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Going on Vacation When You Are In Debt

If there is something that the personal finance blogosphere loves, it’s vacations/travel. If there is something that the personal finance blogsophere hates, it’s debt. When you combine the two, what do you get?

My dilemma. Should I go on vacation while I am in debt. Or put another way, should I use money that I have saved for vacation when it’s money I can use to minimize my debt?

Here’s the situation

Long-time readers will remember the many (seriously, many) times I have gushed about the prospect of going to the Galapagos Islands near Ecuador. CB and I started a joint savings account back in April 2010 to save for this trip. We celebrated each small milestone, high-fived each other when our $250 became $500 became $700 and so on. When the Galapagos Fund crossed over the $5,000 mark in April 2011, I was so excited I almost cried. Now, our darling baby fund is a robust $11,000. It’s ENOUGH. Enough to fund a 7-night cruise to the Galapagos plus a few days in Quito, buy an entry-level dSLR or a really great point-and-shoot, pay for our park fees and international flights. We might even have a thousand or two left over. That’s what the money is FOR.

On the other hand, it’s almost $11,000 in cold hard cash that we can use to pay for less-exciting-but-far-more-necessary things like, oh, you know, graduate school tuition. It doesn’t quite make sense to keep the money in a 0.8%-interest earning account when graduate student loans will start at 6.8% (or more). We could go on a trip in 2013, but we will be busy with school and internships and one of my good friends might be getting married and we’ll have to travel for that, and it’s probably not the best time, logistically speaking.

Paying off Debt vs. Going on Vacation

“Well, at least I’m not taking on debt to go on a vacation,” I thought. But am I really avoiding debt for this trip? Or am I falling prey to a case of mental accounting? Let’s say a year of school for CB costs $12,000 out of pocket, and he will be in school for at least 2.5 years or a total of $30,000. Consider these two scenarios:

Scenario 1: CB and I spend the $11,000 in cash on Galapagos, and we have to take on the $30,000 tuition in student loans. Total debt = $30,000
Scenario 2: CB and I use the $11,000 to pay for his tuition, therefore we need to take out $19,000 in student loans. Then, we go to Galapagos and take out consumer debt of $11,000 to cover the trip. Total debt = $30,000

Even though we “used cash we saved for a vacation” in Scenario 1 and “took on debt for a vacation” in Scenario 2, in both cases, our resulting total debt levels are the SAME. It makes no difference (disregarding interest rates for a second here) whether we spend the $11,000 on Galapagos or school. It matters that that $11,000 is no longer available for tuition if we spend it on Galapagos. Yet another example of the fungibility of money. SIGH. So if I would never ever advocate taking on debt for a vacation, and Scenario 1 would land us in the same debt situation, should we really be going to the Galapagos? Can we really afford to go to the Galapagos?

The responsible, adult, thing to do would be to take that money, defer our dreams of seeing the turtles for a few years, and use it to pay for tuition/living expenses. But I can’t deny the wave of disappointment that comes over me when I think about that option.

I want to see the turtles. I want to do this trip. I want to cross Galapagos off my bucket list.

What would you do?

photo credit: http://www.flickr.com/photos/ndecam/

  • SJM - Without a doubt, and completely seriously, GO!

    I completely disagree with this idea: "It makes no difference (disregarding interest rates for a second here) whether we spend the $11,000 on Galapagos or school." It makes a HUGE difference that you two sat down, planned a goal, and met that goal in cash!

    Not only is that a huge moral boost on your debt journey, but more importantly you are training your psyche that you are able to be trusted! How else will you convince yourself that you can save up for a particular item or experience if you fly in last minute and sweep your dreams away!

    Okay, this got a little aggressive… but for those of us living vicariously, we desperately need pictures of turtles in the Galapagos! (Taken by you, of course!)

  • WorkSaveLive - If it were me I wouldn't go into debt for either…so I'd have to delay the vacation and pay cash for the school. :(

    Sorry, I know that sucks but making the right decision isn't easy and it's not always what we want to hear. You'll be thankful for it later though.

    Good luck with the decision!! ReplyCancel

  • Peaches & Whiskey - As a recent return to grad school student myself, the 6.8% interest rate can be very intimidating. However, as I pay down my loans, I try to keep things in perspective. This vacation will not make or break you financially, and it may re-energize your drive as you create a new goal and build towards that.

    I'm not a Ramseyite who thinks everyone needs to give up everything until debts are gone (especially manageable student loans and mortgage). Enjoy life responsibly. ReplyCancel

    • MakingSenseofCents - I definitely agree with this comment. A great vacation is most likely needed! And you'll have a blast. ReplyCancel

    • SWR - GO. Have one last hurrah before graduate school consumes your life. (I wish that I had done this before going back.)

      Heck, if nothing else, this is one more unique fact to add to your resume and make you stand out from the crowd.

  • Michelle - Tough decision. That is a lot of money but you have been saving it for quite some time. I'm not really sure what I would do! ReplyCancel

  • Karin - I think you should go on vacation! I absolutely think there is a place for sacrifice now in order to have what you want later, but I also think there is something to be said for making a promise to yourself, working hard and rewarding yourself when you achieve it. If you and CB have been slowly putting money aside, excitedly planing for it, and really want to go, then you should go! ReplyCancel

  • Jenn - Personally, my vote is for the Galapagos. You saved the money specifically for the trip, and you should take it. It's obviously important for you to go, and there is always going to be something else that comes up that the money could/"should" be spent on. Life experiences are just as/more important than doing the "smart" money thing. Don't have regrets. ReplyCancel

  • Financial Samurai - For sure go! One life to live! Put it this way, if you have $1 million in debt, and die after you return, you will have a GREAT time and won't have to pay anything back!

    PS, sent you an e-mail on something you need to do by this Friday. thx ReplyCancel

  • @tigerpika - I think you should go. Your lives are only going to get busier and sometimes things get put off in indefinitely. A few years ago my husband and I were planning a trip to Japan. I had saved up just enough money to go and was thinking maybe I should skip the trip and save the money, since I was going down to working part time in a few months and would probably need it. ALL of my coworkers (who were 10-20 years older than me) told me to go now, because I might never go and they all had stories of trips they didn't take before they got married/had kids/bought a house and now they think they never will. They were ready to take up a collection for me. Go and don't feel guilty! ReplyCancel

  • Rye @PPI Claims - Go for Galapagos! We only live once and no one knows what will happen tomorrow. You certainly don't want to wake up one day wishing you had gone to the Galapagos Islands when you initially planned to. You are not being irresponsible. I mean, it's not like you're going to be swiping away your card for this trip- you earnestly stowed away hard-earned money for this and planned it carefully. Go make your dreams a reality. ReplyCancel

  • Kerry - Oh my goodness. I've been reading for awhile, but never commented and this post made me feel an urgent need to comment.

    You must go on the vacation! If you had been dedicating all of your savings to vacation and not thought at all about an emergency fund or retirement, or any other thing, then yes, it would be irresponsible. But that's not what you've been doing. This is something you've been doing slowly while focusing on other goals. It's a promise you made to yourself that you're breaking. If you promised a friend something like that, you wouldn't treat them that way. You set your marks, you met your marks, you were responsible all the way….so do it! It's an excellent time in life to do it. Later you'll never go because you'll be thinking even more about student loans, you'll have a new job that you don't want to leave right away, and other life goals will get in the way. Then you'll have to save again.

    Beyond that, you can't delay fun forever. I believe that life is about a mix of awareness that you could die tomorrow and that you could live far longer than you ever expected. You have to sprinkle fun in along the way, or you're only working toward an end goal and ignoring the joys that the journey brings.

    I sincerely hope you take this vacation. I totally know the feeling you're having. I'm totally inclined to give myself some leeway for fun and then reign myself in with particular ferocity. I think you've been planning with balance. I hope that you act with it too! ReplyCancel

    • Well Heeled Blog - I'm glad you de-lurked. :) You are right… I wouldn't treat a friend this way. But I would probably have never promised a friend a $11K trip either. LOL. I have a lot to think about, and fortunately some time to think about it. ReplyCancel

  • Jordann - Go! As mentioned above, if you set a goal, work towards it and achieve it, you deserve the reward. I understand that you feel like you need to be responsible and put that money towards student debt, but there's always going to be something that you should be spending your money on if you are *really* responsible, right now it's student debt, later it could be a mortgage, etc. It's all about balance, and it sounds like you have it. ReplyCancel

  • Melissa - I'm just going to repeat something I read a minute ago: This is what money is FOR!

    Seriously. Go. And don't feel bad about it. You've been planning and saving for this trip for years, and you've got your plans for school all worked out. Yes, you'll be taking on debt, but you've got a plan. Besides, if you wait until you're completely, 100% debt free…you'll probably never go. So, say you put it toward tuition. Spend a couple of years in school, and then a couple of years paying off that debt, and then there's a wedding and maybe by then you'll want kids, and buy a house, etc. and then do you wait until after the mortgage is paid off? I say, life is worth living, and as long as you've got all your bases covered (and you seem to), you should go ahead and enjoy yourself! ReplyCancel

  • Laura - I’d go on the vacation. If you weren’t a financially savvy person I probably would say use it for school, but you guys manage yor money well. We just bought a house but took a vacation in February. We could have used that $2k to pay down our mortgage, but we wanted the experience of a trip instead. You could always save/pay-off debt with vacation money—it will always be an excuse. ReplyCancel

  • Katie - Go! ReplyCancel

  • MLISunderstanding - I wouldn't go. (That doesn't mean YOU shouldn't go.)

    I would not feel comfortable spending a significant amount of money on a vacation or other similar "want" if I had debt. That mostly explains why I DON'T have debt, and my next vacation will be a a road trip… in 2014. That works for me, and for my partner — you and yours may have different priorities. ReplyCancel

  • wmwo - Definitely go. The problem with life is that it happens. When you finish your masters program, you'll probably eventually have kids and buy a house. There is always somewhere "better" the money could go, be it paying down your mortgage faster, putting the munchkin in private school, or whatever. If you look at it as a pure numbers game, travel will always lose out to something else. You saved your money so you could take this trip, go on it. There's no shame in that. ReplyCancel

  • StackingCash - carpe diem…nuff said… ReplyCancel

  • ShoppingtoSaving - You only live once. That's the motto – YOLO! :) Yes that was from a song, but it is so relevant to how I feel about my life, and about your decision to go. Galapagos is amazing, my boss went last year and I did a project with a small business owner there who owned a safari camp with his wife. Yes you can go later, but the experiences you will get now will be intangible. You saved up for this moment. You HAVE to go. ReplyCancel

  • Ella - If I were you I wouldn't go. People often think that just because they saved the money, that means it is free. No it is not. That's the money you saved at the cost of having a larger emergency fund or more savings. Unless you did something like give up drinking coffee and saved the money intead, in which case you know the only thing you gave up was coffee. Just because the money is saved. Would you take on a loan at 6.8% to go on this vacation? What you are doing is essentially the same thing. Think of it as the cost of going to grad school. ReplyCancel

    • Well Heeled Blog - I absolutely agree. and even if you gave up coffee, that money saved is still money you can use to pay down debt or invest. There's always a cost to spending your money no matter how it came about, because that's money you can either "rent" out or money you can use to decrease your cost of capital. ReplyCancel

  • Allison - Hey, to each his own. If you want to go, go and heave fun and don't let anything weight you down. You work hard and deserve a break. If it were me, I would put the money towards debt. Being debt free just feels so darn good that I never want to go back. ReplyCancel

  • Amy - Go!! You've been saving and high-fiving over your milestones, after all. You are so incredibly responsible with all your saving and spending and budgeting that a trip like this is a reward for the discipline of saving that $11k. Do it, do it! Can't wait to see photos! 😀 ReplyCancel

  • eemusings - I would.

    But you know how I feel about travel.

    And Galapagos' giant turtles are on my life list too 😀 ReplyCancel

  • @moneyaftergrad - I WOULD GO.

    But this girl is also planning a vacation to Germany whilst carrying $17,000 of student loan debt.

    I am a bad person to ask. ReplyCancel

  • oilandgarlic - I would go. At the same time, I've known people who go on those "once in a lifetime" trips and then spend years paying it off one way or another. In other words, that $11,000 trip will cost more because you're not really paying it in full. However, even if it saves you $1,000, maybe reduce your time in Quito and don't count the camera expense as trip expense. Can you use points or rewards? I once bought airplane tickets and applied some reward points that shaved $250 off the flight cost. Small change but every bit helps. ReplyCancel

  • guest - I am surprised at all the "Go" comments.
    In this economy, when both of you are taking on huge debts for Graduate school, with the inherent promise of big bucks in couple of years, which may or may not happen right away, I would not risk spending 11k on a big vacation now.
    If I were you, I would compromise on a smaller vacation now and then do a big vacation when things are settled. ReplyCancel

  • Katie - I think you should go. If you have been specifically saving for vacation for that long then I think you deserve to go. Maybe you could come up with a plan to tackle the student loan debt quickly. But I think there needs to be a fun balance in your life and you might regret not going if something you've been planning for so long. If it's in your heart to go then don't beat yourself up about it. ReplyCancel

  • seedebtrun - the old me would tell you to go and remind you that life is too short to miss out on the chance to have great new experiences.. but the old me buried himself under a mountain of debt from his poor decision making :(

    just think of how much more fun that vacation would be if you didn't have to pay interest on it as soon as you were done.ReplyCancel

  • Christeen - Hi. Love your blog and I'm probably totally outside your normal demographics (40ish married mother of one living in Australia) but I vote for GOING. You set yourself a goal and you achieved it so GO,GO,GO and have a great time before you get caught up in school etc. It would be different advice if you were putting it on credit cards but as you saved cash I don't see the problem. I have no doubt that you will do OK in the future paying off student loans and saving for later. ReplyCancel

  • mommastar - I would choose vacation as tomorrow is not promised. You saved for it, it wasn't an unplanned outing. Vacation 1 school 0 :) ReplyCancel

  • Leah - You can't let future obligations derail your hard-earned dream of going to the Galapagos.

    You'll tell yourself you "should" be saving for grad school….then a mortgage…then babies…then renovations…then retirement…then college for your own kids…whatever. But living ONLY to support your financial obligations is a sick cycle to not enjoying your life. You've got the perfect opportunity, the savings and the savvy to enjoy your vacation AND get a master's degree.

    Plus, you don't HAVE to use the full $11,000 to your vaction. If you want to make yourself feel better (and "punish" yourself for "giving in" to your vacation (even though you worked for it)), why not divert $3,000 back to your student debt fund? Best of both worlds. ReplyCancel

  • asgreen - I would go on the trip. You saved for it and I've never ever regretted traveling. Ever. ReplyCancel

  • DontDebt - I would totally go! As a matter of fact, hubby and I just booked our own vacation at a condo in Florida for this fall! We got a way good rate so we jumped on it. ReplyCancel

  • Liz - You may never have the chance to experience the trip you have planned in the future. I always thought I would travel in my retirement, but now the doctors say it is not recommended. Carpe Diem and GO! ReplyCancel

  • Newlyweds ona Budget - You should GO! And don't listen to the naysayers, seriously. That's the thing with vacations, they are an absolute frivilous expense that you can never justify because it can always go toward something better, like school, loans, debt, emergency fund, kids, down payment, etc, etc, etc….but then you forget to live LIFE. 30 years from now, are you going to regret that you went to the Galapagos instead of using it to pay for school?
    People often regret things they DIDN'T do. don't be one of those ReplyCancel

  • Jessica - I would probably go back and forth perpetually about going or not going. In the end, I would probably choose not to, and take a smaller vacation. I can't enjoy a trip when I am feeling guilty about it the whole time. ReplyCancel

  • Ms. S - Use that money for school! Go to Galapagos once you guys graduate and are able to save the money again. It'll be a great graduation present to yourselves. BUT, I'm being a bit hypocrytical because I've got 2 vacations planned this year with lots of student debt. Difference is, if I could go back and reduce the debt I took on during school, I would. :) ReplyCancel

  • thisaggiesaves - I would go, taking financial cuts where possible without affecting the quality of the trip too much. Another option is to put half the money to student loans, then save up again the other half and go in a few years. ReplyCancel

  • pfblogwatchdog - $11k is an expensive vacation. We spent 3 weeks in Europe last year and spent maybe half of that. I would see about cutting costs where ever I could. I would skip the "nice" camera. I'm an avid photographer and my spouse is a professional photographer, and more than likely you won't be able to produce better pictures just by buying a more expensive camera. Borrow a friend's P&S and go. And hauling around a dSLR is a pain.

    I'm usually all for getting these nice sanity breaks, but $11k is expensive! Learn the ropes of travel hacking and cut expenses where you can!


  • Karen - I'd go on the trip because it's more fun and I'm not always the most responsible.
    If you do go to Quito (which I doubt you'd need more than 2 days) I know a nice place to stay to visit Pululahua crater. ReplyCancel

  • Weekly Round Up: Debt Payoff, Obama Care, and More | SavvyFinancialLatina - […] Well Heeled Blog Girl is trying to decide between using her vacation fund to go to the Galapagos Island or fund her MBA education. […]ReplyCancel

  • Jerry - I say delay gratification. It leads to more satisfaction in the long run. You can go later. The islands will always be there. But, if you're in debt, pay it off. Your insurance for being able to be stable and pay for those vacations in the future is getting out of debt now. ReplyCancel

  • Maria - I say go, what's the point of saving for a goal that you absolutely want to do and then don't go! You are young enough to recover from student expenses and you know where your money is going.

    Us older people do know that life does get in the way. We did lots of travelling as young 20ish year olds but only started again now our children are in their late teens and 20's. There are things I wish I had done when younger but never got around to. ReplyCancel

  • Lulu - Go!!! I would've never advocated this advice 2 years ago. But after my dad died suddenly, I asked myself what I would regret most about life if I had been in his situation. Never going to Paris to see the Eiffel Tower was my answer. So I saved up and went a few months later. Anyone who knows me knows that you have to pry money out of my hands with a crowbar. But I never regretted my decision. That was the best trip I've ever taken. Not because it was all sunshine and roses, but because I learned so much about myself that I would have never known if I had put that money in the bank. ReplyCancel

  • Cait - You guys have worked so freaking hard to save for that trip… go on it. You deserve it. ReplyCancel

  • TLC - I'd take the vacation. I personally have to have a balance in my life.. work hard AND play a little. ReplyCancel

  • From Shoes to Savings - De-lurking. GO! You worked so very hard to save up that money for a specific (and AWESOME) purpose! Grad school can be intellectually, emotionally, and financially tough, and going on this trip before you start will be a wonderful way to both refresh yourself before school and celebrate this new journey in your life! If it would make you feel better, try cutting a few thousand and putting it towards grad school…you can rent dSLRs and such to save too. ReplyCancel

  • Fess Up Friday: 5 Financial Stressers | Well Heeled Blog - […] to keep that money saved and probably spend it next year on graduate school-related costs. I know many of you encouraged me to go, and trust me, I WILL go. It will just be in a few years. In the mean time, I am sure we will be […]ReplyCancel

  • Denis - In the same position i'm in debt with c1 but i've been saving for a trip to Croatia to see my family which I haven't seen in years :)
    I would def go LIFE'S TOO SHORT go without regret and enjoy yourself !

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