Financial Travel Tip #27: Where to Invest Your Travel (and Other) Savings

by Nora Dunn on May 5, 2012


Where do you invest your travel savings when you’re accumulating money for a big trip? How do you invest and draw down on it while you’re on the road? And what about other savings, like retirement, or the proceeds of the sale of your house?

Welcome to the wonderful world of asset allocation.

There is no template answer to these questions. Your personal asset allocation plan depends on your age, time frame, goals, income needs, and stomach for volatility. And depending on your goals (you can have multiple investment goals, independent of one another), you might have different asset allocation plans for different investments.

Here is my asset allocation plan:

Travel Savings: “Cash”

This is a high-interest guaranteed savings account that I draw on when needed, or add to if my income exceeds my expenses, as it often does. (We’ll talk more about this kind of account next week).

Household Sale Proceeds: Moderate Conservative

I initially invested the proceeds from selling everything I owned in a Conservative account, so that I’d have the money available to me whenever I wanted to set up a place again. But a few years into my full-time travels, I realized I wouldn’t likely be “settling down” any time soon, so I increased the risk profile of the account to Moderate Conservative to take advantage of some potentially higher growth.

Retirement Savings: Aggressive

All of my working life before I started traveling full-time, I saved a percentage of my pay for retirement. Although I joke that I “retired” at the age of 30 to pursue my full-time travel dreams, this money remains tucked away for a time when I’m unable (or unwilling) to work or earn an income.

I have some registered (called RRSPs in Canada) and non-registered money invested under the retirement umbrella, but since I anticipate my golden years are a few decades away yet, I’ve invested it aggressively to take advantage of long-term average returns (despite short-term fluctuations).

If you’re not sure what constitutes various investment profiles like “aggressive” or “moderate conservative”, check out the link below for a comprehensive introduction to Asset Allocation, along with some profile examples so you can figure out where you fit into the mix.

Asset Allocation for All Markets


{ 2 comments… read them below or add one }

Ava Apollo May 8, 2012 at 4:15 pm

I’ve been noticing high-interest savings accounts are on par with CDs. I’m with you, might as well just keep it in a savings account!

Reply

theprofessionalhobo May 9, 2012 at 10:25 am

@Ava – Interest rates are currently pretty low across the board, and although the longer you lock your money into a CD the higher the rate you’ll get, you have to know whether or not you might need access to the cash. I like high-interest savings for their flexibility, and I find it’s a negligible sacrifice in interest.

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