34 - Vacation Planning: Travel Without Debt

Planning a getaway doesn't have to mean planning for debt! In this episode of "Making Sense of Your Cents," Daniel and Shanna break down the "Sinking Fund" strategy—the smartest way to pay for your vacation before you ever leave the driveway. We discuss the hidden costs of using credit for travel, the psychology of "guilt-free" spending, and how to automate your savings so your next trip is fully funded. Plus, we answer common community questions about balancing emergency savings with travel goals and getting the whole family on board with your vacation budget. Tune in for a simple, automated actionable tip that will change the way you look at summer planning forever! 

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Transcript

Daniel Hill 0:00

All right, Shanna. I was chatting with a neighbor the other day, and he mentioned that he was already booking flights for late summer. It's time. He sounded genuinely excited, but then he let out this huge, weary sigh. I felt so bad for him. And this is what he said. Now I just have to figure out how to pay for the rest of it.

Shanna Browning 0:25

Oh, yeah. It's that classic pay later panic. That kind of sets in, right? We've been there. You get that really initial adrenaline, intoxicating rush of clicking confirm on that booking package. And then the crushing reality of the total price tag sets in.

Daniel Hill 0:43

Exactly. And it's that universal feeling where you're trying to look forward to the relaxation. Yeah. But secretly, you're dreading the credit card statement that's going to be waiting for you the second you get back. It's the vacation hangover that starts before the trip even begins.

Shanna Browning 1:01

Yeah, yeah. And it is. It's a total buzzkill. There's nothing that ruins an actual memories of a vacation faster than the knowledge that you're still paying on the interest on that hotel room you stayed in months ago.

Daniel Hill 1:13

It's a debt cycle that keeps people stuck. Yeah. You work hard for six months to pay off last year's trip just in time to go back into debt for this year's. Yep.

Shanna Browning 1:25

Yep. So you really feel like you're never on vacation, so to speak. And that's what we're going to try to fix for y'all today. We're going to talk about how to break that cycle and take that guilt out of your getaway because we want you to have fun. You should have to choose between a fun summer and a balanced budget. Exactly.

Daniel Hill 1:50

Welcome back to Making Sense of Your Sense. I'm Daniel Hill.

Shanna Browning 1:54

And I am Shannon Browning. And today we're going to help you build the vacation bucket. We're talking about how to travel without debt, why sinking funds are the secret weapon of the frequent traveler, and how to plan for those seasonal expenses so they never catch you by surprise again.

Daniel Hill 2:13

So let's get deep into the psychology of vacation spending. When we're on vacation, we aren't operating with our everyday brain. No way. We shift into spend mode. We tell ourselves things like, I'm on a break. I deserve this. Or we'll just put it on the card and handle it later.

Shanna Browning 2:36

I've never said that, Daniel. Never.

Daniel Hill 2:38

Right.

Shanna Browning 2:40

That's the primary trap, right? The entire travel industry industry is built on exploiting the exact mentality of what you just said. From the moment you land or you arrive at your hotel, you are bombarded with upgrades. Yep. Rental car insurance you don't need, resort fees that weren't clearly itemized, dining expenses that promise to be once in a lifetime. It's so easy to swipe and so difficult to track.

Daniel Hill 3:08

And the danger of the swipe is that it disconnects you from the value of the money. You're trading your future earnings for a present day experience. If you're paying 20% on that credit card, that fancy dinner at the resort actually ended up costing 20% more than what was on the menu. You aren't just paying for the food, you're paying for the bank's profit margin on your leisure.

Shanna Browning 3:37

Yeah, right. And that brings up that post-vacation blues, right? It's not about the sadness of returning to the grind. It now sets in that it is a financial anxiety. You come home, you open your physical or your digital mail, we're hoping digital mail, right? And borrowed, and suddenly you're hit with that reminder that the relaxation you just experienced was in debt and borrowed.

Daniel Hill 4:05

And it turns a positive, life-enriching memory into a persistent source of stress. The goal of our episode today is to show you how to experience the relaxation without the financial hangover that so many people carry around for months after they unpack their suitcases. So let's shift from a passive consumer to an intentional planner.

Shanna Browning 4:28

Which I love. So let's do that. So if we're going to move away from the pay later model, how do we actually afford a high quality vacation? The answer is the sinking fund.

Daniel Hill 4:40

A sinking fund is just a dedicated, purpose-built savings account. Most people have their main checking account and maybe a general messy savings account, but a sinking fund is a purpose-built. When you put money into your vacation bucket, it's already conceptually gone. It's no longer available for groceries, gas, or that random impulse purchase at the big box store. It's earmarked specifically for your vacation experience.

Shanna Browning 5:10

Vacation experience. Let's tell ourselves that in our head all of our time, right? The vacation experience. And the power is in the math and the consistency, consistency of that. So let's say you want to take a family trip that's going to cost you $3,000. We can save that in three months, right? Let's try to do that. So that's $1,000 a month. Well, that's painful. Yeah. That's hard to do, right? So that's an emergency level budget adjustment. But if you start 12 months out, if you know that you want to take a big trip, like Hawaii's on my bucket list. If I know I want to go to Hawaii, I'm going to start planning for Hawaii, right? Because that's not going to be cheap. So that's about, you know, going back to 12 months for $3,000, that's about $250 a month, $250 a month. That is way more manageable for most family budgets. A lot more. And it's the difference between a crisis and a habit.

Daniel Hill 6:01

And the best part, you're actually earning interest on that money while you save rather than paying interest to a bank. By the time you get to the airport, you've actually earned a little bonus on your vacation savings. You have shifted the power dynamic. You're now the one in control of your financial destiny.

Shanna Browning 6:22

I love being in control. It also fundamentally changes your spending habits while you're there, right? You have a set amount of cash and a travel account that you have built over a year and you spend more intentionally. You aren't just swiping mindlessly. You're deciding how to allocate your own money. If you see an excursion that costs $200, you have to decide: is it worth the $200 I saved for this trip? That makes you much more empowered and an appreciative traveler. People always focus on the plane ticket or the hotel, but the real budget busters are the incidentals: the snacks, the parking fees, the impulse souvenirs, the luggage check fees.

Daniel Hill 8:05

And we call all these fees vacation creep.

Shanna Browning 8:09

It's such a great term.

Daniel Hill 8:11

You have your flights and your hotel paid for, but suddenly you're at the airport and a lunch for four is $80. Then you need a ride to the hotel, and the airport shuttle or ride share is $50 and you didn't budget for that, so you swipe your card. Yeah.

Shanna Browning 8:28

Real easy to do. And then don't forget the convenience fees. You know, you're on vacation, so you stop cooking. That means three meals a day out, plus coffee, plus drinks. That alone can double the cost of a trip. If you go on a week-long trip and you spend an extra hundred dollars a day on food because you weren't eating breakfast in the hotel room, that is $700 you did not account for. That fast. Wow.

Daniel Hill 8:52

That's why your sinking fund needs to be a total trip cost fund. I recommend adding a 20% buffer on top of your estimated cost for these unknowns. I love that. If you go under budget, you bring that money back home and start your next trip fund. It's the ultimate safety cushion.

Shanna Browning 9:12

Well, and another pro tip that we see and try to encourage is automate the transfer. Automate it. If you have to manually move that money from checking to savings, you'll find a reason not to every time. If it's not uh I'm sorry, if it is an automatic transfer on payday, you never miss it. Right. It becomes the invisible saving. And by the time summer rolls around, you look at your account, and that money that you have saved so hard is waiting for you. It turns saving into a background task rather than a willpower struggle.

Daniel Hill 9:49

Absolutely. So, Shanna, we get a lot of questions about this during the summer. What's on people's minds? Going on vacation.

Shanna Browning 9:58

And the big one is what if I have an emergency? Should I take money out of my vacation fund to cover that? I know.

Daniel Hill 10:07

That's that really is a tough one. If it's a true emergency, like the car breaking down, then yes, the vacation fund is a source of liquidity. But the goal is to have an emergency fund separate from your vacation fund. Treat the vacation fund as non-essential. If you have to dip into it, you do it. But that might mean the vacation becomes a staycation this year. And it is better to have a staycation than to take on new high-interest debt.

Shanna Browning 10:43

And we can always put that if the big emergency comes up, make that next summer trip. You know, start saving for it again. So another question we get is how do I get my family on board with this saving mindset when they just want to go now?

Daniel Hill 10:58

Oh, that's great. That's great.

Shanna Browning 10:59

Does that sound familiar to you?

Daniel Hill 11:00

Yes, it does. Um, the biggest thing I can say, and we do this, is get them involved. Yep. Show them the goal. If the kids know that saving $50 a month means we can afford a bigger theme park pass, they'll be much more likely to help track those expenses. It turns it into a family game rather than a parental restriction.

Shanna Browning 11:22

I love that. Include them.

Daniel Hill 11:24

Absolutely. Especially kids. Yeah. Yeah. Yeah. If you can't beat them, join them.

Shanna Browning 11:27

That's right. That's right.

Daniel Hill 11:29

You know, this has been a very timely discussion, I feel. You know, we're we're you know approaching the middle of June and vacation time is starting. Um, so let's give everyone an actionable tip for this week.

Shanna Browning 11:44

Now listen, y'all know I love an actionable tip. So the one for this week is open the travel bucket.

Daniel Hill 11:51

Simple, easy. Sometime this week, open a separate savings account at the bank, at our bank, at first century bank. Yes. I can't stress that.

Shanna Browning 12:02

First century bank.

Daniel Hill 12:03

You don't have to call it anything fancy, but giving it a clear purpose like summer escape or vacation experience makes it much more real.

Shanna Browning 12:15

Yes, it does. And here is a real challenge for you. Once you open that account, set up an automatic transfer of $20 per week. $20 a month. This is this is for you. You do what is right for your budget. And so make it whatever you can. And that's less than a few coffees. Let again, Chris. We're sorry. Sorry, Pierce. We're sorry too. But if it's if, you know, keep your coffee. We we love our things. But at the end of the year, if you give up some of those things that are non-essentials, the end of the year you've got over $1,000 saved for your next getaway. It's the easiest way to start turning someday into next summer.

Daniel Hill 13:00

Yes, yes. And it's all done if you automate it. It's all done without you even having to think about it.

Shanna Browning 13:06

All right, Daniel, I'm ready. Let's go for a trip. Let's do it.

Daniel Hill 13:10

Me too. So we're gonna take a trip next week. Next week, we're moving into a phase of teaching kids under 12 about money. I love that.

Shanna Browning 13:20

I love that. You don't want to miss it. So subscribe now so that it's in your feed next Tuesday.

Daniel Hill 13:26

Again, we appreciate you being part of our community. Now, go out, open that travel bucket, and make some sense of yourself.

Shanna Browning 13:35

That's right. Vacation, you know, you can't do it.