Finacial Planning, Financial Security, Spending, Travel
June 16, 2022
In a recent survey, more than 80% of people said they have plans to travel this summer. I totally get the pent-up desire to get back to having fun and adventure, given the confining nature of the past two summers during the pandemic.
But this summer is setting up to be financially dangerous for those of you determined to live it up after the past few years.
As I explained in last week’s post, we all need to be building up our financial defenses in case a recession hits. The worst thing you can do right now is overspending on vacations and fun times this summer, leaving you vulnerable if a recession does hit.
My summer spending advice:
Pay in full for flights.
Many airlines now offer the ability to pay for your ticket over many months. This is an extension of the Buy Now, Pay Later model that has caught fire with online retailers. I do not like BNPL. It’s a sign you are not living within your means. And airline BNPL deals can be extra costly as they typically charge interest from the get-go.
I am not telling you to not travel. I am suggesting you consider trips where you can pay the ticket in full without BNPL.
Set your vacation spending budget.
I know you feel like you deserve a vacation. You do! But given the prospect the economy may not stay strong as we head into the Fall and Winter, what I also want for you is to not have regrets six months from now about your overspending. Now’s the time to make smart choices. Book the less expensive flight with the connection, choose the less expensive motel or hotel, agree as a family on the types of restaurants you will eat at, etc.
Make tradeoffs to fit your budget.
If you want to stay at the fancier hotel, maybe reduce the stay by a night or two. Like great dinners out? Okay, might you stay somewhere with a kitchenette so you can prepare simple breakfasts and bag lunches and then splurge a bit at dinner?
It is never a good idea to spend more on vacations than you can afford to pay off in full, but it is an especially costly risk to take this year. The average credit card interest rate is currently above 16%, and it’s likely it will continue to rise if, as expected, the Federal Reserve continues to increase the Federal Funds rate.
Delivering fun for kids doesn’t need to break the bank.
Camping in the backyard, organizing a neighborhood Olympics, baking together, treasure hunts, etc. all pack plenty of fun, at little to no cost. If your kids are at least 8 or so, maybe have them be in charge of arranging a day’s activities for you each week! That takes planning, and it is going to be so fun for everyone to see what they come up with.
Inexpensive fun activities should be the core of your summer fun plan for the kiddos. And then you can carefully add in other treats—movies, a day at the water park, a special trip into town to visit a museum, etc.—that will cost more, but will fit into your overall summer spending plan.
Credit & Debt, Saving, Investing, Retirement