I’m back from the USA! In case you haven’t heard, I’ve been roadtrippin’ through the West Coast for the past 15 days: LA, Vegas, the Grand Canyon, Monterey, and San Francisco. Friggin’ awesomesauce, and definitely a much-needed break.
Memorable experiences:
1. Driving against the direction of traffic in the middle of the night because we made a wrong turn (and seeing my life flash before me)
2. Getting my ID checked every time I bought alcohol or tried to gamble, 6 years after I’ve passed the legal age. I shall be forever youthful.
3. Losing $30 bucks in like, 1 second on roulette in Vegas. Yeah, I know what you’re thinking: I’m such a high roller.
4. Seeing the Grand Canyon for the first time (“Damn, that’s a BIG hole”)
5. Coming face-to-face with three T-Rexes, King Kong, a major flood, and Psycho killer Tim Bates in LA’s Universal Studios
6. Lying on the grass in San Francisco with a huge bag of chips and my new Kindle with the Golden Gate Bridge in the background
7. An amazing 5-course tasting menu at 1-Michelin Star Napa Valley restaurant Redd
yeah, we kind of overdid it with the Gangnam Style.
Costs: The Most Annoying Part Of a Vacation
Vacations are totally awesome and essential, but there’s just one annoying part about ‘em: Working out the costs.
Most people hate to think about vacation costs because it’s depressing to find out that their past year’s savings have been effectively wiped out. Kind of takes the fun out of it, doesn’t it? Vacations are kind of like prostitutes – they give you pleasure, but they can be ridiculously expensive (Yes, I just compared taking a vacation to seeing a prostitute. My mother would be so proud).
Funding a $5,000 trip, #likeaboss
There’s a better way to deal with your vacation finances. You can fund your entire trip, with no noticeable impact to your savings or lifestyle.
Let me explain. My entire trip, including hotels, food, travel insurance, airport taxes, fuel, car rental, etc for 15 days cost me S$3,503 (around $2,800 USD for my American friends). It’s a little on the low side because I have an employee benefit that gives me one free air ticket a year. For this exercise, we’ll add $2,000 to that sum for an air ticket, which gives us S$5,503 (I’ll blog a little in the future on how to cut this cost down even further).
But even if I added 2 grand to my expenses for an air ticket, my vacation expenses would still have made no noticeable impact to my savings or lifestyle at all. Why?
The answer lies in planning ahead. If I take an annual trip that costs $5,503, that works out to $450/month, or $15/day. $450 a month sounds like a helluva lot of money to save, but you can totally make arrangements to save towards it, without you even noticing.
Playing with the “Big Play” Account
The answer lies in segregating your savings and your vacation funds from your everyday spending. I have 2 separate bank accounts aside from my everyday spending account:
- A Long-Term Savings Account, where I credit a fixed amount of “responsible” savings to every month, and
- A “Big Play” Account, where I park the money I’m planning to use this year. (I previously called this my Guilt-Free Spending Fund, though I decided to rename it because “Big Play” sounds sexier)
Here’s how you can use both of these accounts to fund your trip WHILE staying true to your long-term savings goals:
1. If you’ve been following my blog, you should already have a Long-Term Savings accountthat takes care of your “responsible” savings (eg for your house, your retirement, your investments, etc
2. Next, estimate how much your trip is going to cost, and then add 10% to that figure. The travel industry is notorious for racking on additional taxes, surcharges and fees that would totally catch you off-guard. I know, because I work in it.
3. If you don’t have a separate Big Play Account, open one up and arrange for a standing instruction to automatically send that amount to it every month from your salary. I use POSB’s MySavings account because I can withdraw the money anytime I like without being slammed with a hugeass penalty.
4. When it’s time for your vacation, empty that account and spend the money absolutely guilt-free. That’s it!
Why This Works
“But Lionel,” I hear you say, “That’s just shifting money around. It doesn’t help me at all”. Hear me out – it’s not as lame as it sounds.
Segregating your money has a profoundly important psychological effect that can help you to spend more consciously. First, by segregating your “responsible” savings into a Long-Term Savings account, you’d have taken care of all the boring, responsible obligations to your family and to yourself, which frees you from worrying about them. That’s why it’s important to commit to this figure first. Once that’s taken care of, your “responsible” savings will be safely locked up in a separate account, away from the temptation of spending it on your vacation.
Next, by segregating your vacation expenses into your Big Play Account, you’re planning ahead for your vacation when you’re rational and coolheaded. The decision on how much to spend is made way before your hotel entices you to spend that $150 on a room upgrade. By viewing your vacation funds as a separate, independent pile of money, you’re consciously making a commitment to stick to a budget – because you cant spend anything outside of this pile of money. So when it’s time for the vacation and you find that you cant afford a helicopter ride over the Grand Canyon, it’s relatively easier to make the switch to the hiking tour instead. (By the way, I would totally recommend hiking the Grand Canyon in the South Rim instead of a lame-ass helicopter ride in the West Rim – you get to see a lot more).
Third, you won’t even notice that you’re money’s gone from your everyday spending. That $450/month is taken from your paycheque and deposited into your Big Play Account before you even get to see it. And if you can’t spend it, then you won’t miss it. I set aside more than $450/month for my Big Play expenses, and my lifestyle hasn’t changed one bit since I started.
Here’s how I see it – if you didn’t plan ahead, you’re going to spend that amount (and possibly more) on your vacation anyway. So you might as well split it up into some smaller, manageable chunks that are easier to deal with, rather than a whopping $5,500 bill after your vacation. It’s automatic, hassle-free, and has minimal effect on your lifestyle.
So try it out, and let me know if it works for you. Bon voyage!
