Quick Guide: What About That Trip?

There are various aspects of travel to consider and processes to complete prior to embarking on a journey. It begins with an initiation stage that sets the journey’s foundation such as determining a suitable time to take the journey; firming up the objective; and deciding on the kind of experience to have which ties in with the approach to logistics, where to go, what to do and the length of stay. Moving to the next stage is listing the places to visit and researching how to get from one place to the next; and checking the availability of accommodation and transportation. The research outcome enables detailed planning and scheduling day-to-day activities in a chronological order, assist in mastering the logistics and collating costs. The next step is making reservations, learning about the destination’s customs, and planning what to wear and pack to suit the destination.

On an Excel spreadsheet, record the activity and the cost from day one to the return date to enable tallying and viewing of total cost. Use columns to record the travel day and date, category, description, cost in your currency, and cost in the foreign currency. In the category column, categorise the item as flight, accommodation, transport, and so on, for easy filtering.

Now, with regards to travel costs, it can be overwhelming to pay for everything at the same time. Therefore, by planning when to settle each cost i.e. staggered throughout the year, it can alleviate financial strain. Usually, the flights are the immediate payment to be made. Some hotels allow bookings without payment until a few days, weeks before check-in or upon check-in, so there is an opportunity to clear the previous spend. Then, the remaining logistics such as local transport, food, etc. usually can be settled on the day of travel.

Let’s say the biggest expense is a school fee that spans across the year. Find their payment schedule and when the actual payment takes place, a rough example is shown on the table below. There maybe a gap in between those payments where travel payments can be made during this gap. Alternatively, allocate an amount of money each month for the trip.

Whilst some hotels offer a discount for prepaid, it is worth analysing the end cost when there is a loan/mortgage involved, as it may be better off to leave the fund in your mortgage account and pay for the hotel at the non-prepaid rate. Here is an example of whether to go for prepaid or pay on arrival. Let’s say the booking for a 2-night stay on 16-18 September occurred on 23 April. Accommodation payment is usually transacted via credit card so, there is a possible advantage in using a credit card when the credit card cycle for spend between 15 September to 14 October (inclusive) is due on 8 November.

Shown below, if the hotel is prepaid on 23 April, $1,167.42 is charged to the credit card immediately. If the credit card cycle ends on 14 May for payment on 8 June, it is 153 days from 8 June to 8 November. This prepaid amount, will incur an additional $32.64 in interest for the home loan.

If the hotel was paid upon arrival, the cost would be $1238.69. This means, with prepay, it is a saving of $38.63.

However, this particular hotel does not accept cancellations or change of booking once prepayment is made. Although, it is a saving of 38.63, when compared to payment on arrival, consideration should be given to peace of mind in the event of cancellation of your trip and any loss incurred with the prepaid rate.

It is also worth noting that the foreign currency conversion and loan interest rate can fluctuate from the reservation date to the day of travel. Therefore, allow a plus or minus 0.5% as contingency in the final cost. If the current loan interest rate per annum increases, interest payment also increases. Similarly, if the current loan interest rate per annum decreases, interest payment also decreases.

This travel expense is out of the ordinary and would require dipping into savings. Building your savings can be achieved through proper financial planning that ties in with your budget including a forecast across all financial scope. Please refer to ‘Bring Me Wealth Please’ <https://www.austinmacauley.com/book/bring-me-wealth-please> for detailed knowledge and step-by-step instructions.

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This guide is of a general nature. It has been prepared without taking into account your particular investment objectives, circumstances, financial situation or needs. Before acting on the information, you should consider your own investment objectives, circumstances, financial situation and needs. This guide is not intended to be, and should not be construed in any way as, investment, legal or financial advice.

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