How I Plan Holiday Travel Without Touching My Credit Card — And You Can Too
Reflecting on Holiday Travel Habits
It’s holiday time and that usually means pressure to find the perfect gifts as well as excitement to see friends and family. Whether you are just driving across town for dinner with family, or have long distances or even flights to arrange, it's important you are mindful about your holiday spending. Often in the past when I got in my car to travel up north (I live in Michigan), I would default to using my credit cards for hotel rooms and gas during the season. But this year, I am reimagining my approach to embrace using only a debit card and using my cash. I think it’s important that we don’t let the holidays derail our financial plans and instead we should be mindful of not only the holiday spending goal we have set but also get clarity on our priorities. And if travel is higher up on the “must do” this Christmas, then make sure you allocate the dollars properly.
I decided this year to give up my airline miles and cash back credit cards because even though I set limits for myself I found I was still splurging too much and instead wanted more control of my spending. Frequently I would have to rush around when the credit card bill arrived a month later and scramble and move my budget line items around because once again I had overspent my budget. Some benefits I've experienced so far is clearer definition around my holiday spending goal, with categories and priorities set first and dollars assigned second. I also was more intentional with my decisions and ensured when we booked our hotel room it was within the range I had set for travel. I think these new steps are really going to ensure no post-holiday financial regrets in January. I actually talked a lot about using cash for the holidays in my workshop, learn more by watching the replay here.
Any time you have a larger amount to set aside for adventures, it’s important to be realistic about your expenses. So, if you are traveling this holiday season, determine where you are going, what form of transportation you will have, are there lodging expenses, meals and food you will need that are not covered by your host(s) and any extras like excursions or experiences when you arrive at your destination. If you are not sure, pull out your bank statements or credit card bills from last year and reflect on your spending. Is the amount reasonable or do you need to adjust based on changes in your plans, or perhaps you do not have as much funding to set aside this year. Adjust your travel spending based on what works for your financial picture, not what others expect of you - this might include reimaging what you can realistically afford. You need to set limits for yourself, and I would really encourage you not to go into debt - I don’t think your family would want you to regret it for months after the holidays.
Build a Sinking Fund Just for Travel
As mentioned earlier, I am a big promoter of sinking funds. You might ask, what is a sinking fund? A sinking fund is simply a fund where you are periodically setting aside money for a future use. A sinking fund does not have to have its own dedicated account, instead for example you can have a savings account where you set aside money for a variety of uses. Some examples include vacation, holiday spending, out of pocket medical dollars, birthday money, etc. Typically, I would set aside a certain amount of my bi-weekly paycheck to be automatically deposited into my savings account and from there I would allocate to the various categories either by percentage or specific dollar amounts. For example, I used ratios - each bi-weekly paycheck I would allocate the following: 6% to my emergency fund, 5% towards holiday sinking fund, 46% towards my vacation sinking fund,4% towards a home improvement bucket, 11% into my auto insurance sinking fund and the rest towards my out-of-pocket medical sinking fund. Most importantly these sinking funds allowed me to use my cash-flow instead of relying on credit cards and worrying if I could afford to pay it off the next month. Instead, when I was ready to use the sinking fund money, I just shifted the funds from savings to checking and swiped the debit card.
If you start utilizing sinking funds, especially if you use them the entire year, you will find that you have cash on hand to leverage seasonal discounts. You can take advantage of price alerts like Google Flights mentions the best rates are 90-days out from the date you want to leave, and if you look at paying for flights or hotels in advance perhaps you can leverage flexible travel days to get the best rates. Or even explore off-peak booking windows, and chat with your family about coming to celebrate the holidays early compared to right during the busiest travel time. Planning beats impulse purchases every time!
Reduce Costs Without Reducing the Experience
Still not sure how you can make the holidays affordable for traveling? This is not the time for depriving yourself but instead get intentional each holiday. Here are four ideas to reduce costs without reducing your experience:
Stay with family and friends where appropriate. I know it’s not always the best option because you may need to give up some privacy but not spending hundreds of dollars on a hotel but instead bunking with relatives can be a great cost saver.
Split costs with a relative and travel together. If you have a family member that is headed in the same direction, consider carpooling or sharing a room. Not only will it give you someone to talk to along the ride, but you can really save some money by sharing expenses.
Create boundaries around gift giving. Some families are quite large, and it can be extremely expensive to not only travel for family but also buy gifts. Instead consider chatting with your relatives about shifting to a secret Santa gift giving alternative, or being more realistic on gift budgets like shopping only for kids under 18. Or one of my favorites, instead of opening presents perhaps you all agree to create memories and make crafts, recipe swap, or enjoy a holiday experience like everyone pitches in to rent a horse drawn carriage for rides instead of buying material items.
Plan meals to avoid last minute overspending. “Let’s go out to a fancy restaurant so no one has to cook or clean this holiday.” Have you heard about that option? Guess what, during the holidays and especially on typical days when everyone else is closed, that restaurant is open because they can charge higher rates or most likely expect you to be more generous to their employees. Last-minute changes to your holiday plans can get expensive, so be thoughtful and plan out every aspect - especially meals. Ask ahead of time what you can bring and encourage meal planning sharing among your relatives to ensure everyone is not only bringing comparison priced dishes, but also ensure you have all the bases covered. If someone forgets desserts, rushing into the grocery store the day before the holiday could provide limited options but also explore your holiday spending goal.
And if you are traveling this holiday season, consider giving yourself grace and prepare for a “travel buffer” for some of those unexpected items. You could have weather delays that means more meals in an airport, gas spikes due to crude oil demands or just forgotten essentials that did not get placed in your suitcase. This buffer prevents last-minute emergency charges on your credit card. And the great part, you can decide the range for your buffer; either rounding up or a set amount like $100 - it all depends on how comfortable you are and how extensive your travel plans are.
How You Can Do It Too
If you are not sure how to plan your holiday trip without touching your credit cards let me offer this simple 4-week jump start.
WEEK 1 > Set your holiday spending goal and reflect on your expenses from last year.
WEEK 2 > Open a savings account if you don’t have one and label your sinking funds with one portion dedicated to your travel category.
WEEK 3 > Automate your payroll contributions, and if you are self-employed consider automating checking account transfers to savings on specific dates of the month (i.e. first and fifteenth of each month)
WEEK 4 > Research and explore the various major travel expenses you might incur and understand when/if they offer reductions or sales.
Reimagining Holiday Travel Without Financial Stress
Every year I reflect on significant moments and ask myself what lessons I learned to make this holiday even better. This year I look forward to not having anxiety in January when I used to cringe looking at my credit card statements. I think using my debit card is really going to work best for me now and hold me accountable to my holiday spending plan including that buffer I created. It may not be perfect the first time, but my intention planning I believe will lead to more freedom to enjoy the moments with my family because I will not be worrying about how I will pay for it all next year.
What travel plans are you most excited to reorganize and use cash this year? Share your thoughts on my social @lordfinancialcoaching
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