From Emergencies to Vacations - Savings Strategies for Life

By: David Smyth, June 19, 2019

We all know that it's important to build up and keep an emergency fund in case life throws you a curve ball. We also know that, if we plan to travel and take vacations, we need to plan and save for that as well. But did you know that the two can be related? Before you get excited, no, a summer beach getaway or a winter ski trip aren't emergencies. But the two savings goals can be linked. Trust me.
 
First, how much to save in an emergency fund is one of the most common financial questions in the industry, and the answer is simple: it depends. Are you a W2 employee or are you a contract worker? If you're in an "eat what you kill" profession where some months and even years are leaner, and others are more flush, you'll need more to tide you through those lean times. The closer you are to a guaranteed paycheck, the less emergency fund you'll need. Our team will be happy to help you find your unique "sleep at night" number.
 
Let me tell you a personal story. When I was in the early stages of my career, marriage, and then raising a family, I automated a certain amount of money into my emergency fund at the end of every month. My goal at the time was about $5,000. I saved a few hundred a month and after a lot of diligence, I reached my emergency fund goal. At the end of each year, sometimes there were emergencies like new tires for the car, or paying off student loans - back then that's what counted as an emergency! Or, maybe we'd moved and had to pay up front for cable installation.
 
But, there were a few years back in those days that went smoothly without any emergencies, and we decided, what the heck? Let's take a vacation with the excess amount above that five grand goal. So, we took the extra and flew to Athens, Greece, spent 12 days on a Mediterranean cruise, then through the Red Sea and Istanbul and Turkey, where we traded Levi's jeans for jewelry at the Grand Bazaar! Seriously - American jeans were a hot commodity back then and we'd brought a few pairs specifically for this purpose. Then we jumped back on the ship to Odessa and Estonia, where we purchased a couple of Russian oil paintings. We ended up in Italy, land of gelato, marble statues, gondolas and art museums. Those were the days - pre-kids!

 

We returned home looking forward to the next year's trip - some years we could travel, and some years there were emergencies that needed to be covered. I don't know how you save for vacations, but my point here is that, if you have a fully funded emergency fund, keep those automated payments up, and then don't be afraid to have a little fun with the excess during those years when life treats you well. As long as you're saving towards retirement and have enough in that rainy day fund to sleep peacefully at night, I see no reason not to take that trip and make those memories that will last for the rest of your life. I'd love to hear about your vacation memories, and to help you plan for the next one.

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