Erase your financial fears – not your vacation

Gas prices are going up, the economy is coming down – and you’re worried. Maybe even worried enough to erase this year’s vacation from your family agenda. Your concern is natural but with the right plans in place, you can still enjoy an affordable holiday and long-term financial health. Here’s how.

Build a plan to withstand

Financial experts agree that the best financial plans are built to withstand the short-term pain of markets and an economy that will always go up and down. Every successful investment portfolio looks like this:

• Make ‘comfortable’ choices. If you can sleep soundly without worrying about your investments, you’re in the right risk tolerance comfort zone.
• Diversify by asset class. Asset classes tend to perform well at different times so a diversified portfolio is likely to produce more stable returns.
• Diversify within asset classes to further reduce the volatility of overall portfolio returns. For example, even though Canadian and U.S. markets tend to move together, there can be subtle performance differences that provide benefits to investors who allocate some of their holdings to each market.
• Focus on the long term. For those with a long investment horizon and a properly diversified portfolio, brief market drops are simply temporary slowdowns along the road to investment profits.

Plan a debt-free vacation

The best vacation plan uses an ‘afford as you go’ strategy that eliminates the need for high-interest credit to pay your travel, accommodation, and expenses. And this ‘extra’ cash is actually money you already have but don’t realize it. The key is to pay yourself first.

Whether you’re saving for a vacation or anything else, set aside a portion of your weekly or monthly pay as soon as it comes in. You won’t immediately spend it and you’re unlikely to miss it.

But don’t leave your money in a low-interest bank account – move it into investments that generate higher rates of return, such as:

• Money Market Mutual Funds that can usually be redeemed in a matter of days.
• Guaranteed Investment Certificates (GICs) or Term Deposits which can be a good, higher-interest choice if your vacation is a long way off.
• Government Savings Bonds that are often cashable at any time. Your employer may offer an automatic savings bond deduction program – another good pay yourself first strategy.

Stop worrying and start living a financially secure life, whatever your dreams — talk to your professional advisor today.