*** Note: my time value of money part two will come in the near future. The same website host that brings us the ridiculous stock images is also awful at managing content and I lost everything I wrote. Second time it's happened in my year doing this blog, and after reporting the problem the first time, and being told it was fixed, it happens again. If you're thinking about hosting a site, please reach out so I can steer you away from these cats. I would air their name out, but they probably have an algorithm that seeks out their name in blogs and would delete all my content. So, I'll be clever and say the host is the string inside a candle. So instead of learning more about Frank's financial journey, I bring you another journey: vacation spending! I had saved as a draft as a written escape from my basement that is now timely. Enjoy! ***
The caption describes this as "Man Driving A Speedboat". I don't how he could possibly go any slower.
After our forced hibernation the last few months, we are slowly making our way back to life as we knew it. Summertime is near! Time to spend a long weekend at our favorite beach, mountain escape, or city retreat. While some may still not feel comfortable venturing out in public for non-essentials (totally understandable), I am optimistic we will return to life as we knew it in the near future. That includes vacations - with friends, family, or solo. Even if you're not ready to go yet, it's fun to think through possibilities ahead of time. To make the most out of your experience without breaking the bank, here are my two major themes for this long-awaited experience:
Budget/Spending Plan
You want to live it up while you're on your trip. Buy that fancy $18 martini at the hotel bar. Get that 3-foot Kokopelli statue from the tourist trap. Go on the 4-hour tour of Richard Simmon's childhood home. Is that okay? Of course! You're on vacation. But do so responsibly. The first step is establishing your budget. Determine how much you're comfortable spending, and plan around that amount.
The key to meeting this budget is factoring in all of your true costs. Think car, gas, hotel, food/drinks, souvenirs, tours, tolls, new clothes, sunscreen, bug spray... you get the point! Here's an example for factoring in true costs: if you ever drive a personal vehicle for work purposes, your company may reimburse for mileage. The 2020 IRS rate is $0.575/mile, which takes into account costs for fuel, insurance, oil changes, maintenance, and depreciation of the average personal vehicle. It's meant to offset your true expenses. So, applied to your personal life, if you're taking a 1000-mile road trip, that would theoretically cost $575 in transportation alone! Provide yourself some wiggle room for the unexpected expense like the must-have novelty shotglass at the truck stop. Doing this will ensure you can truly relax on your trip without worrying about money.
Value Engineering
The concept of value engineering is assessing components of a product by evaluating their function versus their price. You then determine what components can have lesser functionality (while still meeting the product's need) for a lower price. Sorry to nerd out on you, it's my mechanical engineering education coming out! However, I think value engineering can be applied to everyday life, especially personal finance. And it's very useful in vacation planning. Using the example above: Would you rather have the $18 martini, or enjoy the $3 Pabst Blue Ribbon can special (or six at the same price)? Or maybe save it all for your Roth IRA? I know, I'm no fun. But the idea here is reducing costs by accepting different benefits. The martini is higher-quality and, dare I say, classier. But, if you're just looking to drink, the PBR will meet your need. If you don't really feel the need to have that drink, you could go without and put that money to work elsewhere. Perhaps a more relatable example would be hotel accommodations. You can certainly stay at the nicest hotels, but that will cut into your overall budget. When planning where to stay, factor in some must-haves (e.g. location), and find the best deal accordingly. Some travel sites offer "secret" deals that offer significant savings over listed prices. Having used these a few times, my experience has been great overall, where I've gotten a nicer hotel for a very reasonable rate. Also, consider how much you'll use the hotel - is it just a place to rest your head, or are you hoping for more a resort-type experience? Regardless if you're evaluating handmade cocktails vs. cheap beer or Ritz-Carlton vs. Motel 6, use your budget wisely to maximize your enjoyment and escape the monotony!
After the last year, we all deserve a break. For many of us, that means getting out of town for a bit. But that's no excuse to be reckless with your finances. Make a budget, spend accordingly, and value-engineer the heck out of it. Now, burn yourself a fresh mix CD, grab some junk food, and hit the road!
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