Many Americans find themselves grappling with summer travel expenses long after the season has passed. According to a survey conducted by Bankrate in March, 36% of Americans are planning to go into debt in order to fund their summer vacation. The methods used to cover these expenses range from personal loans, buy now pay later services, borrowing from friends and family, to relying on credit cards and carrying the balance over multiple billing cycles. This trend is particularly alarming given the fact that the average credit card interest rate is hovering around 20%, nearing a record high.
The survey revealed that Millennials and Gen Zs are the most likely demographic groups to take on debt in order to finance their vacations. Often, the rationale behind this decision is the desire to create lasting memories for themselves and their families. Clinical psychologist Sabrina Romanoff points out that for many families, the prospect of fulfilling childhood dreams such as a trip to Disney World outweighs the financial burden of taking on debt. While these motivations are understandable, it is important to recognize the long-term implications of accumulating expensive debt for short-term enjoyment.
Financial experts emphasize the importance of planning ahead and budgeting appropriately when it comes to affording a vacation. Romanoff advises her clients to set specific budgets for different categories of expenses while traveling, such as food, activities, and transportation. By identifying areas where they can splurge and areas where they need to be more conservative, travelers can strike a balance between enjoying themselves and being financially responsible. Setting a budget is only the first step; the next crucial aspect is creating a plan to save money for the trip.
Romanoff recommends starting small by setting aside a portion of each paycheck for the vacation fund. In addition to traditional saving methods, travelers can also explore creative ways to save money and maximize their travel experiences. For instance, taking advantage of frequent flier miles or credit card rewards can significantly reduce the cost of airfare and accommodations. Furthermore, choosing to visit destinations during off-peak times can lead to substantial savings due to lower demand. Financial analyst Ted Rossman suggests unconventional travel tactics such as traveling midweek, driving instead of flying, or opting for lesser-known destinations to capitalize on deals and discounts.
While the allure of a dream vacation may be enticing, going into debt to finance it poses significant financial risks. By prioritizing financial planning, budgeting wisely, and exploring alternative ways to save money, travelers can enjoy memorable trips without jeopardizing their financial well-being in the long run.