As summer approaches and families prepare for long vacations, be careful those weeks of respite don’t turn into a massive financial burden when the season’s over.
Holidays can be financially dangerous with a capital “D”. That’s because many vacationers tend to spend lots of money they don’t have.
For instance, how many times have you been on holiday and pulled out the plastic to buy that overpriced painting that you just “had to have” for the living room. You do this even though you know you are going to dread the next credit card bill after you get home. You banish the thought and end up spending even more money to enjoy your momentary bliss.
I’m all for rest and relaxation, but remember that it will probably take you a few months to recover from extravagant spending. A high-priced vacation might even derail other financial goals you have for the year.
So here are some simple rules to keep your spending in check while enjoying your time out of the office.
1. Package your vacation. The easiest way to turn what could be a reasonably priced getaway into an expensive one is to pay for everything separately. As experienced travelers will tell you, always get a package deal. Obtain a deal that includes an air ticket, hotel accommodation plus breakfast and vouchers for tourist attractions.
Your travel agent is vital in helping you save money. A good one can save you thousands of dollars; a bad one can cost you thousands. Check around for a good one.
An agent once told me it was better to wait a few weeks before booking a package. She was right and the price dropped by 20%.
2. Estimate a budget – And then increase it by 25%. Most people overspend when they go on holiday. You can easily lose track of money while paying for everything - from snacks to taxi trips to tickets for shows - with cash and by credit card. And then you also have to keep an eye on foreign exchange rates when going abroad.
So when estimating your costs, after detailing air tickets, hotels, meals and other tourist attractions, it is smart to increase the amount. There are usually a number of other unforeseen expenses you will have to meet.
3. Check how much money you have in the bank. And also what you owe in bills before you leave. There are few things worse than arriving home after a holiday to find you have to pay a bunch of bills you had forgotten about. "Oops. I have done it again," will probably be your reaction, and this sort of mistake might even jeopardize your credit-worthiness. Also, it is difficult to know whether you can afford something when away if you do not know exactly what your financial position is.
4. Resist the "urge to splurge" or do the "step away from the merchandise" maneuver. It is natural when you're on holiday to want to buy trinkets, clothes and jewelry by which to remember the trip. Many people hit the road just to shop. But do not make a holiday a license to spend extravagantly. If you resist the urge to splurge and don't buy some of these things, you will probably find later that you did not really need them. I know of some people who just had to have an antique they saw in Shanghai. They had it shipped home and six months later it was in the corner of a storage room, gathering dust.
Sometimes, when you have the buying bug, it is best just to walk away. The impulse to buy often disappears quite quickly.
5. Save on the little things. Some of the silliest spending mistakes happen right in your hotel room. I never could understand why people will pay triple the cost (plus hefty hotel taxes and all the other silent charges that are slipped in for good measure) for a snack bar, plain bottled water or M&Ms.
Avoid those fridges packed with beers, wine, brandy, cold drinks and snacks in your room. It is better to bring your own bottled water and snacks and get other drinks from a local supermarket. Your hotel will not like this, but you will save a fistful of dollars by doing so. Also, when at a 7-Eleven, get a phone card so you do not have to pay the ridiculous prices hotels charge for using the phone in your room for local and international calls.
One last thing – never exchange your money for the local currency at your hotel, where you will get the stingiest rates. Go to a bank, where you will get a better rate, and an even better one if you use an ATM machine linked to your bank accounts back home. As far as I'm concerned, your hotel is good for only three things: a bed, breakfast and advice on tourist attractions.
You'll find that by cutting out the little things, you'll end up with some big savings.
Questions? Comments? Drop us a line atbizoflife@cnbc.com .