Let’s talk about summer spending. For us, summer is the most expensive season and one that can get out of control quite easily without a sensible spending plan to guide us.
In addition to our summer vacation, there are day-trips to the mountains, summer camps for the kids, lawn care, backyard barbeques, plus the odd beer or glass of wine on the deck. Our fuel costs alone jump by 50 percent.
I wouldn’t be much of a personal finance expert if I didn’t have a plan to get the most out of our summer spending while still making sure that our savings doesn’t take a backseat.
Indeed, over the years I’ve come up with some tips and tricks to help manage our spending when the kids are out of school and the temperature starts to climb.
Here are my favourite tips to manage summer spending:
1. Make it an all-year plan. Remember the classic fable, The Ant and the Grasshopper? The grasshopper plays his fiddle and lives for the moment, while the industrious ant squirrels away food for the winter.
Summer expenses can be a shock to your wallet if you’re not prepared for them. That means budgeting throughout the year, trying to anticipate what your spending will look like in the summer months, and then setting aside enough money during the winter and spring so that you can make the most of your summer.
We book our vacation and some of the kids’ activities well in advance of summer, so at least we have an idea how much we need to save by the time payment is due. We might pay up-front for a hotel or other activity if it means getting a discount. This also eases the burden on summer spending by spreading out the pain.
One more tip: Your take-home pay might actually increase in the summer once you’ve made the maximum contributions to the Canada Pension Plan and Employment Insurance program. Use this ‘bonus’ to offset some of the higher costs associated with summer.
2. Change your spending habits. Canadians love to use their debit card to pay for every purchase, a spending habit that sounds harmless, but can have costly consequences.
Full service chequing accounts that include unlimited debit transactions can run up to $15 per month or more. Add a separate account for your spouse and the cost might double. Even basic chequing accounts are susceptible to additional fees if you happen to go over your monthly transaction limit.
Many years ago my wife and I switched up our preferred method of payment from using debit cards to cash back credit cards. Instead of paying monthly bank fees, we get cash back on every purchase. That change alone earns us hundreds of dollars in rewards each year that we put towards our summer vacation.
A recent survey commissioned by Amex and conducted by Nielsen found that 27 percent of respondents say they put everything on their credit card, while almost half (47 percent) put the majority of their purchases on a credit card.
3. Simplify your spending. Some people can go too far when it comes to saving money and optimizing their finances where they can’t see the forest for the trees. At a certain point there’s a law of diminishing returns – where the time spent chasing additional savings can’t be justified.
Too many bank accounts, credit cards, investment accounts, and savings hacks can put stress on your time and lead to mistakes. Anyone who has forgot to pay their credit card bill on time, had a cheque bounce, or missed his or her account going into overdraft can attest to this.
My wallet used to be full of rewards cards and I would drive my wife crazy when I tried to match every purchase with the card that paid the highest reward in that spending category (i.e. one card for groceries, one for gas, one for travel, etc.) and expected her to do the same.
Sometimes a simple and straightforward solution is the best approach. For example, the top cash back credit card in Canada is the SimplyCash Preferred Card by American Express. It’s the best card because it pays 2 percent cash back on any purchase, in any category, with no limit on how much you can earn. This is after a generous 5 percent cash back Welcome Rate on any purchase for the first six months (up to $300).
2 percent really does make a difference. If you spend $2,000 per month you’ll earn cash back of $480 by the end of the year. Try the cash back calculator for yourself.
4. Stacking rewards and discounts. Nearly every store offers its own loyalty program or participates in a broader coalition program. When you combine a store loyalty program with your rewards credit card, you can earn twice the rewards or discounts and save even more money.
For example, I wrote earlier about our increased fuel costs in the summer. Let’s say you can fill up at a local station that offers a 7 percent discount on gas purchases. If you use the SimplyCash Preferred Card, which offers 5 percent cash back in the first six months, you can increase your discount to 12 percent off gas!
5. Spend on things you enjoy. I’m not a big latte fan, but if you enjoy expensive coffee then who am I to criticize? Spend on things that bring you joy and try to save money in other areas to offset your splurges.
My wife and I like to enjoy a nice bottle of wine (or two) on weekends in the summer, but we’re not that fussed about the type of coffee we drink in the morning (we brew it at home). We also save money by planning the majority of our meals in advance and cooking at home, but we’ll splurge on dinner at a nice restaurant or a weekend excursion once in a while.
A nice compromise is to use the cash back you’ve earned on your everyday spending to treat yourself and splurge on something that you don’t get to do that often. Like maybe picking up a couple of fine cuts of steak instead of the usual ground beef.
This post was sponsored by Amex Bank of Canada. The views and opinions expressed in this blog, however, are purely my own.