A good plan is a flexible plan. It should allow to adjust to the new reality. If not, it is more heavy weight that you drag along rather than a map towards your destination.
When reviewing one of the long term life objectives, it is to travel, to show the world to the kids. But figure this out: it costs money. and spending more means saving less.This money needs to come from somewhere. Getting a second job is a solution that I discard. I work to life, not the other way around. I want free time to enjoy life with family and friends. So, the money needs to come from the current sources.
income – expenses = savings
income – expenses – holidays = savings – holidays = less savings
Good thing, I did not discover this just today. It has been part of the FIRE planning as from the start. The real question is more: how to deal with it when calculating savings rate and the amber index?
Right now, it is easy: all the money that is not spend on living expenses and this years holidays goes into the nest egg. It ignores the fact we will spend a part of the money on travel in the coming years.
These travels are supposed to be big holidays with the kids, showing them a few distinct areas of the world. Think the west coast of the USA and its national parks, think New Zealand or an African safari. This typeof holiday is not covered by the travel budget that is foreseen for in given year. They need extra funding. This funding will come out of the nest egg.
Where are we?
The current FIRE calculator has travel included as a parameter for the FIRE date calculation. This is a good thing. It is this very likely that FIRE date will not be infected too much by our travel plans.
The downside of this solution is that the travel funds are hidden in the net worth. As such, I overestimate the net worth I have. Not seeing the travel funds could also mean that I will hesitate to use the funds when the opportunity for travel is there.
A change I could to make is to split out the travel money from the pure nest egg. As such, I have a better view on where we stand, both from a travel perspective and a true amber index. This means I also need to start officially contributing to the travel fund. This will decrease our saving rate. But in fact, it is already the case today, it remains just under the radar.
On the same line, I would add the company pension savings we have – but can not touch till we are 65 or so – to the amber index. It is money that belongs to us. Right now, it is hidden.
Something similar would need to be done for a house renovation fund. Or maybe here we could use the emergency fund. Or just split it off at the time when we start considering to remodel the house.
How do you manage this travel fund topic? What pros and cons do you see?