I love to travel.
If you don’t believe me, check my passports, I have completely stamped out 4 now and am working on the fifth! So, I get it. It’s easy to love the travel lifestyle. I understand the need to pack your bag and fly away!
But I also understand finances and debt. I understand the trade-offs between current desires and long-term needs. Unfortunately, not a lot of Americans do.
The average American spends about 10% to 15% of their income on travel. Baby boomers and those nearing retirement generally spend the most, nearly 4 times as much on travel, around $6500 a year, as younger people.
The average domestic trip costs about $144 per person, per day, while international trips average about $271. The biggest expense associated with travel and vacations is definitely transportation. About 44% of travel funds are spent on getting to, from, and around your travel destination. Travel isn’t cheap, but that doesn’t stop most people from doing it!
A LearnVest survey found that 75% of Americans have gone into debt to pay for a vacation, with the debt averaging $1,100. Whether you think that sounds like a little or a lot, that vacation is actually costing them much more than it appears.
That’s because of the opportunity costs involved. Say a 30-year-old goes on a 12-night international trip that costs $3,300. They put $1,100 on a credit card at 16% interest and pay cash for the rest. In the end, with interest, the trip will actually cost $3,800. But that is just the cost.
If that person would have put that cash into investments that earned an average of 8% over time, they would have had about $56k at age 65!
You can be financially responsible and still travel. You just have to plan for it. First, you need to make sure that your current wanderlust isn’t bankrupting your future. Make sure you’re setting enough aside for retirement and other big goals. I usually recommend that my clients save at least 15% of their income toward retirement in order to provide for a secure future.
Once you’re funding your long-term goals, you can start planning your vacations. The key, though, is to plan. Over half of Americans fail to include travel in their annual budget even though they do it regularly. If you eagerly pull out your credit card every time there is a fare sale, you will end up in debt and with regrets. Once you pay the interest on your purchase, the fare isn’t such a good deal after all.
Have I got you wondering how your travel habits are affecting your future? I’d be happy to chat with you about it. Together we can develop a plan that builds your future without taking away all of your fun today.