Having dreamed your big trip: how do you turn your dream into reality? Unfortunately the answer is often about cold hard cash, unfashionable I know but basically there is no substitute for being in a financial position where your outgoings are less their your income. If you are not in the position to be able to pay off your credit card from one month to the next its not really likely that you can abandon your paid employment for a number of months to have the wonderful RTW trip that you are dreaming off.
I always remember being invited around to a friend’s home years ago when I was due to leave on a 6 month trip -she said that she really envied me the opportunity, I know we earned similar salaries, but the conversation occurred while we were seated on her gorgeous leather lounge suite which probably cost the same as 3 months travel in India I’m not saying there is anything wrong with nice furniture, a new car or a extensive wardrobe, its just those aren’t my priorities – which I guess is why I keep getting “lucky” with my travel plans!
I guess I show my age if I mention I remember when it wasn’t possible to borrow money without an income. If you wanted to buy a consumer item you paid cash, usually a check, or you put in on lay-by or HP, paying little each week until it was paid for you then you could take it home. These days I hardly ever pay cash for an item, I normally use either a debit or credit card. However, the key difference is that I always pay the balance of the credit card the day its due I’ll take free credit, air miles and whatever else, when its offered, but I am certainly not paying interest on consumables. If I cant pay the credit card off at the end of the month I don’t use it. If I don’t have funds in my cheque account I can’t use the debit card.
So Midlife’s top saving tips are:
- Never borrow for consumption, including travel, only borrow to leverage income earning assets such as real estate property and shares.
- Don’t buy new if you can buy second hand – especially cars, but works well for things that go out of style quickly but keep on working like TV’s, fridges, microwaves and similar.
- Don’t buy a book, join your local library. Don’t buy a video, hire it from the local video store or on-line equivalent.
- If you are thinking about buying a new CD, book, dress whatever decide to come back to buy it tomorrow. Interestingly you will often not come back.
- If you can’t pay off your credit card in full at the end of the interest free period don’t use it.
- Don’t buy quality unless it matters. If I had a job that needed me to wear good shoes or suits I would spend good money to buy quality, but if I see a pretty little skirt in this year’s fashion which is nice but I know it will date, I wait until its on $5 table. I buy quality chocolate, fruit and meat in the supermarket because I like good food but I buy the cheapest no-name brands for items such as butter, sugar, flour, and other basic ingredients because it doesn’t matter.
- Be clear what is an asset (something that makes you money e.g. a rental property, stocks and bonds) and what is not an asset, but are often called one, because they cost you money (a fancy house which you could rent for less than your mortgage, motor vehicles unless you need them to earn your keep, furniture and nick nacks (you can rarely sell them for more than you paid). An asset will help pay for your trip, the other things will stop you ever getting to the boarding gate!
For more finance tips check out my travel finances page. What are your favorite ways of saving money for the big trip – drop me a comment I’d love to hear from you!