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Plan affordable vacations or avoid Facebook

Life Buoy

By Joel Dresang

When I was growing up, vacations were family visits. Most summers, Dad drove us to see our cousins in Illinois. When I was 8, we took the train to California to visit my oldest brother in graduate school. When I was 13, we drove to the East Coast, where my older sister was working.

We ate sandwiches my mother packed in a grocery bag. We slept on the floor at various relatives’ places. We found free entertainment, such as outdoor concerts at national monuments in Washington, D.C.

Vacations seem a bigger deal now, with bigger bills. They can upset the spending plans of retirees. They can divert workers’ earnings from retirement savings. They can contribute to family debts.

Americans spent $761.7 billion on leisure travel in 2018, according to the U.S. Travel Association. That’s nearly $6,000 per household.

At the same time, many Americans would struggle to pay $400 in emergency bills. A recent Federal Reserve report said 27% of households would have to borrow money or hock something to cover an unexpected $400 expense. Another 12% would have to miss monthly payments on essentials such as housing or utilities.

As a result, a lot of families are willing to borrow money for their vacations.

A national survey last summer found 81% of parents with children planned to take on debt for vacations. The summer before, another survey revealed that 74% of Americans went into debt to pay for a vacation, to the tune of $1,108, on average.

More than ever, vacations impose a disruptive force in the balancing act between live-for-today consumption and long-term investing.

Surveys show Americans spending more time thinking about and planning for vacations than they do their retirements. Another finds that workers value paid vacations as an employment benefit more than a 401(k).

Vacations have become part of keeping up with the Joneses. And it’s exacerbated by social media.

A working paper published earlier this year by the National Bureau of Economic Research suggests a “visibility bias” that when we see other people spending money compels us to want to join them. So, when my friends post breathtaking Facebook selfies from Machu Picchu or our neighbor blogs a photo of a spectacular sunset from Door County, I get vacay envy.

Indeed, a recent survey showed Americans more focused on how their friends spend than on how they themselves save. Some 60% wondered how people they knew could afford the experiences they shared on social media; 34% said they’re more likely to spend on activities they saw on social media.

But pricey vacations are not an entitlement. To the degree they cause overspending in retirement or get in the way of saving for retirement or even for a rainy day, vacations should be scrutinized.

“I’m sorry to tell you,” writes personal finance columnist Michelle Singletary, “that you don’t deserve a summer vacation if you’re a financial hot mess.” (The emphasis is hers.)

Vacations are important. In a Harvard Business Review article titled “The Data-Driven Case for Vacation,” researchers wrote, “Statistically, taking more vacation results in greater success at work as well as less stress and more happiness at work and home.”

However, the authors note that we benefit from vacations by how we spend them, not how much we spend on them. In fact, “Poorly planned and stressful vacations eliminate the benefits of time away.”

Instead of spending a lot on a vacation, consider your return on investment and how you spend your time away. Include these factors:

  • Planning. Researchers in the Netherlands have found that the biggest difference between the happiness of vacationers and non-vacationers comes from the mere act of planning the getaway. The effects of anticipating their time away raised the spirits of vacationers even before they left work.
  • Control. Another benefit of planning is gaining a sense of control. Researchers at Texas A&M University said vacationers are more satisfied if they schedule how they spend their time away and feel as if they can decide what they do.
  • Mastery. Those who challenged themselves, broadened their horizons and learned new things while on vacation were better able to relieve stress from work, the Texas researchers reported.
  • Detachment. The Texas study also found that vacationers who were able to distance themselves and forget about work while they were away benefited more from the time off.
  • Relaxation. The Dutch researchers discovered that vacationers who considered themselves “very relaxed” while away tended to be happier longer after they returned to work. Those who reported feeling stressed on vacation mostly cited disagreements with travel partners and illness.

None of the above suggests you need to spend a lot for an effective vacation, but time can be a factor. The Texas study recommends longer vacations to disengage from work and master a new skill. But the Dutch researchers found such a boost from planning that breaking vacation time into shorter, more frequent diversions could be the ticket.

I asked one of our daughters what she remembers of vacations growing up, and she too recalled family visits—mostly going to her grandparents’ cottage Up North but also a cousin’s wedding out west and a slow ferry ride to Michigan, which involved camping and a circuitous drive to visit my parents.

Other Money Talk articles from Joel Dresang

Like my parents, my wife and I are better able to afford vacations as we approach retirement. Those early years of lower-key getaways allowed us to set aside more for when we won’t be working anymore. Before the pressure of social media or the notion of borrowing for vacations we couldn’t afford, we learned the value of just taking a break and making the most of it.

This summer, we’re gathering our daughters to spend time together at Grand Canyon, Bryce Canyon and Zion national parks. To make sure if fits in our budget, we’re scaling back on plans we had to celebrate our 30th wedding anniversary later this year.

My wife has done the lion’s share of planning for our summer trip, but I have been involved enough that I feel a lift from what the researchers call “the anticipation effect.” I’ll bring books to help detach and I’ll map out a rough schedule to feel some control. Perhaps I’ll even benefit from mastering a new skill—especially if I can count riding a mule for three hours.

Joel Dresang is vice president-communications at Landaas & Company.

(initially posted June 26, 2019)

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