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Planning a vacation – save now or pay more later

If a winter vacation is in your plans, consider the financial aspects along with all the details of your trip. As tempting as it may be to just charge your vacation on your credit card, the costs of doing so can be significant. Here’s a chart showing what your monthly payments would be to pay off the vacation.
 
Amount charged on your vacation Monthly payment to pay off in 6 months Monthly payment to pay off in 12 months Monthly payment to pay off in 18 months
$2,500 $438 $229 $159
$5,000 $878 $457 $318
$7,500 $1,315 $686 $477
$10,000 $1,753 $914 $636
 

Looking at these numbers, if you were to charge $10,000 and pay it off in 18 months, you would end up spending $11,448. That’s an additional $1,448 that you could have saved! Another option may be taking out a loan rather than charging your vacation. Make sure to check with your banker on current interest rates as they are often lower than credit card rates.
 
One of the best decisions you can make is to save the money you’ll need before you go. That way, you can enjoy the trip without financial worry. One of the simplest and most effective ways you can save is with an automatic savings plan. Automatic saving programs generally come in two forms – either your employer deducts a certain amount from each paycheck and deposits it into a specific account or your financial institution moves a certain amount from your checking account into a savings account on a regular basis.  Either way, these automatic transfers add a discipline to your saving. Once people use them, they often find they do not even notice the smaller amount they have to spend each month.
 
Your vacation should be fun and carefree. Saving before you go can provide the peace of mind knowing that the cost is covered and can save you quite a bit of money in the long run. You may even want to consider maintaining your automatic savings plan after your trip so you have funds built up for future expenses, vacations, your children’s college tuition or retirement.

 

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