For many people, summer is a time of family vacations, camp for kids, endless rounds of golf, cottage outings, socializing with friends, and heading to a mountain…of debt.
The summer can leave you burned in more ways than one, as all that fun comes at a cost. “People need a summer budget,” says Cliff Broetz, President, Precision Wealth Management in Parksville, B.C., and senior account representative with Manulife Securities Investment Services Inc.
Creating that budget is a challenge for many Canadians, who find it tedious to do and try to stick to, Mr. Broetz says. But a summer budget can be liberating. “Imagine how much better you would feel if your summer is paid for before it arrives,” he says. “Don’t put money aside in the winter for last summer, put it aside for the next summer.”
How to plan ahead and manage your summer finances? Start by analyzing your yearly expenses. Some are constant, like mortgage and car payments, and others are more seasonal – summer, Christmas, maybe back-to-school time. Use an electronic budget tool (many are free online) to “get in touch with your cash flow,” Mr. Broetz says.
When you break down your mandatory and discretionary expenses, and determine what you can afford, you can then shift more of any surplus cash to times of peak demand.
Then, set up savings vehicles for different priorities – something specific like children’s recreation programs or a general fund for summer fun, he says. You can segment your summer savings by establishing sub-accounts at your bank, ones that are low-fee and pay maximum interest.
Now the hard part – sticking to your plan. To instill a savings discipline, one option is arranging to automatically transfer cash to each of those summer accounts, just as you might for bill payments.
Another strategy is allocating cash to term deposits that won’t mature until the summer, when your special expenses need funding, Mr. Broetz says. That ensures you won’t be tempted to dip in and use the money for something else.
Almost 40 per cent of Canadians say that they are looser with money in the summer, and 50 per cent say they’re more lax with their bill payments, according to a 2011 Environics survey. Two-thirds say that the warm weather makes them feel happier and more willing to spend, and that they’ll figure out how to make up the money when it gets colder.
Given the short season, summer splurging is understandable, Mr. Broetz says. Canadians may feel they deserve to be carefree with cash, just for enduring another long winter. The problem is that some people end up with a shortfall. Successful budgeting is all about leftovers, says Mr. Broetz, and not the kind you see after a backyard barbecue.
“Most people spend first and save what’s left over, and if you do that often there are no leftovers,” Mr. Broetz says. “If you save first and spend the leftovers, it changes your life.”
Many summer expenses are expected, such as children’s recreational programs. Others are harder to pin down; you never know how often you’ll head to the outdoor terrace for dinner and drinks. What is predictable is that summer – and its bills – comes every year.
By anticipating and budgeting for additional summer expenses, you’ll enjoy the season more than ever.