I am going to give you the most popular, and least helpful, answer that exists in the personal finance community: well, it depends.
I am a strong advocate of treating yourself, within reason, while you’re tackling debt. Mainly because I think that’s the only way to preserve your sanity. But I do think that there’s a distinct difference between treating yourself and treating yourself. Here are some crucial questions to ask yourself before you decide to go on vacation while in debt.
What Kind of Debt Do You Have?
If you currently carry multiple forms of debt, i.e. car loan, student loan, mortgage, and/or maxed credit cards, I would suggest you think hard before going on vacation. To be honest, I'm not sure whether the ROI (return on investment) will be worth it. Will you really enjoy yourself if you go away, or will you just be more stressed thinking that this money could have been better used towards your debt? The last thing you want is to be sitting on a beach, miserable, and thinking about your financial situation.
When Will You Realistically Be Finished Paying Your Debt?
I know this seems a little counter-intuitive, but if your debt-free date isn’t for another 5 - 10 years, I am more inclined to suggest you take a vacation now. You’re going to be burnt out from restricting yourself for the next little while, and you’ll need a break. I rather take a vacation and destress then get so increasingly miserable that one day, in a moment of weakness, I impulsively buy $500 worth of crap on Amazon. You need to maintain your sanity. Repaying debt is a marathon, not a sprint.
If you’re planning on being debt-free in the next year or two, I would think about whether using your money for a vacation is really worth it now. You’re so close! With the end clearly in sight, I am more in favour of really hustling during that last mile to cross the finish line.
Do You Already Have the Cash to Fund the Vacation?
In no circumstance would I recommend paying for a vacation on credit if you have debt. If you are in debt and have decided to go away, plan well in advance. For my birthday this year I took a relatively inexpensive trip to Montreal, and I slowly saved up for it over the prior three months. It felt amazing to go on vacation and not worry about how much things would cost. I overestimated my expenses and saved more than enough money. I knew I wanted to be able to eat everything, and even made reservations at certain restaurants ahead of time, so I never felt restricted. It was a welcome break from my aggressive debt repayment, and I left Montreal inspired again to return to the grind.
Does Your Work Cover Paid Vacation Days?
Most full-time and/or permanent jobs provide employees with paid vacation days, but if you're working on contract or defined as a casual, part-time or seasonal employee, you may not be eligible for them. If you don't have paid vacation days, you have to consider how much money you're losing by going on vacation. While you may only be missing one or two shifts, that money might be really important to you as you’re paying down debt. When I worked in retail, I couldn't afford to turn down any of my scheduled shifts.
How Much Will the Vacation Cost?
This is the last, and most important, question. As I mentioned before, I believe you should plan a vacation well in advance if you are in debt. There are so many factors you’ll have to research, such as: where do you want to go, when is that destination's "off season", what are the most reasonable accommodations, and what is the cheapest method of travel. While you're planning your vacation, really define the top 3 things that you think are worth spending money on. For me, it’s always the food and experiences. I’m not much of a big shopper so I rarely buy clothes on trips. I much prefer dining at pricier restaurants for a memorable experience. You’ll have to figure out what matters most to you.
In the past year and a half, I managed to visit Chicago, Ottawa (twice) and Montreal. My last two vacations were pretty inexpensive. For my trip to Ottawa, I was lucky enough to stay with friends and I drove there in a rental car (both my girlfriend & I have corporate discounts). For my trip to Montreal, my girlfriend & I had a substantial Airbnb credit, so we ended up paying $36 (tax included) for our 4-night stay. We also ate bagels for breakfast, walked to 90% of the places we visited, and checked out multiple parks within the city. These weren't necessarily intentional choices to save money, but simply activities we enjoyed doing on vacation.
Could I have thrown all that money I spent on my vacations toward my debt? Absolutely. But I had only one type of debt, my student loans, with a decent interest rate of 3.20%. I weighed the pros and cons, saved up the cash beforehand, and decided that these weekend vacations were worth it. I don't regret them in the slightest.
Sometimes You Owe it to Yourself
I really do believe that, in certain circumstances, going on vacation is justifiable, and encouraged, while in debt. Vacations don't have to be expensive. Personally, I knew I needed a break from the daily grind, but I could never justify going to an expensive destination or leaving for a long period of time. For me, a weekend getaway was enough to renew my energy and optimism. That’s not a waste of money, that’s plain crucial. Don’t undervalue the benefits of a positive and healthy mind. It’s so more important than your debt. If taking an affordable vacation is what your mental health desperately needs, delaying your debt-free date by a couple of months is more than worth it.
*I originally wrote this as a guest post on millennialmoneychallenge.com