Never Retire - Pots Of Money In Action
3 ways to use your travel fund
On Thursday, I sent out a story detailing the cost of a one-month trip to Spain and Italy my partner and I are planning for February. It’s only four months away!
The discussion of the costs for that trip (spoiler: It’s less expensive to spend a month in Spain and Italy than it is two weeks in San Francisco) helps illustrate the pots of money approach to personal finance. A core element of my Never Retire strategy.
If you use pots of money, there’s a good chance you have a travel fund.
For the aforementioned trip, I’ve paid for flights, Airbnbs, and trains out of my travel fund and checking account cash cushion.
In the process, I depleted my travel fund. Not a problem. That’s why it exists. To pay for travel.
However, I never stop transferring $50 a week to my travel fund.
As I build it back up, I have options for what to do with it, other than pay for the next trip.
We covered a couple in a recent Never Retire newsletter installment.
One, from a subscriber—
Or Jen’s move of keeping a travel fund, paying for the pre-booked elements of travel out of it (and maybe your checking account cash cushion), then using travel fund money to cover expenses while traveling and maybe back home if you’re losing income while not working.
And another that I entertained—
Book the key elements of travel early. In fact, I will finish booking them this month.
Never stop with the weekly automatic transfers to my travel fund. So, between now and February, it’s beefed up again.
Use the travel fund for expenses back home while traveling.
However, as it ends up, I’ll do something different with my travel fund.
Because it makes more sense given that my girlfriend will cover most of our expenses while traveling. That’s what she’s saving for between now and February. While I take care of the spending that needs to happen ahead of time. It’ll turn out to be pretty close to, if not a 50/50 split.
Plus, I will organize my work to maintain cash flow for February, hopefully preserving business as usual even though I will not work the way I normally do that month.
(I will have a full month of newsletter posts, including some I write while traveling. So don’t worry!).
Therefore, I think I’ll use my travel fund like this.
Most of the time when you make a booking Airbnb offers the option to pay about half now and half just ahead of your reservation. So, for this February trip, the second payments come due in the second and third weeks of January.
This is the beauty of these types of buy now, pay later options. If you manage them properly, they work in your favor.
I can split the most expensive part of the trip I’m covering—Airbnbs—between initial payments this month and final payments in January.
This helps preserve my sense of (optimal) cash security now. And it shows the utility and versatility of pots of money, specifically the travel fund.
At $50 a week, I will have accumulated roughly $1,000 in my travel fund as we get into January.
When Airbnb reminds me of my upcoming and final payment for each reservation, I’ll transfer that amount from my travel fund to cover the charge. This assumes I don’t just do it from my checking account cushion. We’ll see how things look in January.
Either way, it works out and illustrates why we use this pots of money strategy in the first place. It’s the sense of real and perceived psychological comfort you get from having cash in an account earmarked for a specific purpose. It doesn’t feel like you’re hurting your financial position when it’s not coming from savings or a tight checking account. It’s coming from an account you contribute to—over time—that’s labeled travel.
Similar feeling if you have a meaningful checking account cash cushion.
Let’s say I have $4,000 in my checking account on January 1st. After paying my rent, car payment, healthcare, mobile phone bill, and buying groceries, I’ll have north of $2,000 left over. This leaves me enough cash to cover my remaining expenses for the month as they hit.
Plus, it would allow me to make those final Airbnb payments from my checking account. Ultimately, they would amount to rounding errors. My checking account wouldn’t feel a thing.
That’s the ideal situation.
However, it’s hardly less than ideal if I have to tap my travel fund. Because, again, that’s what it’s there for.
Either way, the travel fund gets replenished—over time—and ends up helping pay for the next trip. At the same time, I’m doing likewise with my other pots of money to keep on track for other short- and longer-term goals, needs, and wants.
It’s a versatile, if not methodical strategy that makes absorbing and visioning the cost of doing life easier and relatively stress-free.
If you know you’ll Never Retire, it’s that much more important.
On that note, can’t wait to go back here—Caffe del Cinque in Roma’s Trastevere!
That’s my wonderful partner who’s probably exchanging dollars for euros as we speak!
It’s the sense of real and perceived psychological comfort you get from having cash in an account earmarked for a specific purpose. It doesn’t feel like you’re hurting your financial position when it’s not coming from savings or a tight checking account.
Exactly. When the money is designated for a certain purpose it takes all the stress away. Today, for example, I was paying bills and didn’t even bat an eyelash at paying a $549 medical bill.
In full.
The money is in an account marked emergency/medical. I used some of that and every month, like always, I’ll add money to it.
Best. Decision. Ever.
Thanks for your clarity.