Building family vacations into your wealth plan

Whether you’re looking to cruise or trek across Europe, the trip of a lifetime can be wrapped into your financial plan.

When we think about our wealth plans, we often focus on increasing and protecting our financial assets so we can buy a house, pay college tuition or retire comfortably without having to worry about outliving our money. However, properly managed, wealth plans can be used for fun, too.

“Assets have a purpose,” says Michael Aleman, a Wealth Advisor at Regions Private Wealth Management in Fisher Island, Florida. “We’re used to saying those assets are for retirement or a home purchase, but they can also be used for family vacations and second homes that bring people together and create a legacy of memories.”

In the aftermath of the pandemic, multigenerational life experiences are in demand. Airplanes are full, cruises are sold out and more than 10 million Americans watched a recent hit destination-travel drama. There’s no sign that this trend will abate any time soon. But whether it’s a week at a Florida theme park or two on an African safari, none of these pleasures are free. And with children and grandchildren in tow, costs can escalate far above the “miscellaneous” line item in a family’s annual budget.

What this means, Aleman says, is financing a family vacation can—and often should—be intentional. It can take a couple of years, or even longer, to save up for a major excursion. For example, that African safari could easily cost $1,500 per night per person. “Planning plays such a big role,” he says, “because it could be a once-in-a-lifetime event.”

Factoring in the fun

Regions Wealth Advisors will proactively factor vacations into a family’s wealth plan, Aleman says. “When we meet with our clients, we ask, ‘What are your goals for the next five years?’ If you want to take a family of 14 to the Swiss Alps, we’ll ask, ‘How much money do you think you will need?’ and then we could guide you to save for it.”

Regions’ approach is thoughtful and data driven, based on the needs and every client’s unique situation. Some clients may prefer a conservative approach that doesn’t involve spending down existing assets, especially those aimed at retirement, while others may be willing to take more risk. Regions may advise clients to invest assets in a discrete vehicle that will, in turn, produce enough money to finance the vacation without digging into (or risking) the underlying savings. The amount of money and the type of investment it goes into—and for how long—depends on the need.

“We’ll tell clients tactically how long it may take them to achieve their goal. Is it a year? Is it two? We also consider the plan a working document subject to review, and if it needs to be adjusted—say, to add family members to the trip—we adjust it along the way until clients achieve their goal.”

Clients with larger portfolios could simply opt to purchase Treasuries (U.S. government bills, notes or bonds) or certificates of deposit whose yields and time to maturity best fit their needs. These fixed-income investments may remain under the existing portfolio umbrella, but the growth will specifically fund the experience.

For example, if a client invests $100,000 and the yield is 5%, that’s $5,000 a year that could go toward the family vacation. A $500,000 investment can yield higher returns, and it wouldn’t take too long to fund that African safari.

Reaching vacation goals over time

Clients may find it more advantageous to regiment the process over time, redirecting money from their portfolio or their checking or savings accounts to a money market fund on a monthly basis. “There’s discipline in that,” Aleman says. “You know that every single month, a certain amount of dollars is going to go out. It’s part of your budget, and if you’re looking to achieve something specific, that can be the best way of doing it.”

Wealth planning isn’t one-size-fits-all, and neither is this component of it, Aleman says. “It really depends on what you are trying to achieve. I work with different clients, and each one is unique. That’s why going to a wealth planner is similar to bringing a suit to a tailor who will custom-fit it to you. We fine-tune each individual plan to that person and what they are trying to do.”

Use credit and insurance strategically

One thing Aleman suggests is to carefully consider if a credit card is the right payment method for a vacation. Aleman advises that clients should consider if they are sure they can pay off the debt before any monthly interest accrues. Credit cards can come with frequent-flier miles, hotel points or even cash back, all nice little bonuses to offset the cost of the trip—or the cost of the next one. Regions itself offers a very competitive Visa credit card tailored to high-net-worth individuals. “It’s best, however, that you have the money to pay for the vacation before you go and not put it on a credit card with the idea of figuring out later how you’ll pay that off. Take the benefits of a credit card but make sure you have the cash behind it before you leave,” he says.

To protect your vacation investment, Aleman says, consider trip insurance if the amount of money at stake is considerable, even if the premium appears costly. “We can fold that into the budget planning right at the very beginning,” he says, especially “if you are a little older and more subject to illness.”

Interestingly, Aleman says, many clients will get hooked on saving for a big vacation or other luxury purchase and keep on doing it, discovering the irony that focusing on saving lets them also focus on spending.

“I’ve had clients vacation in certain destinations and then find that they love it and want to buy a second home there,” Aleman says. “Once people find that they can achieve this kind of goal with the assets they have, they just continue with the concept.”

Talk to your Regions Wealth Advisor about:

  1. How to fund your next international excursion.
  2. Whether you need to make adjustments to your retirement plan to achieve your travel goals.

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