The Personal Finance Of Travelling
One of the personal finance myths is that many retirees take their super as a lump sum and spend the money on overseas holidays.
Reality tells a different story.
First, figures collected by the Australian Bureau of Statistics (ABS) show that only a very small percentage of retirees taking their super lump sum spend some of the money on holidays – whether overseas or in Australia.
Second, research by actuaries Rice Warner confirms that, in any case, just a small percentage of super savings in dollar terms are taken as a full or part lump sum.
Perhaps a trigger for the myth about the spending of lump-sum super payouts on holidays is that at least one big overseas trip used to be near the top of most bucket lists. And this grand trip was often taken at the time of retiring from a long working life.
Certainly, many of us aim to travel widely upon retirement – just look at the numbers of baby boomers on outback highways and at international airports. Yet as world travel has become much more affordable, more of us are travelling throughout our lives. Indeed, it has become increasingly critical to manage travel spending as efficiently as possible.
In short, travel spending has become something of an everyday personal finance issue for those who can afford it.
Trying to minimise the cost of travel often seems to largely focus on tracking down the best deals online for air travel and accommodation – but proper travel budgeting should extend far beyond that.
The New York Times recently published a piece, Eight Ways to Save on Travel in 2017, in its Frugal Traveller column. Suggestions include: look for destinations with favourable exchange rates, consider whether to chase the cheapest flight deals or look at sticking with one airline to build rewards for repeated flights, and pay close attention to mobile call and data costs.
Other means to reduce costs are picking the least-expensive times of the year to travel and making full use of reputable apps to compare flight and accommodation prices.
One of the most effective travel cost-cutters is to remain highly aware of the true costs of borrowing to travel – particularly if you're borrowing on a credit card.
ASIC's consumer website MoneySmart has detailed tips for keeping your travel spending under tight control including a recently-updated feature, How to get out of travel debt. While MoneySmart is a strong advocate of saving enough in advance for debt-free travel, it recommends that travellers who have already accumulated travel debt set a plan to methodically repay the money owing.
While Australia's official cash rate remains at a record low in this generally low-interest environment, credit card interest rates remain very high. This can be extremely costly for free-spending travellers.
Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.