Household budgets: Paying for summer travel
“Your summer vacation better be worth it, because chances are you are still going to be paying it off next year,” said Beth Pinsker in Reuters.com. It takes most people about six months to recover financially after a vacation, according to a new survey from online financial planning service LearnVest. On average, survey respondents spent about 10 percent of their annual income on trips; more than half said they typically spend more than one month’s rent or mortgage payment on a weeklong vacation. But the real problem is that they’re reaching for credit cards to foot the bill. Some 74 percent of people admitted to borrowing money to pay for a trip, taking on an average of $1,108 in debt. “It should go without saying, but financing debt after the fact is a lot more costly than saving up ahead of time.”
“One of the major holes Americans dig themselves into when it comes to vacationing is not planning ahead,” said Emily Bohatch in USA Today. Like the holiday season, summer travel is a predictable expense. Yet LearnVest’s survey found that 55 percent of Americans don’t include vacation plans in their annual budget. Treat summer travel “like another bill you have to pay each month,” setting aside incremental amounts in a holiday fund throughout the year. You don’t have to give up plastic altogether—just use it smarter, said Jon Lal in USNews.com. “Once you know where you want to travel, make sure to stack your rewards” by using a credit card that earns points or miles. Then make sure to pay off that debt as quickly as possible, focusing on high-interest cards first. You don’t want the interest payments on your vacation to eventually cost more than the actual trip.
“There is no rule of thumb for how much to spend on a vacation,” said Emily Oster in Qz.com. Ultimately, it’s on you to decide how you want to balance saving for other financial goals—like paying off student loans or building an emergency fund—with summer travel. Will the memories you create with $2,000 spent on an airplane ticket make you happier than the extra security you’ll feel from having the same amount in a bank account? If the answer is yes, “then go ahead and book that flight.” If you’re feeling particularly ambitious, you can try to actually earn some money during your summer vacation, said Rob Wile in Mic.com. Renting out your home or apartment on a site like Airbnb or VRBO while you’re away can offset at least part of the price of your trip. “It’s true: You can have your vacation cake and get paid to eat it, too.”