Start planning for your next vacation

EPISODE SUMMARY

If you're thinking about a short getaway or a longer trip to relieve your cabin fever, start planning right away.
 
 In this episode, Jordan and Evan discuss ways that your vacation can go from a dream to a financial nightmare.  The good news is that planning ahead with some of our tips will make sure that you can spend your vacation relaxing and having fun instead of worrying about your money.

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TOPICS IN THIS EPISODE

1. Memorable vacations 
2. Planning for a vacation - things to consider 
3. Typical costs you might incur on a vacation 
4. Currency considerations
5. Budget planning spreadsheet for your download 

RESOURCES MENTIONED

Evan Neufeld Downloads - Vacation Planner Spreadsheet


OTHER EPISODES

2. Credit Cards - Pros, Cons and Strategies 

5. Budgeting for People Who Hate Budgeting 

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Transcript

Evan Neufeld: Hello and welcome back to the Canadian Money Roadmap podcast. I'm your host, Evan Neufeld.  Today we are looking ahead towards summer and if you're planning a vacation, this episode is for you. We're going to take a look at different ways that you can make sure that you're planning ahead and not going over budget for your next vacation.  Joining me again today is my colleague here, Jordan Arndt. Thanks for joining me today, Jordan. It’s going to be a good conversation today. This one's a little bit more fun than inflation. Well, actually we might be feeling the price of vacations here with inflation coming up, but let's start off with something a little bit more fun.  Jordan, what's one of the best vacations that you've ever been on?

Jordan Arndt: That’s a great question. I'd have to say the best vacation, one of the best vacations, we've been lucky to take a few fun ones. Was my wife and I went out a few years ago and flew into Vancouver, rented a car, and drove up to Whistler for a couple of days. Spent some time there, left from there and drove all the way to Seattle, ultimately to the Oregon coast and spent a couple of nights there on the Oregon coast.  It was just at cannon beach, if anyone's ever in the area, highly recommend checking it out. It was absolutely beautiful. 

Evan Neufeld: So how far of a drive is that from the border? 

Jordan Arndt: It wasn't too bad. I think all the way from a Whistler to Seattle was maybe three hours or so, and then a couple more hours south to cannon beach.  So it wasn't too bad. I don't mind driving, so it was fun. 

Evan Neufeld: Get the podcast going and get the podcast going episodes of the Canadian money roadmap. 

Jordan Arndt: What else do you need, right? 

Evan Neufeld: Okay, cool. One of the most memorable vacations that my wife and I took was a few years ago.  We actually went to Europe. We did kind of a half and half. So we went to expensive cities, but on a budget. So we did the Airbnb thing, some of the tiniest little apartments that you've ever seen, but we ate well and we got to see some things. So we were in Paris and then Nice, France. And we kept taking the train down to Florence and then to Rome, and then flew out of there. Lots of good eating in places like Paris and Rome, boy.  Not great for the waistline, but man, you do so much walking. It's free calories at that point.

Jordan Arndt: Free exercise with the walk and you know, you burn it off. Life is good..

Evan Neufeld: Okay. So now that COVID is something that we are closer to living with. Not going to talk about that too much here, but a lot of people have a bit of cabin fever and planning for a vacation is going to be on the horizon. So whether that's in summer or maybe even next winter, I know with my family we're already planning for the next winter season, but I wanted to have this episode focus on ways that you can prevent vacations from ruining your financial system that you've worked so hard on for the last number of years. Because there's so much money that is spent on vacations. It can be a really easy way to derail good habits. So maybe let's talk about some of those ways that a vacation can go from a dream to a nightmare, perhaps.

Jordan Arndt: I think we'll see how relevant, I guess this is next winter. And as time goes on here, but right now COVID extending your stays is a, a legitimate risk of traveling, especially cross border. I guess just with some of the COVID rules, you know, taking into account potentially having to stay for an extra week or two or whatever it is that the rule is for coming back.  If you do test positive down there, You know, that's going to turn your dream vacation into a nightmare for a few reasons, but financially as well as it's definitely an impact. 

Evan Neufeld: Yeah. This would fall under something along the lines of any other medical emergency and this is something that you can plan for in advance. I don't want to put the cart before the horse here, but getting medical insurance a lot of times now you can actually get COVID specific medical insurance so that if you are hospitalized or need to stay longer as a result of a COVID diagnosis, then your insurance would be able to kick in and help with some of those costs.

Medical insurance is huge, especially when you're in countries that don't have universal healthcare, especially for non-residents. I was in a situation, a really scary situation, not with me, but with a friend that I was traveling with and she had a really bad fall off of a cliff in Greece.  Not to go into too many of the details there, but she was an intensive care in Thessaloniki, Greece for, I think it was about three weeks and then needed to be airlifted home back to Canada. Thankfully she did have medical insurance to cover all that or else that could have been really scary. So that's definitely a way that you can turn a vacation dream into a nightmare, but we're talking about things where we're crossing borders here.  So when you're going to the states or going to Europe, even more expensive places maybe like Japan or going to Asia, things like that.  What about things like currency conversion? 

Jordan Arndt: That currency conversion could add up quick. We think about the states, I don't know exactly where the dollar conversion is today, but you can probably think roughly 30% or so. So if you're traveling in the states and you're budgeting based on your local, maybe Canadian values, well, actually that same product might cost for example, 30% more just due to the currency conversion. 

Evan Neufeld: Yeah and those little things add up. We're both using the quote-unquote dollar. So say you're planning for a $10 lunch. Well, at your $10 lunch in the states is actually $13.

Jordan Arndt: Which adds up over lunch and supper activities.

Evan Neufeld: And if you've got kids and things like that, so yeah. Planning for the cost of currency conversion is pretty significant. Now that's just the bank rate that we're talking about there, like the advertised rate that you might see online. But the actual rate that you're going to receive, that's where the banks make a lot of money and unfortunately there's not really a lot of great ways around that. But that's just another thing to be aware of that every time you convert Canadian to US, and then back is going to be another charge on top of that. We'll talk about a couple of ways that you can get around that a little bit, but again, it's just something to be aware of that.

 Now when it comes to spending, overspending in general is always going to be a problem for budgeting.  On vacation, it's so much easier because you're relaxed and you're wanting to have fun. And you say, oh, why don't we go out? Why don't we get another glass of wine? Why don't we do the dessert? Why don't we go for ice cream? All these other little things that can add up.  Spending more on credit cards is one of the most common ways to overspend. And that has been proven time and again by research. So if there's risk of overspending on credit cards, maybe using cash is a decent way to avoid some of the tendencies we have to be quick with spending.  Now depending on where you're traveling, this might be helped for you. If you're going to a place like Thailand or something like that, where using credit cards isn't nearly as common and they're more cash centric economies, that might not even be an option for, you might just be dealing in cash anyways. But even when you're going to the US, I was surprised, I was there in November, and there are little placards everywhere that says, we accept apple pay or things like that, which we all know is just a version of tap. And we've been able to tap our credit cards at almost every terminal, every restaurant for, I don't know, been here for a long time.  So in the U S I found this is in Southern California is we're in the middle of nowhere here. The ability to use a credit card as quickly and as simply here isn't as possible and cash is much more widely accepted. So using cash, isn't crazy. Even going to the US. Now some places it's not going to be as doable, of course, but the less often you can kind of reach for your credit card on vacation, the better off you're going to be.  

Okay. So now these are some of the potential nightmares that can happen, but how do we prevent those. Well the first one, maybe it's obvious, how about planning ahead? Planning for your vacation budget instead of figuring out where your money went afterwards can be a really great way to do that. And, Jordan, you've actually built a really handy tool to help people with this.  Can you tell us a bit more? 

Jordan Arndt: Yeah, this was fun. This allows the spreadsheet nerd to come out a little bit. We have a vacation budget tool that we built and what it allows us to do is input some of your trip details, focusing on lodging and transportation and food and activities. And of course, some other costs like shopping and insurance, and some of those are things that you know, we need to consider.  But what this tool allows us to do is input all these costs, play around with a little bit. So, you know, put in a few different lodging options, put in a few different maybe modes of transport or food options and just see how that kind of comes out within your budget. You know we don't need to make this more or make it sound more complicated than it is.  It's just a spreadsheet, but planning is important, and we certainly subscribe to that methodology. And this just allows you to think critically about your vacation before you actually get into it. So you can think about where these costs are going to come from. I think Evan, you've thrown it up there on the website.  If you head over to www.evanneufeld.com  you might be able to download it. Is that correct?

Evan Neufeld: Yep. www.evanneufeld.com/downloads  and I recorded a video of me messing around with it so you can actually see how it works. You can download a version for numbers to use a Mac, an iPhone, or an iPad. Numbers is free for you to use.

So you can download the numbers version there, but there's also an Excel version. There's a couple of little differences between the two, but functionally they're the same. So whichever system you prefer to use, that should be just fine. I'm not sure if you'd be able to import that into Google sheets or not, but you might be able to make that work.

Jordan Arndt: You might be able to make it work. That's a good question.

Evan Neufeld: Yeah. Let us know if you have any questions about that. We are not software developers or anything like that. This is just a simple tool that I wanted for myself so I could be a better planner for some trips that I have upcoming and Jordan really took the reins on this and made it into a really usable tool.  It does factor in currency conversion. So things like your food, that is the least likely to be able to be prepaid for in Canadian dollars. So if you're going to the US you can just select the currency that you're going to be in. If you're going to Mexico, maybe you're in pesos, who knows. But you can select whatever currency you're going to have each expense in.  And then back on the main page, you can see a summary in Canadian dollars. So you know how much to be budgeting for in Canadian dollars. So it's a really great tool to be able to do that. Along with that, you can put in a number of how much money you've already saved for this trip and so if you're under budget, which would make sense, most people don't have thousands of dollars kicking around upfront for that, but you can see how much you have left based on how much time you have left before your trip.  So this leads me to the second way that we can prevent nightmares is spreading out some costs throughout the year, instead of just waiting for your trip to come and hoping the budget works. 

Jordan Arndt: Yeah. So when we're going on a vacation, it's one of those things where many months or most months there's no expense and then all of a sudden the one month that you go, maybe for that week or two vacation, the credit card bill is quite a bit higher.  You start to spend that money. So one thing we can do is kind of spread out those costs throughout the year. So perhaps you can prepay for the flights in February and your vacations in April, or whenever, you know, you can start to spread that out. Same thing with maybe some activities or some lodging costs or something so that the hit isn't as bad.

What we actually like to do personally though, is use the YNAB or You Need A Budget approach. And all that really is doing is instead of having all your vacation budget in one month, we like to to take $300 this month and put it into our vacation budgets or bucket.  It's really just a fake bucket that I have in another spreadsheet somewhere else. But what that allows us to do is basically build that up over time. And then when the vacation comes, we can draw down from that already pre-allocated amount of money. We spread that vacation out, I guess, made a bit more of a regular budgeting item, as opposed to having one month just really spike off the charts and throw things off.  So that's something that's been really helpful for us just to kind of plan for those upcoming vacations and make sure that we are not overspending when we do go travel. 

Evan Neufeld: Yeah, that's right. Being able to come up with an extra 300 bucks a month is a lot easier than an actual $3,600 all in one month. And just hoping you can make it and hope you can pay off the credit card bill when you come back. Save for in advance and you can even put that into a savings account, or if you use a second bank, sometimes people have an online bank like Tangerine or EQ bank or something like that.  That way you can put the money out of sight and out at mind and then when the time comes to pay for your trip or take out your currency or things like that, then you can just do a one time transfer and it's already paid for, and there's a lot less stress involved with going on a vacation. Because the whole point of a vacation Jordan is to get rid of stress, it’s for fun. We don't want to have the vacation increase stress. Now I hope it's come across here that this isn't a podcast, or I don't subscribe to the belief that vacations should be avoided or anything like that. They just need to be planned for. I think spending money on things that provide happiness and relaxation and time with your family and seeing other parts of the world is probably one of the more valuable things you can do with your money.  Maybe others would disagree with me but, don't hear me saying don't take vacations. If you can't afford to go to the four seasons, don't go to the four seasons, but whatever type of trip you're going on, plan for it in advance and use some of these tools that we've provided for you to make sure that you can stay on line

Jordan Arndt: I totally agree. You know, some of the best memories are times you spent with family or friends, on vacations and seeing new beautiful parts of the world. So, absolutely vacations are awesome.

Evan Neufeld: Last thing that I have often used to prevent some potential vacation nightmares is, it kind of dovetails into your approach was saving a little bit every month for your upcoming vacation.  I've actually taken that one step further and I've saved in advance in the currency that I'm going to spend. And so I have an account with TD. I'm sure most of the major banks would have US dollar accounts, but it's just a US dollar chequing account. So every once in a while, I can just transfer money from my Canadian chequing account over to my US chequing account. And now I have this buildup of US dollars so that I can avoid the potential impact of getting the currency conversion “wrong“ and say currency is not in our favor on the day we go to the bank to take out our currency. Oh, shoot. Well, I guess our trip just cost us an extra 5% or whatever the case may be. Currency moves quite a bit in any given week and especially now as oil and war and inflation and everything is going wrong. By saving in the currency that you're going to be spending you spread out the potential cost of getting the currency conversion wrong. Think of this like dollar cost averaging, but with saving.

Jordan Arndt: How often, as a follow up question, about how often are you sliding over f money from your Canadian chequing bank account into your US chequing bank account, what would you recommend there?

Evan Neufeld: Yeah, it really depends on what you're planning for. So if I know that I've got a US vacation coming up, I'm going to start doing that every month.  So probably the 12 months leading up to it, assuming I'm planning that far in advance. Every month or so I'm going to be moving it over, but you can also take a look at, this is getting close to market timing a little bit, so I don't know if I can really recommend this necessarily, but if you look at historical highs and lows for where currency has been over the last number of years, If it appears to be relatively high, meaning a good deal to buy US dollars, I might do a little bit more. And if the dollar goes down, I may do a little bit less if it's not as good of a deal. So you can take a look at that. I'm not going to provide any resources or recommendations or advice on that necessarily. That's just the system that I've liked to do, but the more often you do it, the greater chance you have of spreading out that currency risk over time. 

Okay, this is just a quick little episode here, knowing that a lot of you are going to be planning for vacations and wanting to do it properly. As a reminder, head over to www.evanneufeld.com/downloads  and take a look at that vacation budgeting tool that Jordan built and let us know if you have any feedback. I would love to know how you’re using it, or if you find things like that valuable, we'd love to make more things like that for you going forward.

Jordan Arndt: That'd be awesome to hear from anyone who's maybe using it and how they like it. 

Evan Neufeld: Awesome. Thanks so much and happy travels. 

Jordan Arndt: Thanks Evan. Talk to you soon.

Evan Neufeld: Thanks for listening to this episode of the Canadian Money Roadmap podcast. Any rates of return or investments discussed are historical or hypothetical and are intended to be used for educational purposes only. You should always consult with your financial, legal, and tax advisors before making changes to your financial plan. Evan Neufeld is a Certified Financial Planner and Registered Investment Fund Advisor. Mutual funds and ETFs are provided by Sterling Mutuals Inc.