Live It Up! Vacation Accounts | Series 2.2 - Enjoy More 30s: Family Finance

Episode 2

Live It Up! Vacation Accounts | Series 2.2

Published on: 22nd March, 2021

Ensure you take the time for vacations, and at the same time, maybe even improve yourself financially in the process!

  • Setting aside some extra money (02:19)
  • Potential place to save: A separate bank account (02:40)
  • Potential place to save: General investment account (03:00)

Quote for the episode: "Segmenting your vacation specific money can give you a much higher likelihood of having and taking that vacation you otherwise would not have taken."

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC.  TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcript
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Welcome to the Enjoy More 30s: Family Finance

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podcast, the only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out and distract our focus

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from simply enjoying life.

Joseph Okaly:

Hello, and welcome to the second episode now in the

Joseph Okaly:

"Your Money Multiplier" series. Today's episode is titled, "Live

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It Up! Vacation Accounts". And today what we're going to cover

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is what you need to know about setting up a vacation account,

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and what you can do to actually get the most out of it at the

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same time.

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My grandfather, Grandpa Joe, was known as being really organized

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when it came to money. If he was born in a different time,

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outside of the depression when most kids went to college, he

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would have been an accountant or something of that sort. That was

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always kind of his dream to be an accountant. One of the things

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he did with his money is using what some people refer to as an

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envelope system- he would break his cash paycheck into different

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envelopes. So maybe there was a grocery envelope, a rent

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envelope, an electric envelope and you know, that kind of

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thing. By segmenting his money in this way, it kept it better

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organized to make sure he had enough money for each of the

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various expenses that he incurred every month. Now, this

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kind of a system has actually been around for a while, and so

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you may have actually heard about it before. But it is

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incredibly effective both practically and emotionally. If

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the grocery envelope is low, you're eating on the cheap that

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day.

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What you need to know is that this kind of a mindset,

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especially the emotional part of it, can also work outside of

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normal bills- it can work for fun things like vacation goals.

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If you calculate what a normal vacation generally costs, you

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can break it down and set 1/12 of that aside every month, which

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can help ensure that you're able to take that vacation every

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year. Coming up with a couple $1,000, say $2,000-$3,000

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whatever it might be, all at once, could catch you off guard,

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could be difficult if you don't plan for it. If you put just a

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little piece of that aside though every month into a

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separate account, there's a much, much better chance that

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you're going to reach that goal and be able to vacation, which

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you know is kind of a big deal. We want to make sure that we're

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enjoying life. Again, the whole point of all of this is to make

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life more enjoyable.

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So what can you do? Or maybe more appropriately, how should

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you go about doing that? Now let's say that your typical

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vacation costs $2,000-$3,000. Now, obviously, there's a lot of

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variety here for where you are at and what you'd like to do.

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But this example breaks down to, roughly, let's say $200 a month

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or so. Now this can be allocated into one of two places for this

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vacation account goal. The first is just a separate bank account.

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It's easy, manageable, and now you've made sure that you're

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setting aside some extra money, to make sure that you're

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enjoying life, that you otherwise would not have or may

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not have. The second option, though, can be a bit more

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interesting. This option involves that general investment

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account. So if you go to the second episode overall, in the

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first series, "Like Super Gymnast Flexible", it's a

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non-retirement, fully accessible account that sits between your

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bank accounts and longer term retirement accounts. It'd be the

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same $200 a month, automated transfers the bank scenario, but

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now it feels a little bit farther away. Investment

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accounts have your names on them just like a bank account does,

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but when it's an investment account, people feel like it's a

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little bit more removed from their direct control- a little

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bit further away from how they would jump in and touch it. So

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in the bank account scenario, even if you have extra money in

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your regular bank account, let's say, that built up during the

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year, you are very, very likely to still hit up that vacation

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account because it's so easy and accessible to do- it's right

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next to the other bank account that you have for your normal

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checking. And there's nothing wrong with that at all, because

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that is what it was there for. However, if you put into that

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general investment account the money instead, and you have

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enough extra money built up in your bank account during the

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year to cover the vacation anyway, you are more likely to

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just use that excess in the bank. So now the result of that

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is that an extra $2,000-$3,000 that is invested, that would not

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otherwise have been invested. So in either scenario, you're

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taking the same vacation. But in the second scenario, there is a

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greater possibility of having additional savings that are

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invested for you long term towards your other goals, that

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are building up possibly in the process. This means even more

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money maybe for future vacations, more quickly getting

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to retirement or education goals that you might have. Basically

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you put yourself in a position to potentially give more money

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to yourself.

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So a quick recap for today. First is that segmenting your

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vacation specific money can give you a much higher likelihood of

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having and taking that vacation you otherwise would not have

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taken. And really, that's the most important overriding point

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of this whole episode- taking more vacations. The second is

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that you have different places that you can save this into

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very easy, very straightforward.

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While if you have a general investment account that is

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already built up to some degree, saving the funds here could

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potentially lead you to saving more money than you otherwise

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would have if vacation money builds up elsewhere. If you kind

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of think about it right now, if you're not doing a monthly

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savings plan for vacations, which most people are not, you

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still probably take vacations a good amount of the time. Maybe

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there's some years where it's a little tight and you couldn't,

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but most years you probably take them anyway. So if you segment

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the money out to the investment account instead of the separate

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bank account, you still definitely have the money there

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if you need to have it to pull from for vacations. However, if

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you have enough money built up in the bank account on the side

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now, you may not even have to touch it. And now you're

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building up more for your future where you otherwise would not

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have put yourself in that position to have that positive

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side effect.

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Thank you so much for tuning in today. Remember, we do also have

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the new 'ask Joe' section on the show's website- enjoy more 30s

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.com, that's enjoy more three zero s .com, as a lot of these

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topics can be a little bit confusing. If you have more

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questions that pertain to your specific situation, please don't

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hesitate to reach out. Additionally, as I always say

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every week, if you enjoyed this episode, please make sure to

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subscribe and review us on Apple podcasts or wherever you listen.

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There are literally millions of young American families out

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there I'm trying to reach and help just like you. Clicking a

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star, leaving a review, subscribing makes us come up

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higher in the rankings so that more people are able to find us

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and hopefully improve their lives in the process. The next

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upcoming episode that we have is called, "Just Get An Umbrella

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Policy Already". It will cover an extremely cost effective,

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powerful tool to better protect you which despite this, people

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many times still don't have. So as always, it's been great

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talking with you today and I look forward to connecting again

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soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS securities Inc and TFS advisory services and sec

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registered investment advisor member FINRA/SIPC.

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About the Podcast

Enjoy More 30s: Family Finance
Family Finance for Young Professionals.
Young families receive little to no personal finance help. We all grow up to have jobs and money, yet our education system focuses on Shakespeare and Algebra. Even professional advice can be hard to come by, with the majority of the industry chasing retirees and existing wealth.

Joe Okaly's podcast is aiming to change this, providing personal financial advice geared specifically to professionals with young families. This podcast is dedicated to making life more enjoyable for young families, by hitting on the financial topics that tend to weigh on us, stress us out, and distract our focus from simply enjoying life.

Joseph P Okaly is a CFP Certified Financial Advisor who fits directly in with who this podcast is focused on - a young professional with a family. With over a decade of experience as an advisor, there is passion and knowledge to make a difference.

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.