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Balancing Your Travel Budget With Your Home Savings Or Mortgage

It’s time to travel again. Despite the lingering issues with COVID, more areas in Ontario and beyond have opened for business. Unfortunately, due to inflation and supply chain issues, the expense of travel has increased. At the end of September 2021, Canada’s inflation rate was 4.4%. This is the highest number since February of 2003. Due to this, prices for fuel, shelter, and food are higher than in 2020. In other words, the main items for a vacation are now more expensive.  The good news is that the demand is down, as some people are still reluctant to travel. When demand is down, prices go down, and some travel service providers are discounting flights, hotels and vacation packages to get people into the travel habit again. 

It’s not Complete Doom and Gloom

Though the cost of essential needs is higher, it doesn’t mean you need to indefinitely postpone your vacation. You simply need to balance your travel budget with your home savings or mortgage. Here are a few tips to guide you down the right path.

Don’t Touch Your Savings

First off, don’t touch your savings. The purpose of this money is to fund emergencies. This falls under categories such as medical issues and home/car repairs. If you use your savings as your travel budget, then you’re bound to have a poor return on investment (ROI).

Additionally, you can’t relax while you’re away. A nagging feeling will emerge in the back of your mind on the potential issues at home or with your vehicle you no longer have the funds to address. 

So, take your savings out of the equation. Instead, keep adding money so it has, at a minimum, six months’ worth of living expenses.

Don’t Refinance or Take out a HELOC for a Vacation

The staff at Cashin Mortgages wants to ensure you get the most out of your home’s equity. Particularly when interest rates remain low. We’ll work with you if you want to refinance your mortgage or take out a home equity line of credit (HELOC). 

It’s probably a better idea to invest the money you receive from the latter on home repairs or paying down debt instead of taking a luxurious vacation. It’s understandable if you want to do this. The last two years have certainly been stressful. Yet, you’ll get the same nagging feeling that you would if you used your savings for a grand trip. 

Yes, the ROI gained from a refinance or a HELOC is a representation of the effort you have made to maintain your mortgage payments and your home’s upkeep. Still, consider the additional benefits in terms of making necessary repairs to your property or investing in your children’s university education.

How To Balance

The goal of creating a travel budget is not to overspend. You don’t want to be in a position where you can’t pay your mortgage or don’t have additional funds to add to your savings. So, to create a budget that permits enormous enjoyment, consider these steps.

Determine where, when, and how you want to travel

The where, when, and how of vacation planning starts the budgeting process. Particularly the second and third items. A visit to Vancouver via plane in the summer is far more expensive than a trip in the off-season. 

Research is needed for these categories. Review different combinations of location, timeframe, and transportation to narrow down your selections. When you whittle it to three top choices, determine what vacation options offer the maximum enjoyment and savings. 

Download a travel budget worksheet

When you decide on a destination, then you want to put your budget down on real or virtual paper. There are several online sites with downloadable trip worksheets. They provide drag-and-drop categories (food, transportation, accommodations, etc.) and fields to add the amounts needed for each. 

With this information in hand, you then break down what you need to provide each week or month to make it happen. As you add funds to one column, the amount due is reduced. Overall, a worksheet offers a physical representation of your budget that you return to if momentum is lost.

Use other forms of savings

Although using your entire HELOC for a trip isn’t the best idea, there are still ways to balance your travel budget with home savings and your mortgage. For instance, when you refinance at a lower interest rate your monthly payment is reduced. Hence, you add this amount of savings to your travel account.

On the other hand, you could use your HELOC to eliminate debt through a snowball effect. In other words, pay off the smallest bill first and roll those funds into higher debts. If there’s money available after you knock these out, then allocate some of it for your travel budget. 

Plan ahead

A trip to Niagara Falls or one of the provincial parks shouldn’t need too much planning. For some residents, these areas are day trips. However, forward-thinking is required if you intend to travel a long distance for an extended period. 

There are two main reasons for this. First, you develop the funds needed to enjoy yourself without skimping due to a lack of funds. Second, a spontaneous trip in the winter to someplace like Hawaii is more expensive than taking the time to put the proper money together.

Even if you’re clamoring to go now instead of later, try to tamp down the urges. A combination of patience and regular donations to your travel budget increases the enjoyment of your vacation. 

If possible, get the entire family involved in the process. When they know the destination and what’s needed to reach the financial goal, then they’ll do whatever they can to help out. For example, sell items at a garage sale or take on a side job.

In the end, if you want to utilize the savings from a lower mortgage payment or the elimination of debt with a HELOC, make sure to contact our Oakville office today. One of our representatives will help you get things started.