Are you itching for a vacation? These days, there seems to be plenty of opportunities to travel. Finding a trip that you can take that matches your budget, however, might take some looking. If you’re looking to plan a trip, we’ve got the financial tips that you need to ensure you don’t break the bank. And you don’t have to look far to find an ideal destination: travel within Canada is affordable and truly memorable.
You might already be living with debt and maybe it feels like an unmanageable amount. Even so, it’s possible to set financial goals like planning for a vacation or building a savings fund. Professionals like credit counsellors and Licensed Insolvency Trustees (formerly known as bankruptcy trustees) can show you how to manage your debt and regain control over your finances.
Budgeting Will Improve Your Life
If you want to quit dreaming up the perfect vacation and want to actually take off to an amazing destination, you have to have a plan. Even cost-effective travel requires planning in advance to make sure that you can responsibly pay for your trip. After all, you don’t want to go into debt for a trip that’s meant to reduce your stress. To prepare for your vacation, you need to build it into your budget.
Coming up with a budget can seem like an inconvenience, especially if you’re not used to it. There are many online resources that you can use to help you plan out a budget, as this budget basics guide to starting. There are four types of budgets out there, survival, debt-free, financial freedom, and retirement. Each one will look a little different depending on your income. In this post, we’ll be focusing mainly on the ways to make a budget that will hold up under survival and debt-free modes.
We need rules and maps to follow if we want to get to our destination. Think of travelling abroad without a map: sure, you might still get to where you’re going, but not before getting lost, wasting time, and spending unnecessary money. A good budget should act as a sort of roadmap to life. Your budget will guide your spending and give you some parameters that can keep your finances in check.
The 28/36 Rule
Also referred to as someone’s debt-to-income ratio, this rule is the gold standard for mortgage lenders. The 28/36 rule dictates that a household should spend 28% or less of its gross total income on housing expenses. “Housing” refers to the monthly, principal, interest, property tax, and insurance of your mortgage as well as any homeowner association fees. Renters can use the same ratio as it applies to income and rent and other housing expenses like utilities or property insurance.
Additionally, the 28/36 rule outlines that no more than 36% of a home’s income should go towards paying debt. For this, you should consider all of the debt that you owe and find out what the grand total is for your monthly payments. If you’re spending more than the designated 36%, you’re spending too much. As such, you might benefit from debt management services that educate you on the best ways to tackle your debt and give you the support you need to get back on track.
The 50/20/30 Rule for Spending and Saving
Here’s another general rule that you can use to structure your budgeting and spending. It’s excellent for keeping you on track with your savings, allowing yourself realistic personal spending, and managing your debt. The rule states that your income should be divided as such: 50% will go towards essentials, 20% towards savings, and 30% will be devoted to the lifestyle and personal expenses.
The essentials are all of your living expenses and costs needed to maintain a standard of living. Your rent, the mortgage, groceries, student loan repayments, other debt repayment, utilities, transportation, and clothing are all considered essentials. Try not to let these costs take up more than 50% of your takeaway income.
The 20% portion devoted to savings applies for any type of financial goal. This portion of your income will go towards savings, retirement, and debt repayment. When you are trying to eliminate debt, you might find it helpful to re-configure these percentages. You can focus more energy towards paying off debt and reducing your interest payments first before you start to look towards saving for a new car or home renovation.
Debt Relief Is the First Step
Dreaming is easy. We can think of all the amazing places we’d like to go and the life improvements we’d like to make, but thinking doesn’t make things happen. If you’re starting to feel like financial control is slipping out of your hands, take note. Sometimes we get so accustomed to the feeling of living with debt that we struggle to see how we can find true relief. If you’re looking for a way to turn the tables on debt that is negatively impacting your life, know that you’re not alone.
Living under debt has become the new normal, so sometimes we don’t question loans or lines or credit. Recent statistics show that household debt is on the rise and has been hitting record highs in the last year alone. The debt to income ratio among just Canadians was at a record high of 179% per household.
Credit Services to Help Those Struggling with Debt
As the saying goes, however, life goes on. Debt relief is possible through debt management and credit counselling. If you have a more serious case of debt, however, then you might be an ideal candidate for bankruptcy or a consumer proposal. This might sound intimidating at first, but life does go on after bankruptcy and life does go on after a consumer proposal too.
If you worry about how to pay your bills or suffer from emotional or personal side effects of financial struggle, consult with a Licensed Insolvency Trustee. They’ll tell you everything you need to know about the debt relief methods of bankruptcy and consumer proposals. They’ll walk you through the and educate you on how these processes can actually reduce the total amount of debt that you owe. Before we get into just how to prepare and save for a vacation in Canada, here is the gist of how bankruptcy in Canada and consumer proposals in Ontario work.
Bankruptcy vs Consumer Proposal
You’re probably familiar with bankruptcy thanks to its depictions in TV and movies, however, those representations are riddled with myths and misconceptions. Bankruptcy isn’t really what it’s like in the media, and it really doesn’t deserve some of the serious stigmas that comes with it. When an individual’s debt exceeds the value of their assets and income, they are insolvent. It can happen to anyone for any reason and is not tied to income bracket at all.
There are many differences between unique methods of debt relief, though one major difference between bankruptcy and consumer proposal is how the procedures affect a person’s assets. In a bankruptcy, the individual assigns the responsibility of their assets to a bankruptcy trustee who will then distribute what they can to the creditors. It’s not something to take lightly and it can have a serious effect on a person’s assets as well as their credit history and ability to secure loans down the line.
Consumer proposals, on the other hand, are a bankruptcy alternative best suited for those who have under $250,000 in debt but have a steady income. In this process, the bankruptcy trustee negotiates between debtor and creditor. The negotiation is built on the premise that the debtor wants to pay back their unsecured credit, but they can’t pay it back in full or they can’t keep up with payments and interest as they stand. In a consumer proposal, the creditor accepts the offer and then the debtor must make regular payments over a fixed period of time until the debt is repaid.
This process is usually best for those who have a little bit of financial stability in their life and can commit to regular repayments. The specifics of asset loss in a consumer proposal is also different than in bankruptcy. It’s all very serious stuff, which is why you should talk to a Licensed Insolvency Trustee to tackle your debt and start making plans for the future (like a vacation!).
Creating a Family Vacation Budget
Vacations are a luxury for a reason: they’re expensive. And in our work-obsessed culture, many individuals do not even take all of their vacation days they are allowed to take. Why might that be? Probably because of the expected costs that we associate with travel.
Taking a trip can have a whole host of positive benefits on a person’s health, stress levels, and even productivity. Still, when something like an unexpected medical bill has the potential to completely throw someone off course with their finances, it’s easier to understand why people don’t travel much.
With the right planning, however, you can still have an exciting vacation without the stress of worrying if you’re spending too much. To ensure you don’t spend any more than you have to and that you’re well-prepared for your trip, here are some strategies to use when budgeting for vacation.
1. Acknowledge the Big Expenses
The flight, the car rental, and the accommodation are usually the major costs associated with taking a vacation. Travel and accommodation will make up a big part of your budget, which is why it’s important to select a destination wisely. Look for vacation packages or special promotions for train travel or flights. Depending on where you’re going, a look at the hotel costs in the area can give you a general idea of what you can expect the prices to be like once you arrive at your destination.
2. Plan, Plan, Plan
Start early by brainstorming ideal destinations. Create a short list of places you want to go and keep your eyes open for any deals as they might come up. If you don’t know where to go, ask around to find out where others have travelled to or take to social media to browse through potential destinations.
3. Include the Little Things
When you’re planning your vacation budget, it’s always best to round up instead of rounding down. Think of all the small things that you’ll need to take with you or buy as you travel. Consider the cost of meals, activities, and supplies like sunscreen, hats, snacks, etc.
4. Crunch the Numbers
The last thing you need to do is compile all of your expenses in one place and calculate both the total expense and the cost per category. Budgeting software or even a budget app on your phone can organize the numbers for you and even provide handy charts and graphs that will help you really visualize the trip.
Memorable Sights and Inspiring Places to Visit in Canada
Now that we’ve covered what you can do about debt and how it’s still possible to bounce back and plan for financial goals like a vacation, the question remains: where to go? Canada is a huge country with very diverse geography and plenty of natural wonders. Here are a few memorable places that you can visit while staying budget-conscious.
- You can travel to Churchill, Manitoba, one of the very few human settlements where you actually see polar bears in the wild. October and November are the best times to go for bear watching.
- Take in some breathtaking views while hiking at Sleeping Giant Provincial Park on Lake Superior.
- Relax and recharge on the Magdalen Islands in Quebec. Off the coast of Prince Edward Island, this is a perfect place for someone who loves the outdoors.
- Head on over to the east coast and visit the culture-rich Cape Breton Island. There’s plenty of sights to see and you might even catch a glimpse of some whales.
- Travel through the Yukon Territory might seem intimidating at first but it’s well worth the trip. You can visit old gold rush cities and explore vast open areas and maybe even climb a mountain or two.
The Final Word
If you’ve been held back by the pressure of debt, then now is the time to finally take action. No matter what circumstances led to your financial struggles, empathetic and knowledgeable trustees can guide you towards financial freedom once and for all. Even if you’re struggling with debt right now, it is possible to set and achieve financial goals. Good luck.
