuine Irish pub.

The Claddagh Ring – an unmistakable symbol of Ireland

You know what else I loved about my first visit to Ireland?

That it was paid for in cash before I left home!

Yes – that’s right! I saved up my money first then booked my trip. I’ve been travelling for years. At first, it was just within North America but now I go further abroad, mainly to Europe. Yet, no matter the direction in which I point the plane, my motto has always been – have money, will travel!

Always Pay For Travel in Advance

So now that I’m home, it’s time to start planning my 2020 trip. Have I picked a country to visit? Nope. Do I know how much my trip is going to cost? Also, a firm “No.” Do I have any sense of whether I’ll be travelling in early, mid or late 2020? That’s a negative!

I am absolutely certain of one thing though. Whatever I wind up doing and wherever I wind up going, it’s going to cost me some money. At a minimum, I’ll need to pay for airfare. And since I’m in Western Canada, I can count on my airline ticket costing me atleast $1,000. If I book another trip with my preferred travelling company, then I’ll need a minimum of $2700 for my chosen package. Leaving Canada means that I’ll have to buy currency for my destination. And that might cost a pretty penny depending on the exchange rates in force at the time. And let’s not forget travel insurance & souvenirs.

The trick is to start saving for my next trip today so that I have the money when I need it. Even though I’ll charge the trip to my credit card, the money will be in the bank so that I can pay off the card when the bill arrives. Points – yes! Travel – yes! Debt – NO!!!

Next year’s travel is a short-term goal. I know that I spend a good deal of time telling you to save for your retirement and to build your own pension. However, the fact of the matter is that you have a right to spend some money on the things that bring you joy. In my case, that’s travel. And this is how I pay for my magnificent vacations each year…

Getting the Money Together for Travel in 2020

First, I rely on having a dedicated sub-account at Tangerine Bank, which is nicknamed “Travel.” (Originality is not really my strong suit.) The money that goes into this account is spent only on… you guessed it – traveling to wherever I want to go. It could be a weekend in the mountains – it could be a spa weekend in Vegas – it could be another overseas trip to a new-to-me part of the world!

Second, I’ve created an automatic transfer from my chequing account to my travel account to fund my voyages. This transfer seamlessly ensures that my short-term goal is partially funded every time I get paid. A portion of my paycheque is re-directed to my desire to see & visit new corners of the world. The more I can save from each paycheque, the longer I can afford to be away from work.

Third, I visit different websites and talk to other travellers so that I can figure out where to go next. This also gives me an idea of just how big my travel account has to be before I can travel again. It’s also a great incentive to keep my hands-off my travel funds! Travel is one of my priorities, but I’m only human. Just like everybody else, sometimes I’m tempted to spend my money on other things. (Right now, the 2019 Nissan Rogue is calling my name even though my current vehicle is more than sufficient to meet my needs.) Talking to other travellers and dreaming about my next destination keeps me from spending travel-money on non-travel stuff.

Fourth, I book my trip. I do this once my travel account has enough money to cover my flight, my package price, my insurance, and the cost of my foreign currency, if required. I generally book my trips atleast 6 weeks out. This gives me 2 or 3 more pay periods in which I can gather a bit more money for my trip.

Fifth, I enjoy myself wherever I go! I believe in carrying a heavy wallet on vacation since I have no guarantee that I will ever be back to that spot again. If something catches my eye or there’s an experience that I want to have, then I need to have the cash on hand so that I don’t have to deny myself. I want to get as much out of my travels as I can without going into debt to do so.

Have Money, Will <Heart’s Desire Goes Here>

You know your heart’s desires best, so I want you to set up your own dedicated funds so that you can achieve what brings you the most joy. Today, technology allows you to easily create accounts for saving towards particular goals. Open an account – set up an automatic transfer – save enough money for what you want – attain your goal by paying cash for it – repeat!

It doesn’t get any more straightforward than that!