Vacations are awesome. Getting away from everyday life to relax, recharge, and have fun is great for reducing stress and improving relationships with family and co-workers.
For a family of four the average vacation costs $4,580 which translates to 8-9% of their annual household income spent on vacations every year.
The sad truth? Most Americans are taking vacations they can’t afford.
Paying for a Vacation Shouldn’t Put you in Debt
According to a 2017 LearnVest survey, 74% of people say they’ve gone into debt to pay for a vacation.
A vacation is a want, not a need. If you haven’t saved up for a vacation, you should try a staycation or find another way to spend little to no extra money.
We can often overspend on vacations for reasons we’re not even aware of. Here are some of the emotional overspending traps to avoid:
I Deserve It
When you’ve been working hard for many months it’s easy to feel like you deserve a vacation. If you’re lucky enough to get paid time off through your employer, that’s true! Unfortunately, most employers’ fringe benefit plans don’t come with all-expense paid trips.
Keeping Up with the Joneses
It’s easy to rationalize spending money. While vacations to Mexico or Hawaii are lovely, it’s important to remember that relaxation isn’t always better when you’re further way. Your ability to relax or bond with your family is just as likely in Canada or the Washington Coast as it is in a more exotic locale.
Special Occasion Spending
The trap of special occasion spending is most dangerous when you’ve already left on vacation. When we’re on vacation, we allow ourselves to justify extra purchases. Especially when traveling, this can be coupled with the idea, “while we’re here, we might as well experience it to its fullest.”
Avoid Present Bias
Saying yes to spending money on a vacation means saying “no” to other places that money could go. It’s easy for us to put a higher value on what’s right in front of us, rather than considering the value of a longer-term investment.
This is called “present bias.”
Before finalizing your vacation plans, consider if allocating funds elsewhere would be a better long-term financial decision. For example, instead of spending $8,000 on a trip to Europe, consider putting $6,000 in your retirement account and taking a $2,000 trip to Eastern Washington.
Avoid the Vacation Hangover by Planning Well
Too often when we come back from vacation, we pull up our bank or credit card statements and kick ourselves for overspending. Avoid the vacation hangover by planning well, avoiding emotional triggers for overspending, and making decisions to stay within a budget.