thematerialgirl

Greetings! I'm new to the forum and I am in the process of planning my first trip outside the US.

I'm a bit conflicted. I have two separate savings accounts (one for travel and one for general savings). Would it be idiotic to merge the two? As of right now I have few financial obligations (living at home) and no college debt. I just realized that I want to make travel one of my top priorities for the year.

Thanks!

mike2200

Should always have a separate savings for emergencies. Just go ask your parents

bigshooter

If it allows you to better track your finances keep them separate. Since saving cash with these interest rates actually diminishes value you may want to invest them separately and treat travel more aggressively and general savings more conservatively while keeping a set amount in cash for emergency and living expenses.

I'm no financial advisor but don't forget to use tax leveraged vehicles like Roth IRA if you don't have retirement savings.

And does anyone on this forum actually use cash for travel instead of points???

CKA1

I have a CC. It's paid off every month, but I accumulate points.

I'm in a very good position. Good job, few expenses and have no college debt.

I am in grad school. I haven't had to dip into my savings to take a course (distance ed) but if I were to dip into my savings, it would be for some very particular circumstances. Pleasure travel doesn't qualify.

Also, as mentioned, take advantage of tax shelters. It's bad enough having a savings account, unless you take advantage of the free money you get from the government by having various shelters or deferment plans.

If you search on the internet, there are all sorts of schemes to get free flights, hotel nights and upgrades based on things like welcome bonuses on CCs and hotel loyalty programs. As far as I know, say, by taking the Aivion card through RBC you are not obligated to run up a CC bill but get the free travel rewards for signing up. I do think it requires a substantial income to get the card, but there are many available for regular people.

One of my banks had a deal where if you opened a CC account, you got 1,000 dollars worth of travel credits. I already had a CC so I didn't qualify, but go to several banks and see if any of them offer reward schemes, especially on CCs which have no requirement of spending or minimum charges. Some will charge you for it (no free lunch) over time, but many people who have the time will investigate this.

C.

carybrevard

Keep them both and keep them separate. Money stashed away = more options. Something will come up for which you'll need it and you'll be very happy to have it.

In the meantime have a wonderful time exploring the world. Possible to see a lot and have a lot of great experiences without spending a lot of money.

HMPS

CKA1 Which bank gave you the $1000 travel credit ?

CKA1

It was a special from a while back from ATB financial which is a government run bank in Alberta. They have specials like that all the time. Right now, it's 350 dollars for opening a checking account.

RustyC

I continue to be amazed at people in their 20s who've found this site and are already onto various mile-accumulation strategies, even sometimes sounding like fortysomethings on upgrades and such.

OK, so I hit those ages in the pre-Internet era and thought I was doing pretty good getting to Europe at 27 and Asia at 29. In the early Internet era the programs were much more generous and upgrades much more likely if you had status, but booking via command lines could be a real hassle. No ITA or Google flights to cough up full itins.

The emergency fund is definitely Personal Finance 101. But the allocation between the travel and other stuff, including savings, can be tricky. Don't be surprised if many you know say you're dribbling money away on that and should be saving for a down payment on a house or continuing education or something like that. I had a $28K severance from a buyout offer that could have gone that way, but instead I put it into the gap year I never got, using that to travel for a year. I favored "cheap" countries (especially SE Asia), and it took a couple of months to get the sea legs and get more ambitious on sidetrips.

But there's a lot you can do on a 110-day trip that doesn't work out on a shorter trip, as so much of it will come down to transport logistics and time vs. money trades, and when you get to really backwater spots that tend to create the most memories, it's often because it hasn't been reached by that many people. My greatest trip had to be slapping something together on easy SABRE out of Jakarta in 1997 and getting to Ambon, Jayapura (by boat), the Baliem Valley, the Bandas (the old Spice Islands) and Bali in the space of a month.

There's also the "work your way around the world" bit and other ways to crack the more expensive developed countries.

Am sure I'd be well ahead in terms of financial security if using the money for the "responsible" things, but the travel can also alter perspectives on a lot of that and cause out-of-the-box thinking.

It's hard to get the right balance and is a very individual thing. I remind myself of the types of people who take Grey Line tours or who, in the twilight of years, go on Alaska cruises in feeble health. You don't want to postpone for too long.

tev9999

Everyone manages money differently and what works for some won't work for others, but to me keeping separate savings accounts is silly. It is potentially wasteful if you are paying fees on multiple accounts. Either I can afford something or I can't. It does not matter if that money is in one, two or 20 bank accounts. If you lose your job or get run over by a beer truck, are you not allowed to touch your travel savings? How about if your job is rock solid stable and you get an opportunity of a lifetime to go on a vacation that will cost $3000, but only have $1500 in your travel account while there is $30,000 in your emergency fund? Are you not allowed to pull from your emergency fund even though the risk is very low?

mattparkman

It's always nice to have a safety cushion. I'd say have 3 months of income saved up and then save for travel. Just live as simply as possible so you can save like crazy. That will give you freedom to travel and enjoy it.

TravelingBear

I can honestly say what I did in my 20's is not what I would do now in my 40's. In my 20's I would save enough money to get me paid up in rent(living expenses) and have half of what I thought I would need for a trip saved then I would budget the other half to go on a credit card. I was single, young and without mortgage or responsibility to others. When I got back to work I focused down the the credit card debt. For me, this worked while I was trying to get on my feet right after college and let me start traveling. Without going overboard I think winging it when you are younger is okay as you have time and energy to recover. Once I got the mortgage and relationship things changed.

manneca

You really need four kinds of savings: emergency, retirement, middle of life stuff (a house, car) and frivolous stuff like travel. Emergency needs to be reasonably risk free, retirement can be reasonably risky since you want need it for an eternity--the market goes up, the market goes down. And the grown up stuff like cars and houses can be mid risk. The extra money goes to travel or whatever.

Put as much as you can afford into retirement. I did and I'm glad I did. No one can figure out how I can travel as much as I do now that I have plenty of time to do it. Some of the reason is I have learned on FT a lot of tricks, and some is that I choose cheap destinations when I'm not using my Hilton points in the Maldives. This doesn't mean that you never spend money frivolously, but that you have a life time game plan.

And so, separate accounts for emergency and frivolity make sense. What doesn't make sense is using the same kind of investment for each of your goals.

RustyC

Wow. am sensing a lot of Suze Orman types here. While I can't go against the emergency fund advice (even though some people do deplete that as well), I think realistically unless you have a lot of funds you'll hit a point where it seems risky to follow your heart.

A case in point might be Tony and Maureen Wheeler, the Lonely Planet founders, who ran their funds to near zero in Australia after going overland there from England in 1972. Both were able to get jobs there, though, and the books became a side project that would grow into a full-time job.

Another thing about the travel is that it can really change your outlook in ways you could never predict. I noticed how much less I was paying on transportation in Asian cities vs. the total-cost-of-car-ownership in the U.S., and the housing was much more reasonable. While some was due to lower labor costs, a lot was due to better efficiencies. Also, you're around people with much less "stuff" that are still happy.

In my own case I REALLY went against Suze and dipped into retirement savings to extend the travels (taking advantage of what may have been once-in-a-lifetime currency differentials after the 1997 crash in Asia), and as it happens the remainder of the savings got clobbered in the dotcom crash.

In any case, it's a very tricky balance between short-term and long-term. Am glad I got to ride the wave of the FF programs and travel in general through the 90's when I did.

I kinda did my first Europe trip in 1989 and first Asia trip in 1992 like that, having about half saved in advance and half to pay down on credit cards. Both overran the projections, 'natch. Asia trips #2 and #3 were only possible via DL 40K award sales (when they flew to BKK via SEL and TPE), and #4, 5 and 6 were as an air courier (immensely valuable experience for packing light).

The initial trips were motivation to try to find ways to make later ones affordable. A book out at the time, "Arthur Frommer's New World of Travel," was also very inspirational, as he argued that the conventional, most-marketed forms of travel cost too much and there were ways around that.

The most recent Asia trip, on the Etihad mistake fare to MNL, was #55.