On this blog, I’ve written extensively about how I plan and book my vacations. However, there’s one thing that I’ve always been very wary about. That’s exactly what’s driving this trend when it comes to vacation planning. A disturbing trend is emerging, as Americans are racking up debt to fund their vacations.
Funding your vacations via Debt
While I can understand the allure of booking that next dream vacation, flying business class or booking a nice overwater villa, it’s a really bad idea to pay for a vacation you cannot afford. However, as per Fox Business and Debt.com, the growing trend is that of Americans funding their vacations by racking up more debt.
Roughly 83% plan to pay for a portion of their trip using credit cards, a new Debt.com survey said. More than a quarter (30%) expect to finance at least $5,000 of their travel expenses, and 7% said they may charge $15,000 or more, according to the Debt.com survey. More than half of respondents (56%) will use their credit cards to earn cashback and rewards. However, 19% said they had to rely on credit cards because they couldn’t afford to pay cash but still felt the need to get away this summer.
What’s more disturbing is that the survey highlights the fact that close to 60% of respondents said that they took up credit card debt to fund their vacation.
Most Americans (81%) said paying off credit cards was essential and 64% said carrying a credit card balance was not a good idea. However, 45% typically carry one month-to-month. The survey also showed this is a growing issue, with more than 52% of Gen Z and Millennial Americans saying their credit card balance has been steadily increased over the past three to five years. Of those, almost half (48%) were from the middle class while more than a third (35%) were in the highest income bracket of those making more than $200,000.
How I plan my vacations
In the miles and points space, I often state that my goals are two-fold. Firstly, earn miles and points as fast as I can. Secondly, redeem the for the most value by using the least amounts of miles and points. However, most importantly, never get into debt or carry a balance to fund my vacation, no matter how tempting that may be. I have a simple multi-step process that I use to plan my vacations.
Step 1: Finalize the destination
Step 2: Decide which miles and points you need to book your flight and hotel
Now, get ready with pen and paper.
Step 3: Calculate how much you’re paying in taxes and fees for the trip after using miles and points
Step 4: Plan for ancillary expenses like dining, transportation and recreation during your vacation
Most importantly,
Step 5: Calculate the total figure and then adhere to that budget when you travel
The Pundit’s Mantra
Thanks to miles and points, I’ve had some really memorable experiences around the world . I don’t think I would’ve been able to travel the vast expanse of the world at such a rapid pace if it wasn’t for the world that all of us live in and talk about all the time.
While all that’s great, I’d never ever recommend anyone to get into debt to pay for something that you cannot afford, even if it is a dreamy vacation that’s been the cynosure of your eyes for a long time.
Bear in mind that your credit card balance and interest payments can last a lot longer that the joy you experienced during your vacation.
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