Don’t Take Out a Loan for Vacation

If you are recovering from 3-4 long, long months of cold, snow, ice and wind you may be starting to dream about summer vacation in a nice warm climate.

Vacations are great and time away from work, but don’t get so carried away with vacation dreams that you take out a loan to pay for your vacation.

Maybe taking out a loan and paying for vacation in installments sounds like a good idea. But let’s get realistic, a loan is a loan is a loan, and loans create debt.

Some vacation loans advertise that they will not charge interest, but believe me the company making the loan is not giving you money for free and whatever fee they charge is included in the amount you are paying.

Think about this. You decide to take a great vacation in the summer of 2019 and in order to pay for it, you take out a personal loan for $5,000. Your interest rate is 10.5% APR and that means you will be paying a $160 monthly payment for three years. In 2022 do you really want to still be paying for a vacation you took in 2019?

Probably not.

Using a loan to pay for unnecessary expenses, like vacations is one step down a slippery slope of financial decisions that can have a negative impact on your financial future.

To avoid vacation debt, get the family involved in planning for a vacation that everyone will enjoy and one which is within your budget. So many people keep their kids shielded from financial realities which does not teach them anything about wise money management.

Vacation planning is a great way to teach the kids about setting goals and working to achieve them. Even if your summer plans are a staycation, there is some level of spending involved.  Engage the kids by setting up a chart on the fridge showing how much the family needs to save in order to reach your vacation goal. Create one of those thermometers that non-profit organizations use for fundraising goals. This teaches the kids a lot about delayed gratification, making and reaching goals and financial stewardship, which are all good things for them to learn—the earlier the better.

Along with getting the family involved, take a hard look at the family spending. As you dig deeply into spending, you may discover unnecessary purchases of as much as $100 – $200 a month that could be easily saved for a vacation.

A restaurant meal at lunch every day is about $10 a day; $50/week; $200/month and $1,200 over a year’s time. By analyzing the money you are spending on lunch, you may be able to redirect money to areas that are more important to you, such as vacation.

In addition to saving in advance for the vacation, make a budget for the spending you’ll do on vacation. This will help maximize your money.

Be flexible with your vacation destination. Websites like The Flight Deal and Air Fare Watchdog post daily flight deals from major U.S. cities to both domestic and international locations. Many of the airlines will also post flight sales and deals on their own websites.  If you’re not tied to visiting a particular place, you can score a great deal on a flight. Many of these deals will come with restrictions—you may only be able to fly on certain days of the week or between certain dates. However, for flexible vacationers, this can be a great way to save a ton of money on airfare.

It also helps to explore options for accommodations. Staying in one place may be convenient, but changing the place you stay may result in big savings. Hotels in some big cities, such as Washington DC revolve around business trips on weekdays, leaving weekends open for tourists. At the same time, the weekends are more expensive in tourist-heavy destinations; so hotels may give you a better rate if you check in on a weekday rather than a weekend.

You’ll also need to budget for any tours, entrance fees or other money spent on visiting sights, museums and landmarks. Consider stuffing your itinerary with famous and free attractions. Many museums, like New York’s Guggenheim and American Museum of Natural History, offer free hours every week or are donation-based. Skip paying for a guided tour by downloading maps to your phone and researching attractions as you plan.

Souvenirs are an extra line item in your budget. We highly encourage you to help the kids save an amount they can spend on souvenirs. This is teaching them how to manage money and eliminates the whining that comes when they want you to but every trinket they see in every location you visit.

Restaurant meals suck in vast amounts of your time and money. For road trips, prepare coolers full of food and drinks to avoid fast food on the road. Food from home comes in handy at theme parks, where a small bite can cost as much as a full meal—be sure to check if the park allows you to bring a picnic.

For bigger trips, visit local markets for snacks instead of eating out every time you get a little hungry. Eat cheaply most of the time so you can splurge where it’s really important.

Get around like a local by using public transportation if you can, especially in big cities. Research your options to see if there’s a transit stop between where you are staying and where you are going. And while you’re at it, figure out the transit system’s peak times so you can avoid the stress of rush hour.

Keep the whole family involved in the planning so they will be much less likely to complain about cutting back. If they are involved and if they see a visual reminder of saving for vacation it will bring the family together in unity.

We all need time away from our day to day work. Even God rested on the 7th day when he completed the work of creating the world.

Saving up for a big trip isn’t easy, but these strategies should help you save a little bit faster and have your trip already paid for before you leave home. 

Planning ahead will help you have a debt-free vacation and return home debt free so you can keep that vacation feeling alive!

The Compass Catholic Podcast offers more on this topic.