What Type of Holiday Planner Are You?
Mid-year school holidays are here again! If you're heading off soon for a family vacation, you're probably looking forward to a time of eating, drinking, shopping and having fun.
Before holidays can happen, however, they first need to be planned. There are generally two types of holiday planners: the careful planners and the spontaneous ones.
The careful planners always have to be sure that they are making the best decisions possible. They won't spare any effort in seeking out the best deals and promotions, and research everything ahead of time. Red-eye or day flight? Arrive in the morning and risk rush hour traffic, or pay more for a later flight? Stay in a noisy but convenient area in the city, or choose a peaceful countryside retreat that's far away from anything of note? Are there any impending strikes by public transportation workers? What about the weather? When is the best time to exchange money; alternatively, which bank's multi-currency wallet gives better value?
There are many things to consider, all of which can sometimes end up causing immense stress and actually making that holiday all the more necessary.
The more spontaneous group thus choose to shun all that. They prefer to live by the seat of their pants. They find it cumbersome to get bogged down with so many details and want to just do things on the spur of the moment, going with the flow and adapting as circumstances change. But is this necessarily the better approach?
The following stories of two different holidays provide valuable lessons – not just for planning a holiday, but also for planning your financial life.
Gary booked a beach house in Australia's Gold Coast for a week. His friend Robert decided to explore a hiking trail in Kamakura, Japan, based on the good reviews he'd heard from friends. In the end, Gary had a great holiday and returned well-rested and refreshed. Robert came back angry and tired. What happened?
Robert was a spontaneous person who liked to do things on a whim. He had heard about the excellent culture of Kamakura and found many beautiful pictures of this Japanese seaside city online: exquisite temples, the Great Buddha statue, mountain sunsets. So, he decided to go there the next month.
However, as you all know, booking a last-minute trip is not going to get you a good price nor good accommodation. Robert found that all the affordable deals had been snapped up, and ended up paying more than normal for his airfare and hotels. And then, when he finally arrived, a typhoon hit the region right before his hiking trip. His train service was delayed, making him late. As he had not bought travel insurance in advance, he was unable to receive any compensation. The heavy rains meanwhile made the trails slippery and wet. Some areas were inaccessible due to recent landslides. The many steep ascents and descents made the going slow, and he could only cover one quarter of what he had originally planned. Robert ended up spending more money than necessary to achieve less, and came home feeling unfulfilled and frustrated.
Gary, on the other hand, had been planning for his trip for half a year. He found one of the best properties on the beachfront in close proximity to restaurants and shops, so he would not need a car to get around. A week before his flight, the weather report said that an unexpected cold front was about to hit. He packed some warmer clothes and things to do indoors (e.g. books to read) in case he would need it – which he did. Living so near to conveniences and restaurants meant he was less affected by the weather, and allowed him to sample local cuisines and buy essentials. In the end, even though the weather conditions were also not ideal, he felt more rested and ended the trip on a happier note.
Making a financial plan can be a lot like planning your holidays. Being prepared ahead of time will make you more ready to handle anything that goes wrong. While this may cause some stress at the start, it will save you from even greater stress if things go awry.
The reality is that, despite our best efforts, things in life rarely go as planned. Nobody wants to get into an accident while on holiday and end up in hospital, but simply not thinking about it is not going to protect you. Eventually, we will also all have to stop working, by choice or otherwise. What will you do when you're no longer receiving a regular pay cheque?
Planning ahead also helps you lower costs. Let's say you decided to buy a particular stock at $20. If the price just spiked to $24 due to recent events, it would be better for you to be patient and wait for the hype to die down before buying. Impatience would instead make you have to pay 20% more than what you planned for.
Just like in holiday planning, there will always be things out of your control. Trying to account for every possible contingency is both impossible and will result in unnecessary stress. The best holidays usually incorporate some degree of flexibility rather than requiring you to stick to a rigid schedule, adapting to circumstances and your own needs as they come. The same goes for investments. Your financial plan should not be so rigid as to hamper you from making meaningful changes when your circumstances change, such as if you lose a job.
The key is not to try and control everything, but to be reasonably informed and well prepared for what might happen. Just like it's a good idea to bring along an umbrella if it might rain on your trip, you should ensure your investment portfolio is well-diversified with a suitable asset allocation that will prepare it to handle bad times in the market.
For example, you should not be overly concentrated in Singapore or Asian stocks, as that would make you extremely vulnerable should another Asian financial crisis come round again. Not leaving everything to chance or impulse will give you the added flexibility and range of choices to make the best decision. And sometimes, seeking a second or third opinion from your trusted financial adviser (or TripAdvisor, when travelling) can give you valuable insights for your investment journey.
As Benjamin Franklin once said, "If you fail to plan, you plan to fail." There is much wisdom in those words. If all of us could pay heed to them, our holidays, investments and financial life would become much more successful and much less stressful, and we'll find it much easier to enjoy the ride!
