Investment Account for yearly vacations
Investment Account for yearly vacations
Hi. First time on here. Not new to personal finance, but somewhat new to investing. Mainly an indexer/mutual fund type investor.
My question today is have any of you created a taxable investment account to fund yearly vacations? What I started to do this year is fund an account with dividend reinvestments turned off in the hopes that it will throw off cash that I can use to spend on vacations (supplement of course in the early years). I will add to it throughout the course of the year.
If you have done this: 1. is it working as you planned? 2. Anything to look out for other than peeling off some cash for taxes? 3. Any tips on decent funds that do quarterly rather than yearly dividends (I am with Schwab btw.).
Thanks in advance for any advice/insights.
My question today is have any of you created a taxable investment account to fund yearly vacations? What I started to do this year is fund an account with dividend reinvestments turned off in the hopes that it will throw off cash that I can use to spend on vacations (supplement of course in the early years). I will add to it throughout the course of the year.
If you have done this: 1. is it working as you planned? 2. Anything to look out for other than peeling off some cash for taxes? 3. Any tips on decent funds that do quarterly rather than yearly dividends (I am with Schwab btw.).
Thanks in advance for any advice/insights.
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Re: Investment Account for yearly vacations
I fund vacations out of cash-flow (I'm not retired so for me this is currently from my primary income).
My primary investment accounts serve only longer term goals (Retirement; College).
I don't use a separate savings account to save for vacations and short-term large purchases - I simply plunk the money into the same High-Yield Savings accounts as my Emergency Fund then pull it out when needed.
My primary investment accounts serve only longer term goals (Retirement; College).
I don't use a separate savings account to save for vacations and short-term large purchases - I simply plunk the money into the same High-Yield Savings accounts as my Emergency Fund then pull it out when needed.
Re: Investment Account for yearly vacations
I just save money for vacations in my savings account. There's nothing wrong with using dividends, except that companies can eliminate/reduce dividends at any time. If you want to be certain to have the money, just set it aside in a high-yield savings account until you need it.
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Re: Investment Account for yearly vacations
I also fund "vacations" from cash flow, always have.
Back when I was employed, I'd do a trip somewhere every 3-4 months.
Retired for a few years now, I travel more frequently and maintain a higher checking account balance to smooth over the expense bumps better.
Now I do maintain a modest taxable investment account, but that's for longer-term things, in particular, a new car purchase from time to time...
Back when I was employed, I'd do a trip somewhere every 3-4 months.
Retired for a few years now, I travel more frequently and maintain a higher checking account balance to smooth over the expense bumps better.
Now I do maintain a modest taxable investment account, but that's for longer-term things, in particular, a new car purchase from time to time...
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Re: Investment Account for yearly vacations
Seems like if you continued to reinvest the dividends you could sell shares when you're ready to spend the money. Then you could either have earned a little bit on the invested dividends or take a little tax loss.
Re: Investment Account for yearly vacations
Unless one is setting up funds for a vacation many years to come I see little value over just putting the money in a bank.
Re: Investment Account for yearly vacations
Thanks all. Maybe it is just better to set aside cash for vacations, but basically I was trying to us an investment account to generate some passive income to supplement the vacation and other budgets. I am dumping in a good amount to retirement as I am blessed to be self-employed and maxing, so this was just an idea to generate some extra cash for vacations, with the hopes that it would one day throw off enough to pay for all of them and may then some.
Just out of curiosity, what do people set aside monthly for vacations? Especially if you have a family with little ones, and are completely debt averse.
Just out of curiosity, what do people set aside monthly for vacations? Especially if you have a family with little ones, and are completely debt averse.
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Re: Investment Account for yearly vacations
I've got one big portfolio. If we can afford a vacation, we take it and pay for it out of whatever makes the most sense.
Re: Investment Account for yearly vacations
NextMil - the question as to how much we put aside is very personal and will vary. For you, the question really is: how much do YOU and your family want to spend on vacation each year? i.e. you should have a budget, just like for everything else. And then fund it with monthly (bi-weekly, whatever) contributions.
I budget about $10K per year for traveling. But if varies quite a bit depending on where we decide to go and for how long, and we don't have kids.
You might decide to spend 3x as much as we do on vacations, which is great if you can afford it (it kind of sounds like you can), it's just a matter of your priorities. Save accordingly, and have fun!
I budget about $10K per year for traveling. But if varies quite a bit depending on where we decide to go and for how long, and we don't have kids.
You might decide to spend 3x as much as we do on vacations, which is great if you can afford it (it kind of sounds like you can), it's just a matter of your priorities. Save accordingly, and have fun!
Re: Investment Account for yearly vacations
Thanks, Kaudrey. That is super helpful.
Re: Investment Account for yearly vacations
My wife and I spend around $15k annually for major vacations. This does not include weekend trips and smaller things.
Re: Investment Account for yearly vacations
One of my hobbies is playing the points/miles game to add to my travel budget. It involves using hotel and airline loyalty points, and being strategic with credit card sign ups (and keeping certain cards).
It is fun for me and rewarding to take my family to various places for significantly cheaper than if I didn't go this route. As such, my travel budget of actual cash outlay is a few thousand per year which includes food and entertainment costs, typically.
It isn't for everyone, but just wanted to throw that out there.
It is fun for me and rewarding to take my family to various places for significantly cheaper than if I didn't go this route. As such, my travel budget of actual cash outlay is a few thousand per year which includes food and entertainment costs, typically.
It isn't for everyone, but just wanted to throw that out there.
Re: Investment Account for yearly vacations
I fund vacations out of cash-flow part of which is channeled to a dedicated account. We are retired so for us this is from my retirement income, but I keep it separate from every day bill money.
I use a checking account for the everyday stuff and two savings accounts (Ally Bank 1.25%). One is to escrow property tax, car and condo insurance and IRS EFTPS Quarterly payments. The second is to accumulate cruise money (retired so every day is a vacation day) and discretionary luxuries.
I'd use the high yield for everything but there is a 6 transaction a month limit and the everyday account goes over that easily.
I use a checking account for the everyday stuff and two savings accounts (Ally Bank 1.25%). One is to escrow property tax, car and condo insurance and IRS EFTPS Quarterly payments. The second is to accumulate cruise money (retired so every day is a vacation day) and discretionary luxuries.
I'd use the high yield for everything but there is a 6 transaction a month limit and the everyday account goes over that easily.
Re: Investment Account for yearly vacations
Not retired, but I have a similar strategy now. I am youngish, but was thinking that If I slowly dumped some of my vacation money into an investment account I could build a fund that would help pay for vacations in out years. Frankly, a little surprised that most people dont do this, but maybe its best to just cashflow the vacations with a monthly budget line item, and focus on dumping all the rest of your disposable income into investments for bigger ticket items like cars and real estate as others have suggested.midareff wrote: ↑Thu Dec 14, 2017 8:42 am I fund vacations out of cash-flow part of which is channeled to a dedicated account. We are retired so for us this is from my retirement income, but I keep it separate from every day bill money.
I use a checking account for the everyday stuff and two savings accounts (Ally Bank 1.25%). One is to escrow property tax, car and condo insurance and IRS EFTPS Quarterly payments. The second is to accumulate cruise money (retired so every day is a vacation day) and discretionary luxuries.
I'd use the high yield for everything but there is a 6 transaction a month limit and the everyday account goes over that easily.
Just out of curiosity, why do you still do quarterly estimated payments now that you are retired?
To iasw, I also played the churning game for a while, but you have to keep track of it, and I found I value simplicity over complicated. That said, it did help out a ton with a big vacation this year.
Re: Investment Account for yearly vacations
I can't see any reason for a separate account. Spending on vacations is not different from all other categories of spending. We finance spending by collecting SS and pensions and withdrawing from a portfolio of stocks and bonds. There are no buckets or special accounts.
That could be different if one were to spend the majority of one year's expenses once in some particular year.
That could be different if one were to spend the majority of one year's expenses once in some particular year.
Re: Investment Account for yearly vacations
It's just easier for me to escrow those items (property tax, condo and car insurance and EFTPS Quarterly) into a 1.25% interest bearing account. I do a pretty close guestimate at the beginning of the year... mortgage interest is known, so is pension, SS, monthly medical insurance, property tax, expected dividends and interest, historical medical and charitable and so forth. I'll run turbotax's taxcaster and the H&R version and establish my quarterly pays and bank transfers for the year. It's all on excel spreadsheets picking up data from my own Portfolio Manager for dividends and interest and so forth.NextMil wrote: ↑Thu Dec 14, 2017 9:18 amNot retired, but I have a similar strategy now. I am youngish, but was thinking that If I slowly dumped some of my vacation money into an investment account I could build a fund that would help pay for vacations in out years. Frankly, a little surprised that most people dont do this, but maybe its best to just cashflow the vacations with a monthly budget line item, and focus on dumping all the rest of your disposable income into investments for bigger ticket items like cars and real estate as others have suggested.midareff wrote: ↑Thu Dec 14, 2017 8:42 am I fund vacations out of cash-flow part of which is channeled to a dedicated account. We are retired so for us this is from my retirement income, but I keep it separate from every day bill money.
I use a checking account for the everyday stuff and two savings accounts (Ally Bank 1.25%). One is to escrow property tax, car and condo insurance and IRS EFTPS Quarterly payments. The second is to accumulate cruise money (retired so every day is a vacation day) and discretionary luxuries.
I'd use the high yield for everything but there is a 6 transaction a month limit and the everyday account goes over that easily.
Just out of curiosity, why do you still do quarterly estimated payments now that you are retired?
To iasw, I also played the churning game for a while, but you have to keep track of it, and I found I value simplicity over complicated. That said, it did help out a ton with a big vacation this year.
Re: Investment Account for yearly vacations
Withdrawing dividends from a taxable account is a withdrawal. On the dividend date, the NAV drops by the amount of the dividend. If you re-invest the dividend, you stay where you were. If you put them in the settlement account and then transfer to your bank account, that is a withdrawal.
We use a savings account for spending in the next year.
We use a savings account for spending in the next year.