I help many friends with their finances, or more specifically, I help them budget. Last night I met up with one of these friends and she told me she had booked another holiday. I was quite surprised since she had just enjoyed two weeks in the USA costing over £1000 and plans to spend two weeks in Asia next year at another cost of £1000, which she only has £100 saved towards so far. I also know she would like to give £150 to a specific cause, which she is struggling to find. I asked how the free holiday came about and she said friends were allowing her to stay at their timeshare in Spain for free for a week in December so she “only” had to pay for flights and food…
It turns out flights including tax are over £100 and food is around £10 a day (eating in the flat for at least two meals each day), plus she planned to take the couple giving her the week’s holiday out for a nice meal as a thank-you, costing approximately £30. Not including any extra holiday related purchases (sunscreen, sandals, swimsuit) and only if she is actually going to only eat out once each day, she is already paying £200 (approx $300) for a free holiday and she admits it is probably going to cost “only” an additional £50 for everything else…in my books this holiday isn’t free.
That £250 would be 1/4th of the cost of her big holiday next year and would more than cover the giving she wants to do with £100 to spare…
I think where people struggle is they don’t see that the choices they are able to make in the future largely depend on what they do now and they really don’t understand that each £1 you save is one step closer and each £1 you spend is one step further away.
This friend is able to save £80 a month after paying her bills, her £80 for August is already committed for 2 nights away in Somerset, so she has September – March to save for her Asian adventure.
Looking at the options:
Option A:
£80 x 7 months savings = £560 + £100 savings – leaves a deficit of £340 for her holiday. Which will most likely go on her credit card…
Option B:
£250 (instead of the “free” holiday)+ £100 (current money for her Asia trip)+ £560 (savings for 7 months) = £910 and with interest, it would be nearer to £930 which means within 1 month of returning, her £80 savings from April and her trip would be paid off.
When I am planning my spending I see each £1 as a piece of the jigsaw and how I spend or save that pound either leaves a piece missing or is one step closer to a complete puzzle.
At the end of the day, my friend has to make the choices that are best for her, but I struggle to see how getting into debt for a holiday is a good option for most people, especially when you are under an illusion the holiday is free, when in fact it may just force you to go back into debt…
Tip top post Frugal.
That’s where the “cheap flights” scenario always used to get to me … by the time you’ve added the extras – these days just luggage sometimes is an extra, you might as well put the money to a holiday you REALLY want and one that you have the cash to pay for NOW.
With reference to the title of your post, the very BEST free thing is …
a smile!
Very well put. I’ve only just read a post on my friend’s blog regarding a finance book she read where it discusses DDI – Daily Disposable Income. It’s a similar theory. Sure, that $2 for chocolate, or a packet of chips in your afternoon slump, or that latte or magazine you quickly picked up while going past the shop or that can of soda is only $2, but when you put it in terms of DDI, that’s potentially $2 x 365 days in the year = $730 for which you have nothing to show (except if it was food related DDI, perhaps some extra weight gained!
too funny!)
It really hit home for my own DDI, you need to control where every dollar goes for your future goals to become reality.
And I agree nothing much is free these days….
Nice post!
Like the puzzle analogy, very useful indeed.
Need to apply this myself. There are some big changes afoot here (still working through) which may mean the loss of one income for a while so I really need to take this on board.
And no this does not relate to more babies I assure you!
This is such good advice, sadly people think too much about what they think they deserve.
Great post, I too like the puzzle analogy!
That’s the trouble with a lot of things that are ‘free’ – the process of getting hold of them is often what costs money. There seems to be something about holidays that particularly brings this out – people get blinded by the ‘because you’re worth it’ buzz that they fall into the Ryanair trap of free main course, expensive extras
This is a trap I fall into and need to work on. Thanks!
I think this is a great post. So very true. Each dollar we spend is a choice. If there is something we really and truly want we can find the money for it, by not spending on something else. HOnestly though, some people just can’t see the long term.