Live It Up! Vacation Accounts | Series 2.2

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Welcome to the Enjoy More 30s: Family Finance

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podcast, the only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out and distract our focus

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from simply enjoying life.

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Hello, and welcome to the second episode now in the

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"Your Money Multiplier" series. Today's episode is titled, "Live

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It Up! Vacation Accounts". And today what we're going to cover

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is what you need to know about setting up a vacation account,

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and what you can do to actually get the most out of it at the

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same time.

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My grandfather, Grandpa Joe, was known as being really organized

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when it came to money. If he was born in a different time,

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outside of the depression when most kids went to college, he

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would have been an accountant or something of that sort. That was

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always kind of his dream to be an accountant. One of the things

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he did with his money is using what some people refer to as an

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envelope system- he would break his cash paycheck into different

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envelopes. So maybe there was a grocery envelope, a rent

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envelope, an electric envelope and you know, that kind of

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thing. By segmenting his money in this way, it kept it better

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organized to make sure he had enough money for each of the

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various expenses that he incurred every month. Now, this

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kind of a system has actually been around for a while, and so

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you may have actually heard about it before. But it is

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incredibly effective both practically and emotionally. If

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the grocery envelope is low, you're eating on the cheap that

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day.

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What you need to know is that this kind of a mindset,

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especially the emotional part of it, can also work outside of

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normal bills- it can work for fun things like vacation goals.

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If you calculate what a normal vacation generally costs, you

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can break it down and set 1/12 of that aside every month, which

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can help ensure that you're able to take that vacation every

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year. Coming up with a couple $1,000, say $2,000-$3,000

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whatever it might be, all at once, could catch you off guard,

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could be difficult if you don't plan for it. If you put just a

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little piece of that aside though every month into a

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separate account, there's a much, much better chance that

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you're going to reach that goal and be able to vacation, which

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you know is kind of a big deal. We want to make sure that we're

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enjoying life. Again, the whole point of all of this is to make

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life more enjoyable.

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So what can you do? Or maybe more appropriately, how should

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you go about doing that? Now let's say that your typical

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vacation costs $2,000-$3,000. Now, obviously, there's a lot of

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variety here for where you are at and what you'd like to do.

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But this example breaks down to, roughly, let's say $200 a month

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or so. Now this can be allocated into one of two places for this

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vacation account goal. The first is just a separate bank account.

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It's easy, manageable, and now you've made sure that you're

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setting aside some extra money, to make sure that you're

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enjoying life, that you otherwise would not have or may

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not have. The second option, though, can be a bit more

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interesting. This option involves that general investment

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account. So if you go to the second episode overall, in the

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first series, "Like Super Gymnast Flexible", it's a

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non-retirement, fully accessible account that sits between your

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bank accounts and longer term retirement accounts. It'd be the

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same $200 a month, automated transfers the bank scenario, but

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now it feels a little bit farther away. Investment

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accounts have your names on them just like a bank account does,

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but when it's an investment account, people feel like it's a

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little bit more removed from their direct control- a little

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bit further away from how they would jump in and touch it. So

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in the bank account scenario, even if you have extra money in

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your regular bank account, let's say, that built up during the

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year, you are very, very likely to still hit up that vacation

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account because it's so easy and accessible to do- it's right

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next to the other bank account that you have for your normal

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checking. And there's nothing wrong with that at all, because

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that is what it was there for. However, if you put into that

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general investment account the money instead, and you have

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enough extra money built up in your bank account during the

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year to cover the vacation anyway, you are more likely to

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just use that excess in the bank. So now the result of that

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is that an extra $2,000-$3,000 that is invested, that would not

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otherwise have been invested. So in either scenario, you're

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taking the same vacation. But in the second scenario, there is a

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greater possibility of having additional savings that are

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invested for you long term towards your other goals, that

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are building up possibly in the process. This means even more

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money maybe for future vacations, more quickly getting

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to retirement or education goals that you might have. Basically

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you put yourself in a position to potentially give more money

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to yourself.

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So a quick recap for today. First is that segmenting your

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vacation specific money can give you a much higher likelihood of

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having and taking that vacation you otherwise would not have

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taken. And really, that's the most important overriding point

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of this whole episode- taking more vacations. The second is

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that you have different places that you can save this into

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very easy, very straightforward.

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While if you have a general investment account that is

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already built up to some degree, saving the funds here could

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potentially lead you to saving more money than you otherwise

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would have if vacation money builds up elsewhere. If you kind

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of think about it right now, if you're not doing a monthly

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savings plan for vacations, which most people are not, you

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still probably take vacations a good amount of the time. Maybe

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there's some years where it's a little tight and you couldn't,

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but most years you probably take them anyway. So if you segment

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the money out to the investment account instead of the separate

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bank account, you still definitely have the money there

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if you need to have it to pull from for vacations. However, if

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you have enough money built up in the bank account on the side

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now, you may not even have to touch it. And now you're

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building up more for your future where you otherwise would not

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have put yourself in that position to have that positive

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side effect.

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Thank you so much for tuning in today. Remember, we do also have

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the new 'ask Joe' section on the show's website- enjoy more 30s

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.com, that's enjoy more three zero s .com, as a lot of these

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topics can be a little bit confusing. If you have more

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questions that pertain to your specific situation, please don't

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hesitate to reach out. Additionally, as I always say

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upcoming episode that we have is called, "Just Get An Umbrella

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Policy Already". It will cover an extremely cost effective,

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powerful tool to better protect you which despite this, people

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many times still don't have. So as always, it's been great

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talking with you today and I look forward to connecting again

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soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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