Don’t have enough money to go on holiday, are you sure?
Sometimes it’s a cash flow issue. Saving money for holidays or anything for that matter may not be as hard as you think. Essentially you need to do the following:
- Put your day to day spending on a credit card
- Create a separate account for all of your household bills
- Reduce your direct debits and pay some annual bills in full
Many people say they can’t afford a break away with their family for a number of reasons; including school fees if they have them, high mortgage payments, monthly bills and day to day spending. We want to challenge this.
Make a few organisational changes to how you spend your money and you will see how your options improve. If you manage your spending to create some financial transparency in your life, you won’t believe the difference it can make. Lets get into this a bit more.
Put your day to day spending on a credit card…
If we start from your day to day spending, you need to isolate this spending separately preferably on a credit card. Just to clarify day to day spending covers the following:
- Fuel charges
- Train/public transport fares
- Daily parking (if you’re charged and use a car/motorcycle)
- Daily food costs (breakfast, lunch, dinner)
- Any other daily commuting costs
- Leisure activity in the week e.g. a couple of drinks after work, cinema trips etc
Why should you isolate you’re spending this way? Simple, it’s efficient and can give you a value of how much you’re spending on a monthly basis after your base bills. From this, you can easily figure out how much you can save if you cut some costs that you live without out. If you’re a couple, it’s even better. Keep on reading to see why.
We got married not too long ago and we took out an American Express BA card. Two cards, one account. If you guys are ineligible for this card, go for a card with avios points and cash back benefits. We’ve written a review on the American Express Premium Plus Card, which you can check out here. But to cut to the chase, we decided to spend on one credit card and chose the American BA card for the following reasons:
- Firstly, transparency (as explained above) to figure out what we could cut out of our monthly expenses.
- Secondly, because the BA card offered you a free ticket anywhere in the world if you spend £10,000. We bought a house, had expensive commutes so figured we may as well capitalise on it, and it worked.
- Finally, when you’re a couple you should operate as one. A massive advantage of being in a relationship is that you have another person who shares your goal. Working together can can only get you there quicker.
Please note that although this is a credit card, we treat it like cash, in that we pay the balance off every month without fail. If you can’t discipline yourself don’t bother getting it as credit cards are expensive otherwise.
Create a separate account for all of your household bills…
Next, monthly bills should all come out of a separate account to the one that you get your pay cheque in. Again, if you’re part of a couple then get a joint account. Why? Well a few reasons:
Clarity of how much you’re paying out. If only your household bills are coming out of one account, it’s easy to see where your money is going.
- If you are physically putting money in one lump sum amount to pay your bills, naturally you want to reduce how much you put in.
- Seeing the money go out, will give you an incentive you to look harder at your outgoings and will be easier. This will prompt you to keep on top of your bills, and make it sort of like a game that you want and can win.
Leading on from the last point, the game, use sites like comparethemarket.com, to reduce your bills, whether that’s your car insurance, or your gas or electric bills, broadband or whatever. Point being, set your goals and do your utmost to stick to it.
At this point, you should have a pretty firm grip on your costs and you should try and keep them as stable and low as possible. That money jar may be building up quite nicely.
Once you have done this, the next question you should ask yourself, is there a way that I can increase my monthly cash flow without earning any more money on a monthly basis? The answer is yes. So your account with all your household bills is the target here.
Reduce your direct debits and pay some annual bills in full…
You will have some bills that can be paid annually, rather than on a monthly basis. Attack the biggest one. You may think that doing this is the same difference as paying on a monthly basis is the same.
“Money today is worth more than money tomorrow” is a motto that we follow. Why do we think it’s beneficial to think this way?
- Having more money at your disposal on a monthly basis gives your more options financially over the course of the year than a regular direct debit.
- Life can hand you some unpredictable costs and having that extra cash to hand helps.
- Ultimately, you’re ability to take a holiday when you want and how you want increases. We’re passionate about holidays here but ultimately you have extra money for anything you want.
- Mentally you feel less “trapped” by the system so to speak.
Well this is our view, you may disagree, and if you do let us know, we’d love to hear it. Let us know in the comments below or message us.
Direct debits should be seen as a noose around your neck and if you can loosen that noose to the point that’s its a hoop you can step out of, just imagine the possibilities.
It will be difficult to pay it the first time, but it will get easier year after year. You may be thinking, “oh my gosh, that large bill will come around every year”.
Yes, if you do not prepare for this bill once a year it will become something to be worried about. The reality is a lot of this bills can be prepared for within a month or two.
This method has helped us to go on holidays we want to but has also given us the drive to strive for more. We hope these methods help you as much as they have helped us. 🙂