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Chapter 1: What are the essential steps for financially planning a holiday?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from How To Money and Owen Rascovitch from Rask Finance.
The Australian Finance Podcast is provided for educational purposes only. The information is general in nature and does not take into account your needs, goals or objectives. What that means is the information does not apply to you specifically. So consider getting the advice of a licensed and trusted professional before acting on the information.
Kate, welcome to this special episode of the Australian Finance Podcast.
Thanks, Owen.
Today we're talking about financially planning for a getaway, going on holiday. Yeah. And it just so happens that you have a getaway of your own planned, right?
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Chapter 2: How can you budget effectively for a trip to Europe?
And which countries are you going to?
Uh, starting in England and working my way around from there. I haven't, I'm trying to keep it a little bit spontaneous.
England, just writing this down.
Owen wants to come too.
Yeah. I'm going to meet you there. So you're starting in England and then you're just going to make it up as you go.
Yeah, I've kind of got a general idea of places I want to see and particular things and friends I want to see and things I want to do, but I'm trying to keep it fairly broad so I can change it up as I go.
Cool. So just straight off the bat here, how much did you budget for a trip to Europe? Did you break it down per day or per week or something like that?
Um, the first thing I probably started off was trying to work out the flight. So that can be around, I think to Europe, it's often 1500 return. Um, I managed to sort of get my flights on points actually. Um, but so then I worked that out. I think insurance was another, it's going to be another $500. My passport had expired cause I hadn't actually left the country for a while. So I had to do that.
That was another few hundred dollars. Um, And then I'm sort of budgeting around $100 a day.
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Chapter 3: What tools can help you estimate travel costs?
You and I were talking off air. You started planning for this holiday, even though this is coming up in early 2020, you started planning for this maybe towards the end of 2018. Yeah. So over a year and a bit.
Yeah, so at the end of high school, I wanted to go and travel, but I started working full time at 17 and that's been my life for the last four years. And so I finally got the opportunity to travel, but next year, hopefully. And so I actually started planning properly for it around November in 2018 because I knew trying to save more than a couple of grand was going to take me about a year.
And so I worked out I wanted to go to Europe, so that was going to cost me more. I wanted to spend a few weeks in London. That's going to cost even more. I'm pretty happy to do hostels. I've spent a few nights in hostels, but... Who knows in Europe if I'll cope or not, but hopefully I will.
And hopefully just traveling everywhere by fairly inexpensive means of trains and buses and I guess planes, sometimes internal planes in Europe are actually cheaper. So yeah, I started building the overall vision for my trip, which I think is really important to start with of where you want to go, what you want to do. What type of travel?
Are you happy to backpack or do you want to travel a bit more comfortably? Because that's going to be completely different price ranges. And where do you want to go? Because saving up for a four month trip in Southeast Asia is going to be very different to saving up for a four month trip in America, for example.
Getting that broad overview of where you want to go, the type of travel you want to do, whether you want to see a lot of things or if you're planning to go do a lot of shopping or you want to go to more free museums and go on hikes. So working out that general gist of the trip will help you not only motivate yourself, but start to approximate the cost.
Anything else? That's a really good way to think about it, right? Just what do you want from your trip first and foremost? It's also important to be realistic to some extent, right? You know, if you want a backpack, it's going to be a completely different experience to then having kids or, you know, going and living the lifestyle in a hotel, like a four-star or above.
One of the things I found really useful, we found useful was just simply Googling for average costs in cities and TripAdvisor was a really good resource for us because, you know, TripAdvisor, this is not just us being a poster child for that, but TripAdvisor was really good because you could effectively, you know, just get the top 10 sites for each city or each location that you're in and then all have the approximate cost.
and you kind of work back from there not that you need to plan every day i think if you plan every single day you trip you don't leave much to the imagination yeah so um yeah you don't want to be doing that necessarily but at the same time it gives you a rough idea and it was pretty cheap to be in vietnam for a few weeks
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Chapter 4: How do you choose the right travel insurance?
That's going to be a very different cost again.
Totally, yeah. I think in Vietnam, unless you're very confident on a scooter or on a pushbike, you wouldn't want to be just... A bit dangerous?
anyone that's been can relate but it's uh it's pretty much organized chaos people flying through red lights anyhow that's a topic for next time um so after you design i guess where you want to go the kind of things you want to be doing how did you work out your costs you said you know you had all these things uh like passport expiring flights etc how did you work it out you just
I did a lot of research. I probably spent a lot of time on Google and looking at different... There's so many... It's quite funny. It's like the financial independence community. The travel bloggers actually put every detail of their expenses online for you to trawl through. So you can see exactly...
What a week in London costs for someone who's traveling on a hostel budget or a comfortable budget or a luxury budget. And you can see what sort of things they did, how much those activities cost, transport, accommodation on different budgets. So it's often worth having a look around. You might even find a travel blogger you really like and you like their level of travel.
So they might be a budget traveler.
and you can look at different locations and figure out what's the general costs of staying here and even having a look at airbnb um because that's another option that wasn't there 10 years ago for locations and they have that inspiration section now so you can sometimes you just go on airbnb and they show you a tree house in the moldives or something really strange So different things.
And yeah, I guess maybe just if you're planning a year out for a larger travel, work out what are those big costs. Flights, that probably won't change too much. So work out what do you need for flights? What do you need for travel insurance? If you need visas, you often have to book them quite, register for them quite a long time in advance. And all those sort of fixed costs.
And then you can keep the accommodation food more general.
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Chapter 5: What should you consider when managing finances back home while traveling?
booking.com you know any of these sites and you can get pretty you know accurate flight estimates our flight costs so and even google now you can you can search for flights um another thing you mentioned airbnb there are other sites that you can use you know there's a litany of sites that compare hotels um you can even join like rewards programs and things like that where you can
use points like you did, or you can get member discounts and those types of things. Some of them are pretty much a scam, but some of them are, and some of them actually fulfill or live up to expectations.
One thing you can do if you have a credit card, not that we are endorsing credit cards on this show, hopefully they've all been cut up, but if you are a frequent traveler, you can use your business card to book things and you might get things cheaper.
Another thing to do, just a quick one while we're here, is when you book into a hotel, if you're part of a couple, remember to tell them it's your honeymoon or your anniversary. No matter what, it is your honeymoon or your anniversary. Even if it's not, just tell them that. So when you get up to your room, there should be a complimentary bottle of wine or some flowers or something nice.
So remember...
always always always it's your it's your anniversary or your honeymoon another thing which we found really useful is just speaking to travel agents obviously it's just you know it seems a bit old-fashioned you know you can book your flights online but it's actually free to go down to most travel agents get a quote if they're competitive yeah maybe you take them up on their offer but if they're not then you just just disregard the quote altogether but you take some of the
the ideas that they give you so they can you know that chances are they're a wealth of knowledge they've been to these places so some things you might um you might do in fact include you know asking them for like apps for like to get around that particular city because there might be you know maybe google maps isn't the best option or maybe there's an app to um you know explore the nightlife in that city and things like that so we did that exact same thing for vietnam you know the quote that we got back from the travel agent was just outrageous and
So we just decided, well, we're just going to do it our own. But we actually got some things from that meeting. And you can just go down to a travel agent and speak to them about where you're going.
And sometimes travel agents actually have better deals than what you're finding online because they've secured maybe a thousand of X flights to London. And then they're offering them at a really low rate and publicizing them on their mailing list. I'm just thinking in Melbourne, when I walk past Flight Centre, Hello World, I think there's a student travel site.
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Chapter 6: How can you minimize fees when withdrawing money overseas?
What can you do? Can you upgrade us a room for the same price? All those types of questions. One more final little quirky thing that you might be able to do is you might be able to create an email address. We might have an email address. that's kind of like the travel department. So you might have like for business, you might have travel at rask.com.au, right?
And then you book with that email address and they see that and they're kind of like, oh, maybe this is someone from the travel department or, you know, something like this. And then it gives them the impression that, hey, maybe we should really, you know, wine and dine this person because they might be, you know, consistent business lead for us. Let's give them a better deal.
So this is a little quirk. You might better make up some email or, I don't know, do something and you might get a special offer.
A lot of places also say if you give them a nice review and you show them the review, they'll give you XYZ bonus as well. So that's always something to keep in mind.
Yeah, for sure. Okay, so we've kind of talked a bit off topic here, but we talked about some of the little tricks you can use. You obviously set out your vision for what you wanted to do. You've kind of worked out the rough costs. Then what did you do? How did you plan for that? You had a year, so time obviously was on your side to help you budget for this. Yeah. But did you just break it down?
This is how much I need to save per week, per month, something like that?
Yeah, absolutely. So I worked out, let's say for this example, because I can't remember my exact figures and I can't do maths on air, it was $12,000 for the trip because originally I was planning to go for a longer period of time. And then I would divide it by how many months before I plan to go. So let's say 12 months, I need to save $1,000 a month.
And if I'm not currently saving $1,000 a month, just in general savings, how am I actually going to get to that thousand?
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Chapter 7: What are the best practices for currency exchange while traveling?
And that's by you have to go through your budget. And if travel this trip in a year's time is a real priority for you, you're going to have to make room in your budget. And I've known people that have taken on second jobs, side hustle. I've done some extra work on the side and put that money straight towards your travel fund. So I created a separate bank account.
I called it, I think it was like Travel Adventure 2020. I did this back in 2018 and I then automated. So when my salary hit my bank account, it automatically moved the $1,000 across every month.
Cool. Do you or did you before you start saving for this, did you have an account where you just allocated some money anyway? So did you have like a holiday account?
No. You don't? I just had a general savings account that I used.
Yeah. Okay. And that's kind of, you know, when you're ready to go away for a weekend, let's say you would just draw money from that. Yeah. Okay. Right. Okay. Because we try and be a bit more explicit with it. We kind of allocate 10% for it just to think like 10%.
Of your income. Yeah.
Your combined income. 10%. Yeah. So we try and save, you know. 20% of our wage.
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Chapter 8: How can you prepare for unexpected expenses during your trip?
So save and invest 20%. And then an additional 10% is for holiday. So effectively we're saving 30%. Yeah. Which is a lot of money, right? For some people, but it's all about keeping those other big costs down and driving a wedge between those, the costs and your, your income. Okay, so you've put away $1,000 a month. You said you've renamed the account, but was it a high interest savings account?
I'm guessing you didn't invest it.
I mean, as much interest as we're getting at the moment, I definitely didn't invest it. If you're planning to use this amount in the next year or two, I wouldn't recommend investing it.
Yeah, cool. It's the same question we get all the time. I've got three years until I want to buy a house. Do I invest this money now? Imagine how that conversation would be if you said, I'm going on a holiday in three years or whatever. It's the same logic. It's the same purpose. We're going to be using that money.
But I guess the psychology of it is no one would be crazy enough to spend their holiday money on the share market. It's leaving too much to chance. Yet it seems with our home deposit, we're almost prepared to do it.
and what i did actually it's a bit cheesy but i uh i made a document that had travel adventure 2020 on it and i had 1000 then underneath 2000 all the way up to the total amount i needed and then i printed that off stuck it on my wall and then every month once i'd salary had come in automated payment had moved the money across i crossed out another amount so i could see it throughout the year slowly get closer and closer to my target so that was quite motivating to keep going and
Remember why you've taken on extra work or cut expenses in certain areas or remembering why you've actually changed your budget to fit this goal.
That's a good one. I really like that. It's kind of like anything we do with budgeting, right? It doesn't have to be a holiday or whatever. Just some way to keep track of what your goal is.
Yeah, and it's another method I've seen a lot of people do when paying off debt, having something tangible that you can cross off every month as you get closer to the balance of zero, which is the goal.
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