If You Can Afford a Vacation You Can Afford to Invest

If You Can Afford a Vacation You Can Afford to Invest

This post today is a response to a few comments I saw on different Facebook feeds and other blog posts regarding planning for retirement. The basic conclusion I received from these comments are two-fold: 1) they could not afford to put any money away for retirement; 2) they didn’t have the time right now to deal with the situation. And in that same vein, similar people were responding to different posts and articles about vacations and the like (e.g. where they were going, how much time they were spending, travel hacking, etc). I have several responses to these posts.

First, more Americans should take their vacation days. The average American only takes 1/2 of their vacation days because they believe that they will be replaced if they do so. Taking a benefit that is given to you and then being fired for it would be highly dubious and I think would be grounds for a lawsuit. So if you have vacation days folks take them! You earned them! If it is just taking the day off to go to the movies or whatever.

Second, if you have time to plan a vacation then you have the TIME to look at investing. Americans have admitted in surveys that they spend more time planning a vacation than retirement. To me that is just bonkers. Are you kidding me? I know the reason why. Retirement is not immediate, a vacation is. People think they have all the time in the world. But an ounce of prevention is worth a pound of cure. Part of my reason for writing this blog is to get people talking about money, particularly my academic colleagues. It is imperative we discuss it. No topic maybe more important to your personal financial future than this subject. You cannot NOT talk about it and think about it. You have an obligation to your family, to society, and to yourself to think and plan more. I know there is a lot of info and it is easier to do a vacation, but it isn’t that difficult. You can do it and it doesn’t have to be complicated. You can just have a couple of mutual funds and that would be a balanced portfolio. So please spend some time thinking about retirement.

Third, there is a legitimate amount of people out there that cannot afford some retirement savings. I am talking about the family that is living below the poverty line or the single-mother trying to make ends meet working two jobs. This post isn’t directed at them. Last year, an article was written in the Atlantic about the secret shame of the middle class. In essence, the article argued that most Americans could not handle a $400 emergency. And I greatly sympathize with those people. However, the person who wrote the article, in my opinion, is not the right messenger for advocating change. You can read my post here about what I thought was wrong with him being the person to write it.

Finally, if you can afford to take a vacation (and I mean going away somewhere) then you can afford to save for retirement. Most vacations if you are packing the kids in the car, driving somewhere, and the like will cost hundreds, if not a couple of thousand dollars for hotels, food, etc. I want you to have a vacation. However, if you can afford to do this vakay then you can afford to put some money away for retirement, even if it is $100 a month. It just has to be a conscious decision. In fact, I would rather you save for retirement and not go on a vacation (just take your vacation days). Maybe that will make me a pariah. But I know what the math is on compound interest. Would you rather spend $3000 for a vacation where that money can grown to potentially $30k (and I am not kidding about that) or do something else with it? I know some of you would say the vakay. However, I want to implore you to think about what your money will/can do for you.

Moreover, I don’t think it an either/or. I think if you can be diligent in saving for a vacation then you can be diligent in saving for retirement. You can do both. Split the difference. Maybe put 1/2 of those vacation savings into a Roth IRA, 401k, IRA, whatever and then the other half into a trimmed down vacation. But this mindset that people cannot save for retirement and then turn around and brag about the vacation they are taking drives me nuts. When it comes to that then it is about priorities. And I personally think our priorities need to change a bit in those situations.

The Bottom Line: If you can afford the time to plan for a vacation you can afford the time to talk and learn about investing. If you can afford to take a vacation then you can afford to invest. The two don’t have to be mutually exclusive, but unfortunately we often do only one at the expense of the other.

23 thoughts on “If You Can Afford a Vacation You Can Afford to Invest

  1. Thanks. I am so tired of people saying they don’t have the time. It isn’t that hard to learn some basics. Thanks for stopping by Lance.

  2. You’re on point here, Jason. Something that sticks with me from Sowell’s Basic Economics is the high expectations Americans have for their lives. Taking a vacation is not a right that all Americans are entitled to. So when people complain that student loans payments are too much, or that retirement is out of reach and then plan and take yearly vacations, well… those are misplaced priorities.

    1. Lisa – A SUPER GREAT reference to Thomas Sowell (who, by the way, retired last December at the age 86 (see: https://www.creators.com/read/thomas-sowell/12/16/farewell)) and his classic textbook: “Basic Economics – A Citizen’s Guide to the Economy”

      Page 1, Chapter 1 from that book: “Economics is the study of the use of scarce resources which have alternative uses. What does ‘scarce’ mean? It means that people want more than there is.”

      To your point more specifically, on page 2, he writes: “In short, middle-class Americans’ desires what they can comfortably afford, even though what they already have would be considered unbelievable prosperity in many other countries around the world–or even by earlier generations of Americans…There has never been enough to satisfy everyone completely. That is the real constraint. That is what scarcity means.”

      He goes on to write, “To all these people–from academia and journalism, as well as the middle class people themselves–it apparently seems strange somehow that there should be such a thing as scarcity and that this should imply a need for both productive efforts on their part and personal responsibility in spending. Yet nothing has been more pervasive in the history of the human race than scarcity and all the requirements for economizing that go with scarcity. Not only scarcity, but also ‘alternative uses’ are at the heart of economics. If each resource had only one use, economics would be much simpler.”

      “Basic Economics” is the only economics textbook I’ve ever read that doesn’t contain a single equation nor chart nor table. It is literally a TEXT book.

      Time and money are our two most scarce resources and they both have many, many alternative uses. The better economists we are, the happier we will be.

  3. When I was a kid we did mostly camping vacations. The cooler held milk for cereal for breakfast, lunch meat for picnic lunch, and the treat was going out to dinner. Wonderful times on a budget.
    My typical get away is going to my mom’s cabin, no cost to stay! Amazing views! That’s because I’m saving up vacation days for a bigger trip next year. By our estimate we’ll need 18-ish days, so I need to save some more. My company also let’s you go 40 hours in the negative, and I’ll probably needs some of that time.
    At the last place, I suspected I was being shown the writing on the wall pointing towards the door, so I conserved my days for a pay out, since I was about to have the free time anyway.

          1. We have started a list of what we want to see, but keep adding to it. We’ll have to sit and plan with a map to get it settled. Also trying to pin down when. Not too cold, but not too touristy. TBD.

  4. I wonder how much of this is because people DON’T save for retirement and just put that vacation spending on a credit card to “pay later.” Too bad you can’t put retirement on a credit card 😉

    1. That is a great question Angela. I am not sure. And I wouldn’t doubt that at lot of people fund their vacations through debt. I mean I pay for things on a card, but I try to put the money away ahead of time. And putting retirement on a CC would be great (of course I wouldn’t want to pay it back later….e.g. a reverse mortgage). Thanks for stopping by.

  5. Recently, I’ve realized something about vacations with my family. We are both self employed and were looking forward to the idea that we could take vacations whenever we wanted. And although we do travel hacking, the amount of money in lost wages for a two week vacation is nothing to sneeze at. If we spend $1G on a vacation, we also have to consider the lost wages that could come to $8G. Compound that! Yikes. I still want to take them but gosh, I can understand why people who don’t have paid vacation would hesitate to take the days!

    1. That is certainly understandable when you are self-employed. I mean you don’t have paid vacations. It can be a really tough choice to take your vacation. And I can certainly understand biz owners and others not wanting to take a vakay, particularly when you might be the only employee. Before you know it you both will be FI and that is where the fun can begin!

  6. Great piece, Jason.

    It amazes me how many folks spend money on unnecessary things, but won’t put money away towards to future. Too many live for the Here and Now, not planning on their later days.

    Keep up the great work!

    Keith “Shin” Schindler

    1. Thanks Keith. I am surprised by that too. The truth i Should actually take more vacation days, but I just want to keep saving more.

  7. I agree on this one, not having time or money are lame excuses.

    Even if you manage to only invest 30$ a month, the mental boost you get from seeing your balance grow is huge.

    1. Absolutely! The power of compound interest is amazing and training yourself to save is also amazing. I just wish more people got that.

  8. For the majority of Americans, we SHOULD spend less time on retirement planning then planning a vacation. The issue is that people THINK they need to spend a ton of time to learn the basics or do it at all, so they are intimidated and don’t do it. The reality is the basics are extremely easy and online tools and investment options with great index funds are making it even cheaper and easier than ever before.

    My wife and I went on a trip to the UK last month — I spent more time planning that than I did in the last 5 years on my retirement planning. I manage my own investments and know the basics quite well. What I did not know are the rules for driving a car in Scotland or the best way to travel from London to Edinburgh to St. Andrews to Glasgow — figuring that out took FOREVER!

    The key lesson is that learning the basics are easy — set it and forget it — and then spend time on things that require a bit more planning.

    1. Hi Rogue Dad,
      I think you are exactly right on many counts. Learning the basics is quite easy. Doing the Ron Popeil method of investing is the way to go, primarily with index funds, IMO. Also, trying to drive in the UK would drive me nuts. My wife and I have contemplated doing one of those Groupons where you get a rental car along with your trip. If we ever do it Mrs. ROB is driving. I wish more people would really just get over their fear of investing or at the very least take the time to learn a little bit. A little information goes a long way. Thanks for stopping by.

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