Summer plans shouldn’t lead to a fall financial hangover – It’s Your Money

Summer plans shouldn’t lead to a fall financial hangover – It’s Your Money

Brett Millard – | Story: 490492

With inflation impacting nearly every aspect of daily life, planning a summer vacation can seem daunting when money is tight.

A recent Ipsos poll conducted for Global News found 79% of those surveyed “really need” a vacation, 62% plan to take a vacation this summer and yet only 19% could easily afford to take a vacation.

Sometimes, a well-planned getaway is still possible without straining your finances. Here’s a comprehensive guide to help you enjoy a memorable summer vacation while staying financially responsible:

Set a realistic budget—The first step in planning a budget-friendly vacation is to establish a realistic budget. Evaluate your current financial situation, taking into account your income, expenses, and any savings earmarked for travel. Determine how much you can comfortably spend without jeopardizing your financial stability.

Choose affordable destinations—Selecting the right destination is crucial when money is tight. Opt for locations that are known for being budget-friendly. Consider national parks, smaller towns or cities with free attractions. Staycations or nearby getaways can also provide a refreshing change of scenery without the high costs associated with distant travel.

Travel off-peak—Timing your vacation can significantly impact costs. Travel during off-peak seasons, or mid-week, to take advantage of lower prices on accommodations and flights. Summer can be busy but early June or September often have better deals than peak times in July and August.

Plan and book in advance—Booking flights, accommodations, and activities well in advance can lead to substantial savings. Airlines and hotels often offer discounts for early bookings. Use fare comparison websites and set up price alerts to monitor deals. Flexible travel dates can also help you find the best prices.

Utilize loyalty programs and points—Leverage loyalty programs, credit card points or travel rewards. Many credit cards offer travel points that can be redeemed for flights, hotels or car rentals. Joining hotel or airline loyalty programs can also provide discounts and perks that reduce travel expenses.

Consider alternative accommodations—Instead of staying in expensive hotels, explore alternative lodging options such as vacation rentals, hostels, or home-sharing platforms like Airbnb. These options often provide more space and amenities at a lower cost. Additionally, consider house swapping or staying with friends or family to save on accommodation expenses.

Create a detailed itinerary—Having a detailed itinerary helps you manage your vacation budget effectively. Plan your daily activities and meals to avoid impulsive spending. Look for free or low-cost attractions and activities. Many cities offer free museum days, outdoor concerts, or community events during the summer.

Cook your own meals—Eating out can quickly deplete your travel budget. Select accommodations with kitchen facilities and prepare some of your own meals. Visit local markets and grocery stores to experience regional foods without the high cost of dining out. Pack snacks and picnic lunches for day trips to save even more.

Use public transportation—Relying on public transportation instead of renting a car can save a significant amount of money. Many destinations have efficient and affordable public transit systems. Walking or biking can also be cost-effective and allow you to explore the area more intimately.

Look for deals and discounts—Take advantage of deals and discounts available for tourists. Many attractions offer discounted admission fees if you purchase tickets online in advance. There are many websites dedicated to finding discounted rates for local activities and dining. Tourist information centers can also provide valuable coupons and advice on budget-friendly options.

Set sside a contingency fund—While planning your vacation budget, allocate a small contingency fund for unexpected expenses. This ensures that you are prepared for any surprises without derailing your overall financial plan.

Monitor your spending—Keep track of your spending throughout your vacation to ensure you stay within your budget. Use budgeting apps to monitor expenses in real-time. Being mindful of your spending helps you make adjustments as needed and prevents overspending.

Enjoy free activities—Maximize your vacation enjoyment by taking advantage of free activities. Explore nature trails, visit public beaches, attend free local events, or simply enjoy a day relaxing in a beautiful park. These experiences can be just as fulfilling as costly activities.

Planning a summer vacation on a tight budget amid rising inflation requires careful financial planning and smart decision-making. By setting a realistic budget, choosing affordable destinations, and making the most of deals and discounts, you can enjoy a fulfilling and memorable vacation without putting your finances at risk.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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Brett Millard – May 27, 2024 / 4:00 am | Story: 489383

On May 23, FP Canada released its latest Financial Stress Survey Index, revealing significant insights into the financial well-being of Canadians.

The survey highlighted the growing financial stress among the population and underscores the importance of financial literacy and planning.

The index is compiled annually for FP Canada by Leger and is a measure of how much financial stress Canadians face, the key causes of that stress and steps that are being taken to combat the financial stress that so many face.

I wanted to use this week’s column to highlight some of the key findings of the survey as well as discuss some steps Canadians can take to reduce their financial stress.

Money continues to be top stressor—Driven by a challenging economic environment, elevated grocery prices, inflationary impact on living costs and higher gas prices are key factors contributing to financial stress.

• 44% say money is what tends to cause them the most stress in their lives, more than personal health (21%), work (16%) and relationships (16%).

• The gap continues to widen as money wasalso cited as the top stressor in previous years – 40% in 2023 and 38% in 2022.

• 45% of those surveyed reported their financial stress has increased over the past year.

Impact on mental health—Of significant concern is the impact this financial stress has on people’s mental health. Sixty per cent of those surveyed reported their financial stress has adversely affected their mental health.

• The constant worry about finances has led to increased anxiety and stress levels.

• Young adults (ages 18 to 34) were most affected by financial stress, with 55% reporting higher stress levels quoting factors such as student loans, job stability and housing affordability as the main culprits.

Growing optimism—In the way of good news, despite Canadians continuing to grapple with financial worries, there is a growing sense of optimism as they prioritize financial well-being with a renewed focus on financial self-care.

• 50% of those surveyed expressed increased optimism about their financial future compared to 47% last year, despite higher stress levels. This is not a huge increase but momentum in the right direction considering the external factors people have faced over the last year is encouraging.

• Optimism among young people is higher with 55% of those under the age of 35 feeling more hopeful about their financial future.

• 91% are proactively embracing strategies to reduce financial stress and combat growing economic pressures – common strategies quoted include tracking expenses, paying down debt, saving more and creating a budget.

While not necessarily a pretty picture yet, these results indicate a rise in proactive financial behaviours and demonstrates that Canadians are eager to take charge of their finances.

What can you do? As mentioned above, we are seeing a renewed surge in people taking action to combat the financial stress that they face.

Simple tasks such as creating a budget, cutting non-essential spending and better managing their debt are showing increased traction among Canadians. While there are steps you can take on your own, the study shows a clear difference in stress levels of those that work with a professional financial planner.

Canadians who don’t work with a planner are 23% more likely to have lost sleep about financial worries versus those that do.

Overall, those who don’t work with a professional planner are 33% more likely to be stressed about money.

Looking back at the 44% number quoted above (those who cite money as their top stressor), that same figure drops to 36% for those who do work with a professional planner.

This year’s Financial Stress Survey Index highlights two key themes. First, financial stress is clearly still on the rise which is likely not surprising to many people out there. But second, and more important, we are seeing a rise in people willing to take action to improve their stress and financial well-being.

If you are one of those still sitting on the sidelines and not being proactive, consider what steps you can take today to get back on the right track and improve your financial and mental well-being.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Brett Millard – May 20, 2024 / 4:00 am | Story: 488340

When managing their overall net worth and planning towards their retirement, there are many Canadians who encounter a distinctive hurdle—a significant portion of their savings is often invested directly into their employer’s stock.

This situation can lead to significant overexposure to a single company’s performance (and often also overexposure to a specific industry sector), posing risks in the event of adverse market movements or company-specific challenges.

Investing a large portion of one’s savings in employer stock can create concentration risk, leaving investors vulnerable to fluctuations in the company’s performance and broader economic trends. While loyalty to one’s employer is commendable, it’s essential to ensure that investment decisions are grounded in diversification principles to safeguard against potential losses.

Sometimes, the old adage of “invest in what you know” can have serious negative consequences as well. I’ve seen countless examples of someone who works in a specific industry and has much of their savings in their own company’s stock and then the parts they don’t have in their own company’s shares are invested in other companies in the same industry since this is the area they know best.

For example, picture someone who works in the oil industry and the majority of their retirement savings are in the stock of their own company. The remainder of their investments are then put into the stocks of other oil and oil service companies since this investor knows that area and feels “safe” putting money there. If the oil markets take a prolonged downturn, they could be in big trouble.

Further complicating the situation is that many Canadians are already overexposed to the housing markets with much of their net worth tied up in their primary home. Now imagine someone who’s worked is tied to the housing market and their investments are in that company’s stock.

To protect yourself from these concentration risks, here are some effective strategies investors can consider to mitigate the lack of diversification that many are facing:

1. Asset allocation: A fundamental approach to diversification involves spreading investments across various asset classes, such as stocks, bonds, and alternative investments. By diversifying beyond employer stock and into other sectors, investors can reduce their exposure to company-specific risks and enhance portfolio resilience. Familiarize yourself with investment correlation (how different assets move in relation to each other) and look for options that will react differently to various market events.

2. Gradual reduction of employer stock exposure: While holding employer stock may offer certain benefits, investors should aim to gradually reduce their allocation over time. Implementing a systematic approach to rebalancing allows investors to trim their exposure to employer stock while maintaining a diversified portfolio.

3. Employ dollar-cost averaging: Dollar-cost averaging involves investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy can help mitigate the impact of market volatility and reduce the risk associated with timing the market, particularly when diversifying out of employer stock mentioned above.

4. Utilize Tax-Advantaged accounts: Take advantage of tax-advantaged accounts like Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) to diversify investments and optimize tax efficiency. These accounts offer a range of investment options, enabling investors to construct well-diversified portfolios while minimizing tax liabilities.

5. Avoid certain sectors: If you work in say the banking industry and have company stock and/or stock options as part of your compensation, you near to carefully consider any further investments in the same sector. Similarly, if you have a significant portion of your wealth tied up in your primary home, carefully consider further allocation to real estate based investments or ones that are tied to housing prices.

Managing concentration risk stemming from heavy investments in employer stock requires a proactive approach to diversification. By being aware of the risks and implementing appropriate strategies, Canadians can build resilient portfolios that withstand market uncertainties.

By embracing diversification principles, investors can navigate the challenges posed by concentrated holdings and pursue their long-term financial goals with confidence.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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Brett Millard – May 13, 2024 / 4:00 am | Story: 487096

Living in Kelowna, nestled in the heart of British Columbia’s picturesque Okanagan Valley, offers a blend of stunning natural beauty, endless outdoor recreation opportunities, and a high quality of life. It’s no wonder why so many people choose to live here.

But living here seems to cost more every day and many wonder how they can afford to do so on an “average” salary. This idea got me thinking about how a budget may look for someone earning the average Canadian salary, somewhere around $60,000 depending on which source you look at, and if they could afford to live comfortably here.

For a single person earning a salary of $60,000 per year, managing finances effectively is key to enjoying all that this area has to offer while maintaining financial stability. Let’s explore a typical month in the life of such an individual and what their budget should look like:

Income breakdown: On a $60,000 annual salary, the monthly take-home pay after taxes and CPP deductions would be approximately $3,900, assuming a standard tax rate. This forms the basis of our budgeting framework for the month.

Housing Costs: Rent prices in Kelowna can vary depending on the neighbourhood and type of accommodation. A modest one-bedroom apartment in a central location might cost around $1,500 to $2,000 per month. If we take the mid-range of that and add on utilities such as electricity, water, and internet, the total housing expenses could amount to around $2,000 per month, or approximately 51% of the monthly income.

Transportation expenses: Kelowna offers a relatively compact layout, making it conducive to walking, biking, or using public transportation. However, owning a vehicle for convenience and exploring the beautiful surroundings is common. Assuming you already own a vehicle and then factoring in fuel, insurance, maintenance, and occasional parking fees, transportation expenses might average around $300 per month.

Food and groceries: Maintaining a balanced diet and enjoying the local culinary delights is essential for a fulfilling lifestyle. Allocating around $400 per month for groceries and limited dining out can provide flexibility while ensuring nutritious meals. With today’s prices, this amount can go quickly and is certainly not inclusive of regular restaurant visits.

Healthcare and insurance: Healthcare costs, including medical insurance premiums, co-pays, and prescription medications, should be factored into the budget. Setting aside $150 per month for healthcare expenses ensures adequate coverage and peace of mind. Obviously, many factors such as age and health issues could increase this amount quickly.

Household expenses: Aside from rent and utilities, and not captured in the grocery budget, there are additional household expenses that should be considered. This could be anything from buying or replacing a piece of furniture to cleaning supplies. Budgeting an additional $150 per month for other household expenses is likely a minimum amount to consider.

Entertainment and recreation: Kelowna offers an array of recreational activities, cultural events, and entertainment options to enjoy during leisure time. Setting aside around $200 per month for entertainment won’t offer a large range of options but can provide for occasional outings for socializing and exploring the city’s offerings.

Savings and investments: It’s crucial to prioritize savings and investments to build a secure financial future. Aim to allocate at least 15% of your (net of tax) monthly income, or $585, towards savings and investments, including retirement accounts, emergency funds, and long-term goals.

Miscellaneous expenses: Finally, it’s wise to budget for miscellaneous expenses and unforeseen circumstances. After adding up all of the above amounts, this only leaves $115 per month for miscellaneous costs, such as personal grooming, gifts, clothes and other expenses.

Total Budget Summary:

• Housing: $2,000

• Transportation: $300

• Food and Groceries: $400

• Healthcare and Insurance: $150

• Household Expenses: $150

• Entertainment and Recreation: $200

• Savings and Investments: $585

• Miscellaneous Expenses: $115

As you can see above, living comfortably on a $60,000 salary in Kelowna requires careful budgeting and prioritizing expenses to align with income levels. The amount that was “left” for the miscellaneous expenses category is clearly smaller than most would like it to be.

Arguably, the easiest item to adjust here would be the amount going into savings each month since putting less away would provide more funds for other areas. But doing so would leave your retirement plans at risk.

The key here is proper budgeting and sticking to the plans that you create in order to strike a balance between securing your financial future and enjoying all that living here has to offer. Adjustments to the budget may be necessary based on individual circumstances, but with discipline and prudent financial management, living in Kelowna can be both fulfilling and financially sustainable.

Yes, I know that everyone’s situation is different, some people will have significant other expenses not listed her. This doesn’t touch on the idea of owning a home instead of renting and many other variables.

The idea of this week’s column is not to give you a budget that will be just right for your unique situation but instead to get people more open to the idea of creating a budget in the first place.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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