Organize savings for the holiday trip



Few Swedes do not want to go abroad in the summer, during their holidays. Although, as this year is, nice weather at home in Sweden, most would like to go abroad. I can understand that it attracts because there is a big difference in the atmosphere, feeling, food, environment and culture in another country, such as Greece or Italy. However, it costs to travel and must be financed in some way.

Being able to stay in a hotel and jump in the pool a little at any time and have a good ice cream or drink is very nice and it is another calm when you are away on a trip compared to if you are at home, no matter how nice the weather is in Sweden. Or if you prefer to travel to an exciting city and experience things or check out sights for that matter.

Push up the prices extra much

cash

It is far from free to go on a holiday trip abroad, which most people are probably aware of. A trip to the sun for a week for four people can easily be between USD 20-30,000. Of course even more if you choose a more expensive destination and hotel and maybe a little cheaper if you lower your standard some. In addition, if you wait to book, bad weather in Sweden can push up the prices extra much.

But we can say, for example, that it costs around 20,000 USD to go four people in a week, a package trip with hotels and flights. On top of that you have to cook (lunch and dinner seven days for four people) and some money to spend on nice things like ice cream, souvenirs and other entertainment. In total, it might be around USD 33,000 for the trip in this example.

It is not easy to say exactly what a family of two working adults on average will have over each month, after the bills are paid, etc., but we can fairly calmly state that there is rarely more than USD 30,000 left. Especially not if you also want to spend money on saving (buffer saving, long term saving, child saving etc.). It is therefore not likely that you can only “cash” the trip with money from the latest salary without it being noticed in the cash flow.

How can you afford your holiday abroad?

How can you afford your holiday abroad?

Since the holiday abroad is an important part of this year’s events for many Swedes and something that comes back in principle every year, it is important to consider how to finance it all. The absolute best and most logical solution is to save money during the year that is put away in a travel pot, but unfortunately, not everyone is so good at planning.

There are quite a large number of people who instead finance their journey by taking out loans. Of course, a loan can have the function of giving someone the opportunity to buy something whose price is so high that it is difficult to have the money in the account in a normal month. For example, if you want to buy a new car or similar. Then a loan is good and probably a must. But in some cases, you have to think about whether a loan is really the best solution. It actually costs money to borrow.

Start putting money away for next year’s trip

Start putting money away for next year

The answer to how to afford to go on a holiday abroad that costs over USD 30,000 for the whole family is that you have to start saving for the trip well in advance. After returning from this year’s trip, it’s immediately time to start putting money away for next year’s trip. If you start on time, you have more or less 11 months to spend money.

If you have set a budget for your trip of USD 35,000, you must spend at least USD 3,200 in savings for the trip each month. Then you have managed to save all the money until you go next time. So you have to start by checking what your budget looks like and how much money you have to move with each month, in order to find out if it is reasonable to spend that money each month.

The better the budget calculation you have, the easier it is to see what you have for income and expenses and where the money should go. In a healthy economy, there is also a saving for buffer and other things that strengthen your finances. You should not spend this money on it, but you should be able to afford USD 3,200 a month in addition to other savings.

Do you find that it feels ok then you simply put this money into a savings account marked “Holiday travel” or whatever you want. You can think about investing the money in, for example, shares or funds until it is time to travel, and if you are a bit invested, it can be a good alternative. However, there is a certain risk that money will decrease in value and it is always worse to invest money that you need to use shortly.

To borrow instead of saving

money

Basically, it is not that different to save money compared to borrowing money, except that a loan has some disadvantages that you want to avoid. If you save money, you have to put aside USD 3,200 every month for the trip if you can afford to pay the full amount when it’s time. If you take out a loan, you must also pay off the loan each month until everything is repaid. The only difference is that you pay on the loan after you leave instead of doing it in advance.

However, it is not so easy that you can borrow money for free. You also have to pay interest and fees for your loan. If you save money you can put away USD 3,200 every month for 11 months to reach USD 33,000. If you were to borrow USD 33,000 instead, you could get an interest rate of, for example, 12% plus a setup fee of USD 500.

How much you pay in total for the loan depends on the maturity. If you only have 1 year maturity, you basically have to repay the loan at the same rate as your savings, which would have meant that you paid USD 3,200 a month plus the interest rate. The interest will be a total of USD 2,145 for this period and with the set-up fee the cost of the loan will be around USD 2,645.

Repayment of a loan

This means that you have to pay USD 2,645 more if you pay the money after you have completed your trip (in the form of repayment of a loan) instead of paying the money (in the form of savings) in advance. Given that you will certainly want to go out and travel again next year, you will probably also need to borrow again next year if you have borrowed for the trip this year, given that you have to make the repayment.

For that reason, you can say that it will be almost exactly the same with savings and loans in such a way that you have to spend every month with money that goes to the trip – only that you save USD 2,645 each year by starting to save in advance. instead of borrowing the money required. There is no doubt that it is better to save than to borrow. The only “problem” is that you need to have some planning ahead and start planning and saving a year in advance for the upcoming trip.

If you were to deduct the repayment of the loan so that you instead repaid for three years, the total interest expense would instead be USD 6,104 for the same amount and with the installment fee USD 6,604. That’s quite a lot of money overall. Ask yourself if it is worth spending so much extra just to be able to travel abroad this year, even though the wallet does not allow this. Or is it better to wait for next year and start saving for the journey already today? I know what I would have done.

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