What Kind of Vacations Should You Take While in Debt?

This question can be complicated. First off, what kind of debt are we talking about? Do you have a bunch of credit card debt? Maybe you only have the mortgage left. Car loans, student loans, other personal debt? So many different types of debt and people think differently about all of them.

As far as I’m concerned there are essentially two types of debt: house, not-house. Most people would say the difference is between “good debt” and “bad debt,” with the “good” being classified as debt on something that goes up in value. Well since we’ve shown that houses don’t always go up in value, I don’t call any debt good. That being said it is clearly a different type of debt, and certainly not nearly as bad as having $20,000 or more in credit card debt.

Now there are a few stages people can be in and I’m going to try to talk about the subject of vacations in each of them.

In debt, lots of bad debt

If you have credit cards and car loans, in my opinion vacation shouldn’t really be a part of your vocabulary. I’ve made an exception for this once, and it was for my honeymoon. I didn’t have any debt when we got married, but my wife did bring student loans into the marriage. The honeymoon is something that you only get one shot at, so we decided to go ahead and take a nice vacation. Generally speaking though, if you have lots of debt, you shouldn’t be considering vacation. If you haven’t read about our insanely ridiculous honeymoon, you might want to check out the story – How My Emergency Fund Saved My Honeymoon From Total Disaster.

Speaking of emergency funds

So you’re out of debt except for the house? That’s good. Now, do you have an 3 to 6 month emergency fund? No? Probably shouldn’t be taking really extravagant vacations at this point either. If you don’t have an emergency fund at all, you need to wait. Period. If you don’t have a decent amount save but you aren’t quite there, I’m willing to say a small vacation could be okay. If you really need to celebrate getting out of debt, I can get on board for a short weekend away. Provided you pay for everything in cash.

Full emergency fund, still have a mortgage

This is where I find myself currently. We are trying to decide how much to spend on our vacation this summer. I think at this point it is reasonable to go on vacation, I’m just not sure how much I’m willing to spend. At this point we haven’t changed our budgeting at all. We still don’t count my wife’s salary as part of our budget, and 100% of it goes to saving, investing, or paying extra on the house. To take a paycheck or two of hers and go on vacation wouldn’t really hurt us, but it does set us back a bit in our other goals, like retiring early and paying off the mortgage early.

Honestly, I think this is the toughest section to figure out what is reasonable. Part of me says it’s not a problem at all, go have some fun and then get back on it. The other part of me says this is a slippery slope and I might want to “just use a check or two” keep buying other stuff that isn’t and shouldn’t be in the budget. We also save a fixed amount out of my checks each month for vacation (though not much).

The question is, how much vacation is reasonable at this point. Unfortunately, I don’t have an answer for this particular section. So far we’ve been very disciplined with our money as we’ve paid off debt and saved up an emergency fund, so I’m not too concerned about falling off the slippery slope, but it’s there. At this point, I’ll say we are leaning towards adding a bit of her check to supplement our vacation. Feel free to let me know your thoughts in the comments.

Paid off the house

If you have the house paid for and retirement funded, it looks like you’ve reached the goal of baby step 7. Give, save, and spend. This is when you get to spend some of your hard earned money. Take a cruise if you want, or 2 or 3. If you are financially independent you probably don’t need a blog post to decide if you can take a vacation. Go have some fun, see ya in a few weeks.