Summer is here, and I hope you are enjoying the season. Taking advantage of the summer weather is free, but this time of year can become an expensive couple of months, with countless demands on wallets, from holidays, weddings, and for those with children the calls from little voices craving entertainment and adventure over the 6 weeks of freedom from school. The costs can soon add up! Over the next couple of weeks I’ll be sharing some summer saving ideas to inspire you to develop your own plan of action to stop your money melting away like an ice-cream in the summer sun.
In my role as a Financial Planner, I help clients build wealth and live the life they want, both now and in the future. Whilst a lot of time is spent recommending and implementing advanced strategies like tax planning and investment management, the most important part of a financial plan is ensuring clients are not spending more than they can afford, and are saving enough to reach long-term goals. The core advice that makes it happen is a written budget or spending/saving plan. It’s a proven way to reach financial goals, but a budget doesn’t work unless it acknowledges that certain times of a year tend to be more expensive than others and is updated accordingly. The biggest budget buster around this time of year is, for many people, their summer holiday.
Saving up for a holiday and paying for it with cash is usually the best option for your finances. Setting up a regular payment (direct debit or standing order) to automatically transfer a set amount into your savings account each month is a great way to keep plans on track. With the money put away each month, you are unlikely to earn much interest on the balance, based on the current low interest rates but that’s less important than the psychological power of seeing your savings account grow over time and gaining peace of mind that you can enjoy a fully-paid-for holiday. That said, it’s still worth reviewing your savings account regularly to check you are getting the best rate of interest as many savings accounts begin life with attractive bonus introductory rates but then fall back.
If you have saved up the full amount in cash, then paying for your holiday by credit card could still be a good option, as the purchase is likely to be protected under Section 75 of the Consumer Credit Act. This means you can claim against the card provider as well as the firms providing your flights, hotels if the firm went into administration (in addition to whatever cover may be already provided through ATOL and travel insurance). However, paying by credit only makes sense if you pay off your card bill quickly and in full with cash already saved up. Otherwise, you could be paying hundreds of pounds extra in interest – plus, many travel firms may charge you a fee for using a credit card.
Next up is ensuring your hard-saved cash goes as far as possible. When booking a holiday, if you can, consider travelling mid-week for cheaper prices. Having flexibility of dates can yield some good savings – anyone who has played around on flight booking website will likely to have seen this, but the savings can add up with other services too. For example if you’re renting a car, rates can spike up during the weekend rush.
Similarly, if you are not limited to school holidays, being flexible with dates can result in considerable savings. Postponing your ‘summer’ holiday to September can reduce costs substantially whilst still maintaining high odds of providing sunny skies in many parts of northern hemisphere.
*The Financial Conduct Authority does not regulate tax planning