By Thomas Kostigen
The average American family spends about $2,000 on summer vacation every year. With the likelihood that holidays will be diminished by the Coronavirus, it’s probable that leisure budgets won’t be spent anytime soon for people fortunate enough to have those extra dollars in their budgets as unemployment soars and businesses shutter. For the lucky ones, it may be time to consider reallocating that money to investments or savings.
A financial advisor can help readjust family budgets and reallocate family assets. Indeed, many financial advisors say they are doing just that: reassessing plans and scheduling client conversations to discuss new risks. Some advisors are even getting into vacation planning tactics, suggesting virtual vacations or other at-home experiences that don’t require physical travel, such as “digital getaways” to museums and/or overseas cities. In any event, financial planners are going back to the basics of budgeting and asset allocating while also trying to help best serve client needs.
To be sure, actual vacation dollars may still be spent — just at later dates. A recent survey of travel advisors found that many people are postponing trips; they aren’t canceling them altogether. Still, that money in the here and now can be put to work, especially at the moment when stock markets seem to be resilient to bad news and are on the upswing.
In total, Americans spend more than $100 billion annually on summer travel. That’s a lot of capital that can earn returns in the equity markets, or be kept in less risky securities that can garner returns. If Senator Elizabeth Warren’s formula for personal finances is any guide (she popularized the 50/20/30 budget rule, dividing up after-tax income and allocating it as 50 percent on needs, 30 percent on wants, and saving the remaining 20 percent.
Those ratios are sure to be thrown out of whack by COVID-19. Even in the best of times, people need help with budgeting. A recent Certified Financial Planning Board study revealed that consumers, no matter their income or assets, need support with spending and household budgeting. Fifty nine percent of consumers don’t track their spending; more than one-in-three confess spending more than they save; and two-in-five have never had a budget at all. It seems like a good time to discuss not only travel budgets but entire financial planning budgets with people.
Sure France, Austria, Sweden, and parts of Asia may beckon. In those places, shutdowns have lifted and life is easing backing to a (new) normal. For most though, AAA predicts vacationers will have a preference for domestic destinations, mostly local and regional locations or that great American road trip. These trips are sure to be less costly than big, overseas voyages.
Considering that less than half of all American can afford to cover a $1,000 emergency expense, 2020 may be the summer to emphasize the practice of savings versus spending. Indeed, it may be forced saving: for the first time in more than two decades AAA will not release a Memorial Day travel forecast because so few people are traveling.
Good, sound discussions with financial advisors are in order. For many, these discussions won’t be a trip to the park, but parking money this year may just be the ticket to ride out the summer during this pandemic.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
