Summer is here as students are graduating and classes are ending, time to think about a vacation!  This may be the most normal summer we’ve seen yet post pandemic; at least I hope so.  I think it’s uber important to travel with family and friends during the summer months.  Prioritizing this at the top of your list of other financial responsibilities is critical, here’s why.

Regardless of where your investment accounts stand now it’s vital to spend some cash on a summer get away.  A vacation where you are not checking email, answering your phone, and are completely present with those you care about.  It doesn’t need to be far; it could be a trip to the lake or nearest beach.  It maybe on ship or plane far away, it should be fun and, in a location, where you can rest and relax.

There is too much written and discussed about the urgency of saving and investing for retirement without considerations of spending today.  It seems from what I can tell it’s either one or the other, save or spend.  It shouldn’t be that definitive as that misses the value of spending on travel while you continue to prepare for a successful retirement.  It’s critical to enjoy your journey and not defer spending on travel indefinitely.  Deferring enjoyment is just not sustainable or recommended from my perspective.  I don’t believe in skipping coffees or saying no when saying yes is a possibility.  How do you know when you can say yes?  The answer rests in having an updated financial plan that includes a “future fun/happiness now” account with cash to spend as you wish.

Setting aside cash in a designated “fun account” allows you to know exactly what’s available to spend on travel.  Ideally, this addresses a summer vacation that allows you to truly get away without remotely managing work responsibilities.  Top performers regardless of their industry, need time for rest and recovery so they may continue to be awesome doing what they do.  Given the last two years of what may have been limited travel, we are all due for more time to chill out this summer.  Here’s how to do it without jeopardizing your financial plan.

It’s likely you have an emergency account that’s accessible in cash to handle unexpected expenses as they pop up.  Think of your fun account in the same manner.  Funding both the emergency and fun account each month from your net pay ensures there is enough going to each before it’s needed.  More importantly the dollars aren’t all lumped together in a single savings account.  Segmenting your cash based on a particular job description and timing avoids mentally accounting for all jobs your cash reserves may serve.  That’s too much to manage in your head or even on paper.  Knowing exactly what’s where for a specific purpose supports better spending today and planning for tomorrow.

Practically speaking, you may charge the vacation on your rewards card or preferred plastic depending on how you manage your household cash flow.  That’s another topic we’ve previously covered and its value to your financial wellness.  Returning from your trip, it would be nice to have the cash available to pay off the card when the bill arrives.  Having cash set aside in advance in your fun account gets the vacation paid off and allows you to begin planning your next trip.

Without a fun account or setting monies aside for travel, how does the upcoming bill get paid?  Your monthly income or a bonus may absorb this expense depending on the size of the trip.  It may not and as a result may pressure your other essential spending and expenses.  This may lead to negative side effects such as losing your enthusiasm for travel!  Or worse, carrying a balance on your card at much higher rates than necessary.  All of this is avoidable with a little planning in advance.

Another benefit to keeping a fun account is that your spending on travel becomes more visible when it all flows from one account with a specific purpose.  A quick scan of monthly bank statements may tell you exactly what was spent on travel and fun the past twelve months.  This would take too much time and likely be ignored if you simply maintain a checking and savings account without guidelines or purpose.

One day you’ll retire, or maybe you are retired now, and your awareness of what dollars are going where will be more critical as you lean on your investments for income.  Having a fun account allows for you to spend with less worry knowing your other essential expenses are covered as part of your financial plan.  Cash reserves and room for error are always welcome and work best when integrated together.  If you’d like to learn more about managing your cash flow with a fun account while planning for tomorrow, reach out and we’d be happy to chat with you.

Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.

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