What’s the point of being prudent with money if you don’t take the time to reward yourself by actually spending some of that hard-earned cash? As a financial planner, i have seen heart-wrenching examples of people doing everything they can to master their financial position, only to see ill health, family circumstances or an early death remove any opportunity of enjoying the fruits of those years of care and diligence. So here’s a financial planner’s view of holidays, retirement and planning. i can assure you that financial planning for holidays is a vital part of my daily job, and one i very much enjoy.
Think of an advertisement you’ve seen recently for retirement planning – it will inevitably focus on the travel aspect of retirement. I’m not really fussed who you may choose to invest with towards achieving these dreams – the purpose of this post is to step back from all that and consider just where holidays fit in your overall financial planning efforts. And why am i choosing to cover this topic now?
Australians today have to plan more carefully for those dream holidays, as incomes and our currency have failed to keep up with those grand plans from just a few years ago. And if recent economic forecasts play out then those global Grand Tours will need even more planning again..
There are two over-riding themes that punctuate discussions i have with people when planning for retirement :
- Not having to worry about bills or living costs in retirement, and
There are other themes of course – family, housing, accumulating and distributing an estate to family and beneficiaries, “falling in love again” (the situation where a couple must rediscover their relationship as they spend much more time together than may have been the case for many years), hobbies, sports and community interests – but the most universal issues are definitely funding an existing lifestyle, and travel.
Financial Planning for holidays
Holidays don’t just impact on financial planning from a retirement point of view. Holiday planning impacts the average person’s cashflow every single year. Even people who do not take annual holidays will generally save up for a larger holiday eventually, whether it be when changing jobs or perhaps while on Long Service Leave. In an effort to better understand where holidays may impact on broader money matters, way back in 2014 i contacted Flight Centre’s marketing people. As one of the largest providers of holiday dream fulfillment, i sought out their insights into the holiday habits of Australians and corresponded with Public Relations Manager Kellie Carty. Kellie provided a few areas as being representative of ‘typical’ holidays over the average Australian lifetime :
- Students and Contiki-type tours
- “Gap year” holidays after finishing school or university
- The “European tour”, which does not seem to be falling in popularity
- The Honeymoon
- Family holidays
- “Golden Gap” year holidays – in other words, taking a years’ holiday on retirement
- Less grand retirement holidays
- The Grey Nomad
As long as the list is, i have yet to meet many people who feel they have had too many holidays. Except for a lovely retired woman who recently told me just that – i’m talking to you, Sally!. For the bulk of the working population though, the wish-list of holiday destinations is much longer than the travel list of destinations visited. For many people, the time between holidays can seem interminably long – but planning for the next holiday as soon as you get back from the last one can help mitigate the “back to work” blues, so planning for holidays is not just a financial issue!
One of the fascinating aspects of financial planning over the past 5 years has been the changing impact of travel plans and dreams. In the grand years of the commodity boom and Australia’s super-strong dollar, our advisers noticed that clients were allocating more money for longer overseas holidays, tours and cruises. And even after the Australian dollar fell from that magical “parity” level of 1.00 $Australian for 1.00 $US, those grander plans were continued to be made.
In the more recent past, this global holiday planning remains in place – but time frames and scope are reducing to reflect local worries about jobs and incomes, and the gyrations of the Australian dollar.
Australians love to travel
Perhaps it’s because we are fairly remote over here in the world’s smallest continent. Perhaps it is because a very large chunk of the Australian population weren’t actually born in Australia, and there are strong ties to people and places far away? Perhaps it is just an ache to see a more diverse world or simple cultural curiosity. Maybe it’s because we work hard, and like to get out there and do “different” in the work breaks we can engineer? Whatever the reason, travel plans are a big slice of the average Australian’s budget, and i can assure you that financial planning for holidays is just as important as planning for cars or home renovations or career planning.
The Reserve Bank of Australia (“RBA”) have noted in recent papers the strong increase in global tourism that has helped bring in overseas dollars, and help offset some of the impacts of falling commodity prices. Yet for all the increase in visitor numbers, there are more of us heading out of the country than global travellers visiting us.
Future Travel Plans..
Financial planning for holidays in the years to come could be far more challenging than in the more recent past. Why?
- Because there is a possibility that incomes will not grow as strongly in the future as they have in the past.
- Australia’s currency may fall in relation to overseas currencies
- Oil prices are volatile, and could act to drive up travel costs.
The news is not all bad, however. As a fairly flexible bunch of folk, Australian’s quickly adapt to changing times and where there is a will, there is a way! Holidays in some countries may be far cheaper than others. Trips to many Asian destinations can be substantially lower cost than to Europe, the United States or the UK – not just from the point of view of local living costs but also from more favourable currency conversion.
Cruises have grown in popularity, with more sea-borne travel options available for Australians today than was the case just a few years ago. And more people could decide to embark upon treks and backpacking tours in place of the more expensive bus tours and hotel holidays. Tastes change and when the aim is to have a break then the simple novelty of a different country can take the place of more expensive dalliances. It’s all a matter of individual preference and capacity.
And what of economic conditions?
This will be the topic of another post. What are the expectations for the Australian dollar? What are the likely conditions for income and wealth in Australia? I will introduce some of Australia’s foremost experts in their fields, and share some of their opinions on what the future may hold – even while remembering that nobody – absolutely nobody – has a crystal ball. The future remains unwritten, and all you and i can do is to plan for the worst and hope for the best. In the meanwhile, we can buckle down to some serious financial planning for holidays!
As usual, comment, criticism, critique and clarification are welcomed.
Notes and Links for Financial Planning for Holidays
- “Australia’s Tourism Industry“ by Karen Hooper and Marileze van Zyl of the Reserve Bank of Australia’s Economic Analysis Department. www.rba.gov.au/publications/bulletin/2011/dec/pdf/bu-1211-3.pdf
- “Australian Resident Departures” Australian Bureau of Statistics (“ABS”) from YearBook Australia 2010 : Published on the ABS website in 2012. www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1301.0~2012~Main%20Features~Australian%20resident%20departures~138
- Suncorp’s “Tips for Trips – The Grey Nomad” http://www.suncorpbank.com.au/news/tips-trips-grey-nomad
- “Travel trend: Babyboomers take a gap year” by Nina Karnikowski of the Sydney Morning Herald www.smh.com.au/travel/travel-news/travel-trend-babyboomers-take-gap-year-20131207-2yy2d.html
- ING blog article on how Australians spend their income : https://blog.ingdirect.com.au/2014/06/23/how-australians-spend-their-salaries/