25 Jan need a (debt-free) getaway?
Commercial airline traffic is down significantly since March of 2020 as lockdowns and the fear of contracting COVID-19 continue. I flew from New England to Florida in the fall and the number-one question I was asked about my trip was whether I felt safe on the flight (answer: yes).
For many of us, our annual vacation is something we look forward to all year.
One of the problems I used to have with vacations (and I think many of us may have) is that I would charge the vacation to my credit card and then end up paying for it for many months. It kind of puts a damper on vacation memories when you are paying for the flight six months after you got back!
Is there a way to pay for your vacation ahead of time, without breaking the bank?
I have seen some financial coaches say your best bet is to take out airline and other credit cards which will give you miles, hotels, and the like. That’s not the best idea. While people say – and sincerely believe – that they will pay the credit card bill off in full the next month, in reality, an unforeseen problem could delay paying it off, and then the interest hits. Only 45% of people pay off their cards every month. In addition, people spend far more when they charge something than when they pay using a debit card or (especially) cash.
So how do you go on vacation without going into debt? The answer is by using a sinking fund. Spend some time determining where you want to go, when you want to go, and how much it costs. Then, look at the total dollar amount and divide it by the number of months you have until the trip. Take that monthly amount, and include it in your budget as a sinking fund. (For more details on budgeting, see https://yourwalletwellness.com/2021/01/02/budgeting-101-for-2021/ )
For example, you want to go on a trip in eight months and stay five nights. The trip is going to cost you $1,600 in total for your flight, hotel, rental car, and food. You have to save $200 a month in order to go on your trip debt-free. When you put together your budget each month, set up a separate line item for “vacation fund.” When the new month begins, move that money into a separate bank account which will accrue the money until you need it. (You may find that you have to save a bit more in earlier months in order to pay for upfront costs like flights.) If there is no way you can work this into your budget, look at a less-expensive vacation, push your travel plans out, or do a staycation until it fits into your budget.
If you don’t foresee a trip in 2021 due to COVID-19, why not start saving anyway so that you have the money once travel really starts back up again? Unlike a vacation you are still paying off months later, a debt-free vacation is always fun to look back on!
Feel free to reach out if you have any questions or would like a free consultation!