Get out the vacation debt trap

Your vacation is a time to relax and be worry free. You must, however, properly manage your finances when on vacation so as to avoid any potential stress that could reverse the benefits of your time out.

Personal Financial Advocates’ resident ‘Debt Therapist’ – Nicholas Dean (622-4PFA, pfaltd@tstt.net.tt) said in an interview that he believes if your vacation includes foreign travel, it pays to be prepared financially. He recommends saving in advance for your getaway.

In his experience he has helped many clients find ways to resolve the stresses that accompany paying for their vacation years after the enjoyment has faded. The stress that comes with the reality of vacation debt when a household budget now has a new loan payment that melts away all the wonderful memories you created on your holiday.

The young but seasoned advisor stressed that vacationing is indeed important. “I recommend, if you can’t vacation every year, do it every 18 months.”

Dean, who has been in the financial sector for 15 years, said he likes the idea of planning for vacations. He even prepares a schedule for his clients in which he has them put aside money for vacations out of their monthly paycheck into a separate account. “This becomes a fixture to their budget. When they get back from their vacation they don’t have to worry about any installments or interest and they just simply continue saving for their next vacation,” he said.

He pointed out that there are vacation packages that are quite economical. “One of the biggest challenges I’ve found with my clients is that, when they give in to their ‘extraordinary impulses’ – especially to travel to far away places like Europe, China or Australia – it’s hard for them to recover when they return because their credit cards are maxed out and debts have to be consolidated.”

Nick has found great success in matching loan payments versus food money. He said, “I get clients to understand that as their debt payments go up, their budget for food goes down and if this continues unchecked at some point they begin to borrow to buy food. It is not uncommon that people even approach loan sharks when things get really bad.”

He has also experienced circumstances when clients’ vacation loans get refinanced back into school loans then to Christmas loans and last but not least Carnival loans. As such it sometimes takes six months to never, to recover from an impulsive vacation debt.

Dean went on to explain that it is possible to get the best out of both worlds with “all-inclusive packages” to places like Laguna Mar in Margarita. He finds the packages quite economical and you get more “bang for your vacation buck” because almost everything is included and the hotel is usually good.

Of course, you have alternatives like our very own Tobago. He beamed, “Tobago is one of the best destinations for a vacation. One can even vacation in Trinidad. There are local camps and things to do like sailing, eco tours etc. I highly recommend the local magazine Cr? Ol? if you decide to vacation in TT.”

He then went on to talk about the “cash management tools” that can be used for spending while on vacation. “Credit cards are very useful but could also put you into trouble,” he said. “If you plan on taking credit cards you need to find out from your bank if it can be used both locally and internationally. The money you plan to spend on your vacation could be placed on the card before you use it so that when you get back you don’t have the debt. Of course the alternative is to settle the full balance used on your return.

“If you decide to take along those credit cards to prevent and minimise impulse purchases, you can take the one with a controllable credit limit and leave the others (depending on how many you took on the vacation) in a hotel safe box,” he said.

“Then there are ‘International Debit Cards’ which use money you already have saved up in a saving or checking account. Another common and safe alternative is Travelers Cheques which if lost, can be replaced,” he added.

The advisor, who has been on quite a few vacations, warned that stores are designed to trap you and your money. “If you see something you are compelled to purchase – look at it, walk away and cool out. If you still think you should get it then by all means. You must always remember that popular stores are very skilful in encouraging you to act by evoking your emotions or your ego,” Dean said.

He said the cool out period should help you focus on whether you really want that specific item and it should help you figure out if it is just the ambience of the store that was making you purchase the item.

Plan what, how much and who for – you are going to shop and set aside just enough to cover – and when the money is done that’s it. Dean has found that a prepared itinerary is helpful. It could help you get the most out of your visit as an alternative to wandering about when you get to your destination. There are great tours that you can take to see as much of a destination as possible.

“This is where research comes in.” He stressed that the Internet is an excellent resource and will help you to find out a lot about your destination including the level of crime in certain areas. The Internet can be used to purchase tickets, rent cars and hotels all from the comfort of your home. Check out the following websites – www.priceline.com www.expedia.com and www.travelocity.com, or you can just consult with local travel agents who are generally very helpful. Be sure to ask them about travel insurance that cover a myriad of losses including health care treatment in foreign places. Airline tickets are especially cheap during the off season so you can save a buck or $200.

In conclusion, Dean said, “Please don’t think I’m a kill joy or anything but a little proper prior planning can prevent pathetically, poor purchases during a time when you should be living it up and having fun. So please go out and enjoy yourselves, you deserve it but don’t forget to bring me back a T-Shirt!!”