It’s probably not all that surprising to find that the behaviours you’ll indulge in saving for a honeymoon or, in fact, any travel, are about exercising your financial literacy skills. These skills include financial goal setting, budgeting, saving and investing, avoiding the credit debt spiral, protecting your identity and your money.
Your financial goal in the case of saving for a honeymoon is the total cost. This will start as a ballpark figure and become more refined as you work out exactly what you want your experience to look like.
There are aspects of every holiday that will affect the cost.
Destination and style of holiday
Is it going to be high end, mid-range or budget? Length of stay, and distance from home are important costs variants. Aspects, including accommodation, meals, tours, flights and in country travel, shopping, currency exchange and seasonality, also play a part in determining the cost.
Booking packages or booking early can often mean finding deals that reduce the cost. Conversely, last-minute deals are also a possibility. Going in the “off” season can also save you money but comes with its own set of issues. Are things open? Is the weather hideous, etc.?
Make your goal measurable
Once you have a total travel cost, break it down into the monthly or weekly amounts you need to save to reach your goal. It’s motivating to see the balance go up regularly.
Make your goal achievable
If the outcome is difficult to begin with you may get disheartened. If you’re not reaching your weekly or monthly savings targets, maybe rethink your total goal or look at where you are spending money (your budget) and plug the leaks: less Friday night drinks; more dinners at home, etc.
Another strategy might be to increase the length of time you’ve given yourself to save for it. Can you leave a couple of months later? Can you compromise on something in your travel plans and reduce your accommodation costs, for example?
Begin knowing you can meet the goal. In this case you might save less in the first two weeks and then increase the intensity of the weekly goal to reach the required monthly amount because you know you perform better under pressure.
Set a timeframe and end date for the goal so you have a clear target.
What is a budget?
Simply, a budget is an estimate of income and expenditure for a certain period, usually a year. Here, is a great budget planning tool from Westpac’s Davidson Institute.
Why do I need a budget?
A budget puts you in control of your finances by itemising what you earn and what you spend on life. Here are some common expenses: rent/mortgage, bills, food, entertainment, transport, car, education, etc., etc. Knowing where your income is being spent and where you are saving money or could save money is empowering.
Using interest to grow your savings can be an effective strategy. There are bank accounts which earn you more interest but will usually come with other conditions. All sorts of comparison sites can help you research the offerings of different savings accounts or, perhaps you’re interested in term deposits. Term deposits lock your money away for a period you choose and provide a known return based on the offered interest rate. Term deposits are great if you can put away your savings and forget about them, but if you need to access your savings you will need to give notice and you will incur penalties.
The credit debt spiral
Credit or a personal loan is essentially a cash advance. Cash advances use incredibly high interest, or interest paid over a longer period. You pay back the money you borrowed and the interest on this money. Paying back only the interest or the minimum on the money you have borrowed will mean you pay back much more than you borrowed and it will take you a long time. If you miss a repayment or only pay the minimum, the amount you owe will keep growing. This is how the lender makes money. It’s better to pay something but preferably more or all of what you owe when it is due.
Protect your identity and your money online
Check your accounts regularly and report suspicious activity, it will help guard against fraud and identity theft. You also need to keep your personal details up to date on your accounts. Westpac Protect can provide more help and the Australian Securities and Investment Commission’s (ASIC) Money Smart website also has great information and help.
Exercising these five financial skills will make them stronger and it will help increase your confidence levels.
The information above is general in nature. Always seek professional assistance to assure that your decisions are appropriate to your personal circumstances and objectives.