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June 2011 - Save money for your vacation .

Save money for your vacation .

☳ by Adam Aspilla

Almost every one plans a vacation if not yearly, every two years. Vacation is good for it can relax our minds and relieve us from work related stress. It is the primary reason why employers give an average of two weeks annual vacation with pay to their employees for vacation would generally increase employees productivity.

 

While vacation is good, the unhealthy effect of vacation is it is one of the common causes of financial problem.

 

When you go on vacation with borrowed money using your credit cards, line of credit especially if you do not make a limit on spending, the tendency is you will overspend by using your credit cards.

When this happens when bills come in and you cannot pay the amount in full on due date you will be paying an excessive interest even up to 29% per annum on some credit cards.

 

This would be the beginning where you could not easily get out of debt for your payment monthly would be applied more towards interest and only a very small portion for principal.

 

A good illustration was a couple whohad good jobs and they made it a point to take a vacation yearly in Europe, Asia and other parts of the world. They own a house and over the years it builds up equity.

For convenience purpose, the open a home equity line of credit, and they were given a credit card to access their equity line wherever they went. On most of their vacations they overspent by using their equity line.

 

Over the years, instead of reducing the mortgage on their home, it went up substantially for they kept on using it for the their vacation expenses. Now that the husband had retired and the wife lost her job, they can no longer pay their basic living expenses including the mortgage payments.

 

They only way for them to get out of debt is to sell their house or to consider filing bankruptcy for they could no longer qualify for debt consolidation, credit counseling or even consumer proposal for they could not meet the income requirement.

 

To avoid the experience of the above mentioned-couple when you plan for a vacation, save money for your vacation expense and do not spend on borrowed money.

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.