A German proverb states that Things that you don't know, don't make you hot or in plain English Things that you are not aware of, don’t need to worry you (Original: Was man nicht weiss, macht einen nicht heiss). In essence it is sometimes beneficial to not be aware of troubling events. If you don't know that the stock market is falling while enjoying a beautiful, sandy beach, it will not affect you. Only if you were to glimpse at your smartphone or laptop would a theoretical drop in your portfolio's value dent your mood. If you were to come back two or three weeks later after the market has rebounded, not checking the markets would have allowed for an untainted, relaxing holiday.
While the saying generally applies to things that may negatively affect you, we can extend this principle to saving in general, and holidays in particular. Unconscious saving for your vacation is one such event when not knowing that you are saving can make for a wonderful trip. Something Mrs. Captain Finance and I have been doing for a few years now. If you are puzzled by all of this, let me explain.
The hidden holiday budget
Last year Mrs. Captain Finance and I went on holiday with friends. While it is the best time of the year, it also requires some financials. Particularly when it is in the midst of the peak holiday season with prices double and triple of that during any other time of the year. As we were searching for the cheapest flights, I started feeling discouraged. We had just bought a new property and I, for my part, had depleted my savings for a massive down payment (50% of the property).The budget my wonderful companion and I had subsequently set didn’t leave much wiggle room after paying for the flights. I stared at the prices, scribbling down the various other costs – hotels, rental car, food, money for meals and other leisurely expenses. It is quite astonishing to how much it all adds up if you want to see more than just the beach and enjoy the local life.
But despite the very exhausting times that lay behind us - mentally, physically, and financially - we were more than ready to go on holiday with some of our best friends. I did not want money to spoil this magnificent experience. But the more items I mentally added to the list, the more discouraged I felt.
I turned to Mrs. Captain Finance and sighed.
“What are you worried about,” Mrs. CF asked.
“About how much all of this will cost us,” I replied, “our budget is just about to cover for all the expenses, leaving us with only a couple of hundred Euros for us to spend on leisure activities. And this is over two weeks of holidays.”
She smiled and said:
“I think you have forgotten something.”
“Have I? What?” I inquired.
“Our holiday account,” she answered.
Yes, of course, I did forget our holiday account. It seemed so far from my consciousness. I had entirely forgotten about the big stash saved for this most fabulous time of the year. I looked at my sheet again and realized that we had more than covered the vacation budget with our holiday account alone. Planning our well deserved trip to the beautiful country of Greece with our friends had suddenly become a real pleasure rather than a penny pinching exercise.
Regular savings into a far-from-awareness holiday account
But how did I arrive at a point where, as the proverb goes, I was not hot because I didn't know? Why had I entirely forgotten about our holiday account? It was due to two reasons: 1) Mrs. CF is in charge of the account. But I still pay into it every month so I should still be aware, right?
When Mrs. Captain Finance and I had moved in together, we decided to open common accounts for a number of things: property, bills, and holidays. We also wanted to earn interest on the respective moneys and thus opted for three different accounts all paying interest when not not needed. While I am in charge of the property account, Mrs. CF takes care of the other two: bills and holidays. All accounts are regularly fed, that is on a monthly basis. We never save explicitly for that magnificent time of the year. Instead by setting up an automatic mechanism transfering money into the respective accounts, we have become accustomed to the money not being available. Thus we circumvented the issue of: “This month might be hard to put away €50. We will do it next month.” But as too many are aware, the following month again turns into another month of excuses for not putting money aside.
Every month, we have the same amount of money that goes into the respective accounts. We have calculated what we need and are happy to spend. But as it is an automatic transfer, it just seems like any other monthly expenditure going out of the current account. As time goes by and earning interest, the money grows without my awareness and frequently surprises me when the time for another holiday has arrived. Through its automatism, the money steadily grows into a significant sum. I am not even aware of it, as the money is simply another monthly outgoing post.
It is the only financial aspect of my life that I have absolutely no awareness of and am glad for it. Because next time I will be sifting through the hundreds of flight offers, Mrs. Captain Finance will lighten up my day with her smile and tell me I should not worry - I had merely forgotten about our holiday account.