How Can You Take Vacations While Saving for Financial Independence?
I arrived back in the arctic Minnesota tundra last night from a 7 day vacation out west. What a beautiful and relaxing time it was. It was just my girlfriend and me that made the trip. Everything worked out perfectly with the exception of my camera breaking and a few clouds on the last day. How great is it when you can escape the below zero January Minnesota weather and head to the sunny, 60-70 degree whether in California? Pretty great indeed.
This was my first vacation while being debt free. It’s only been two and a half years since my last vacation when I was stressed about money, but it’s been what feels like decades financially since then. We managed to plan this so frugally (with the help of my girlfriend’s great family and my frequent flier miles) that it cost us basically nothing, which is how a vacation should be. It shouldn’t set us back financially. We work too hard for that and deserve an escape once in a while.
How Do We Know If We Should Take the Vacation?
The question of whether we should be taking the vacation is an interesting one. It obviously depends on our financial situation. If you’re financially independent and the vacation fits within your preplanned lifestyle, then sure, it won’t hurt you at all to take it. On the other hand, if you’re in debt, you may want to think again. In fact, being in my position of far from in debt, but still far from financial independence, I go both ways on it.
The thing is, for every $1,000 we spend in a year’s time on vacations, $25,000 is required in investments (using the 4% withdrawal rate) to earn that income in financial independence. And $1,000 is a cheap vacation for most people (although mine was closer to $300). Let’s say we were able to keep our vacations to $1,000 each and only one per year. We would then need to save $25,000 more (on top of our normal retirement nest-egg) to pay for those vacations each year. How long does it take you to save $25,000? If you’re saving 50% of your income, maybe not much longer than a year. If you’re saving less, it will take you longer. The big question is, are those vacations worth another year (or more) of working?
I know how much most of us deserve vacations. It’s just that we’re giving up our future time to take them. It’s something to think about. I sure have.
Since I kept the expense down to around $300, I feel okay about taking the vacation. In fact, I got a lot of much needed relaxation, reading and reflection in while out there.
Me Vs. Everyone I Know – What Is With Me?
At the start of the trip, my girlfriend became quite frustrated with me. It seems I couldn’t escape my save for retirement mode long enough to buy a $3 Snapple Iced Tea. Thinking back on that, I wonder, how the heck am I so different from her or from everyone I know for that matter. It seems I’ve gone off the deep end.
Here I am not buying a Snapple Iced Tea because it’s overpriced by $2. Seriously? And I’m only taking a vacation because it’s $300 instead of $1,000, even though I haven’t traveled on a relaxing vacation for almost 3 years. That’s a little odd and even I’ll admit that.
My Friend’s Unemployed and Stressed About Money. This Is Why I Do It.
My good friend picked me up from the airport last night. He recently was laid off from his job. He’s hurting financially. I listened to his struggles with finding employment for a while. It clicked with me once more why I’m doing this. Because I don’t want to go through that.
I don’t want to struggle finding work, just to pay the bills. I don’t want to feel at the mercy of everyone else for my livelihood. I don’t want to feel like crap because of my struggles either. I’m not going to be in his situation. Not because I’m any more special than him, but because I’m proactively taking my life by the horns and ensuring financial independence.
I’m often made to feel like I’m crazy for not wanting to spend money. Yes, I may in fact be a little coo-coo. But if coo-coo is what it takes to never have to worry about money again, to never have to be made to feel like I’m untalented or unwanted and to never have to be in a position like my friend is in right now, then it’s worth it.
The worst part about my friend’s situation is that he isn’t realizing there is a better way. He isn’t reading this blog post or the blog posts of all the other inspiring folks in the personal finance/early retirement online community. He isn’t asking me about my progress. He doesn’t have a clue that I’m well on my way to a worry-free financial future, not because I keep it from him, but because he just isn’t interested. He’s far from being on his way to a stress-free, peaceful and financially free future. I’m going to keep seeing what I can do in getting him over to this side of the fence.
On this side of the fence, we watch our spending. We also learn to be content with what we have. We pocket and invest our earnings for the future. Over there is where they spend all they make, get laid off, and get in tight spots financially. Over there is where they feel like crap all the time. It’s not where I’m going to be. Those $3 Snapples are things they buy over there, not over here.
Category: Living Cheap
It’s really pitting two huge fears against the other IMO – my fear of being old and broke vs being old and not being able to enjoy my money for whatever reason and not having gotten to do the travelling I want to do (poor health, early death?).
Yes, those are both fears of mine too. It’s almost a gamble. It’s risky.
I like what eemusings said. I can totally see where you’re coming from. I WAS your friend for my first couple of years of unemployment/freelancing. I could have saved myself SO much headache and worry if I was just 10% more cautious. But here’s the bad news: if you friend is not ready, all the advice in the world won’t matter. He will see things his way. I do think you need to find more balance though. Sounds like you have swung almost too far in the other direction? Hopefully your fear of ending up like your friend will start to dissipate as you regularly practice your good habits. They will become second nature. PS, sounds like you came to cali at the right time. Before that it was “cold”, and now it’s raining.
B&TB,
Yes, I realize that my friend isn’t going to take my advice. He needs to figure this all out on his own. Perhaps, I’ve gone too far in the other direction (since I can’t even buy $3 bottles of Snapple).
And yes, what GREAT weather we had out in Cali. Do you live there? I’m quite jealous.
$300 for a trip to CA? Seriously, how did you pull that off?
Well, I used a AMEX gift card as well so it wasn’t REALLY just $300. I had a free flight through frequent flier miles and we managed to stay with her family for most of the nights. We also had 2 hotel nights gifted to us. It was a lot of luck how it all came together.
Interesting post Kraig. To play devils advocate, I consider myself a frugal person, I save my money, and don’t buy $3 Snapples. But if I lost my income like your friend, and couldn’t find work, had bills to pay and 3 mouths to feed, it would be stressful. That’s with an emergency fund, no debt, and money in the savings account.
I’d be curious to know the steps you have taken to keep your financial independence if you lost your salary for an extended period of time? I suppose if I were single with no kids it would be much easier. Thoughts?
Hi Kyle,
First of all, thanks for stopping by. I actually am not financially independent. So yes, I would be stressed also if I lost my salary at this point in my life when I am still relying on it.
The steps I take to prepare myself for something like that are just saving as much as I can of my income each year. If I lost my salary tomorrow, I have almost 4 years of cushion. This means if I didn’t earn a dime for 4 years, I could live the same lifestyle as I have now and not go into debt.
That’s comforting. The odds are very good that I could make some sort of income as well in unemployment doing this or that, extending that period quite a bit.
Again, I’m not at a point of financial independence. I’m somewhere around 9 years away from that at my current pace. But for now, I think I’m doing okay as far as protecting myself against too much stress if anything happens.
I completely agree with this post. I wrote about this yesterday and a few people didn’t like my opinion. Glad to see some others agree.
Grayson,
Good thinking and good post from the other day. I agree with you that taking a vacation while in debt is a BAD idea. I’m not going to tell anyone how to live, but I will tell them that it’s going to slow them down from being debt free. And speaking from experience, being debt free FRICKIN ROCKS!
Kraig,
You’re not going to believe this, but I also faced my own Snapple iced tea dilemma a while back when I flew home to Michigan to see family for Labor Day. I was at Sarasota Airport and for whatever reason was particularly thirsty. I looked around at the *very* limited options and stumbled upon a bottle of Snapple iced tea. It sounded awesome, but at almost $3 a bottle I just couldn’t do it. I stood there in front of the refrigerator it was housed in for what seemed like an hour. I was basically talking to myself. “I can afford this. It’s only $3. No, I can’t do it. It’s way too much for a little tiny bottle of iced tea.” I went back and forth forever.
I ultimately decided not to buy it and wait for the free beverages on the plane. I drank that free small glass of Coca-Cola with gusto and gratitude!
It’s the small choices like this that we make everyday that add up in the long run.
Best wishes.
DM,
That’s funny, but I believe you. Snapple is so tasty and most likely the best option at the airport for a cold refreshment. Hope you’re doing well down there in South Florida while we all freeze up here in Minnesota.
I know when I was laid off I felt much the same way you described. The 1.5 years of trying to find work wore on me but it led me down a much better path. Now I have a very well paying job and since I’m focused on early FI, I feel so much more comfortable. It’ll be even better when I reach that point and know that I don’t have to stress about losing my job ever again if I decide to work since I can still survive on what’s coming in.
JC,
Sounds like you went through a long and hard time looking for work. I’m sorry you went through that. Congratulations on coming out the other side running. Not having to stress about losing my job is exactly why I do it too. I don’t want to live like that.
It is hard to find a balance between saving and spending. I used to go on holiday with a $1,000 budget and come back happy if I had spent only $800. Now I don’t pay attention to what I spend during the holiday, if I have $1,000 set aside for it specifically, then it should be enjoyed, even if that means buying overpriced beers or meals.
Pauline,
Great idea. It sounds like you just budget for the vacation and don’t worry where that allocated money goes. I will consider that approach as it sounds less stressful and more free-spirited. I agree that a vacation should be enjoyed.
This issue really hits home for me. I’m having trouble rationalizing a vacation that all my friends seem to have no problem with. My buddies will throw down $2,000 for a vacation, but I think “What could that have done if I’d put it in an index fund instead?”. I guess we all just have to figure out what the right vacation/work balance really is for ourselves.
Ross,
I too find it hard to rationalize a $2,000 vacation. I mean, that’s 10% of my spending for the entire year. I’m thinking the same thing about my car right now. Now that I have it paid off and it’s worth over $10,000, I imagine a scenario in which I keep it and it depreciates to nothing and the other in which I sell it and invest in index funds with that money and see it grow.
There is always an opportunity cost when it comes to spending money.
I didn’t vacation at all (other than a trip to my folks place, we drove and stayed with them and ate for free of course) when I was still in debt. I couldn’t justify spending any money on luxuries when I was still in debt. That being said, if I had had more debt and it would have taken me many years to pay I probably would have saved a little money to do a little trip so I didn’t feel totally deprived. It all comes down to sacrifices and what we’re willing to do to be and stay debt free. Some people want to vacation while in debt, I don’t judge them. To each his own.
KK,
Agreed. I took a vacation while in debt. I’m not trying to tell people how to live their lives but in my experience, it set me back. Being set back by it however, did fire me up to pick up the pace and finish the race as soon as possible.
This post made me a little sad. Three years with no vacation? I would be so depressed . What is the point of working and saving if you can’t enjoy it? I work so that I can travel and enjoy my life, and I know years from now I would regret skipping an important event or travel opportunity more than I would regret paying for overpriced beers. We only have one life. It’s a balance, yes, but for me factoring in vacation is equally as important as financial independence. Financial independence means nothing to me if I don’t allow myself to enjoy it.
If only all of us could have as much self-control as you. Also, you may know better than the rest of us (certainly me). I’m new to your blog but will be back, I’m in need of some financial advice for 2013.
Hi Emily,
It’s great to meet you and I’m glad you stopped by. You have a great blog over there and it’s information that I definitely could use more of.
I think you’re giving me more credit than I deserve. I struggle with self control just like everyone else, but financially, I just want freedom so much that I’m able to say “no” to spending quite often. I’ve learned to feel discomfort when spending and comfort when not spending. That keeps my self control in control.
We’re working towards financial independence as well. We broke down on one of our 6 plane rides this month and got cokes when our plane was delayed after 8 hours without food (In the first 2 years we wouldnt have gotten 1, a couple years ago we would have shared one, this time we each had our own- decadent at $2.50/drink in the airport). Then yesterday on our way home we had a full breakfast and appetizers for a late lunch at 4 pm. By 8 pm we were starving again, and waiting in the airport, tired, knowing we were another 4 hours from home. We each made a loop through the fast food area and surveyed the choices, finally settling on pizza at $3/slice. Again, we each had our own slices. The other options were $7-$10/per serving.
I’m probably too far on the extreme side but I’m trying to mellow out, especially when on vacation, and let things go. I practiced by being a lot more generous with those who had less than me on this vacation (tipping 25% to cab drivers, waiters, etc). Eventually I was able to relax my own spending. I think it’s important and allows me to enjoy more without stressing out myself (and my husband).
If your friend were my friend I would offer some cash or a gift card for picking you up at the airport as a way to give generously to him during his time of need (even if he’s not being as prudent as he could be with his money). You didn’t say whether you did anything for him. It feels good to me to give generously to others, and learn to be more generous with ourselves in our budget (which like you said, we deserve).
Glad you enjoyed a vacation too!
Jenny
Hi Jenny,
Thanks for stopping by. I feel your pain in being at the airport and hungry or thirsty, not wanting to pay the big bucks.
I did give my friend some cash for giving me a ride to and from the airport, however I could have given more. You’re right, I should be thinking about those who are less fortunate than me more. It’s a difficult thing to do when you’re so focused on maximizing your savings. If you have tips on how to balance giving with saving for hardcore savers, I’d love to hear them. I could definitely improve this in my life.
I think vacations are necessary. Saving for financial independence is a long game and you’ve got to make sure that you don’t burn out along the way.
The specifics of how much to spend are something that I leave up to the individual. We all have a different idea of relaxing. Maybe you want to be around family, or maybe you want to be as far from them as possible. Maybe you’re a go see New York City person, or maybe you’re into camping in the wilderness. So long as you can fit it into the budget, it’s all good.
I agree with you that since its a long road to financial independence, it’s important that we don’t burn ourselves out. That’s why I took the recent vacation to California. It needed to be done. I had to get away and not for work, but just for relaxation and fun.
I would have bought the $3 Snapple. Little purchases while on vacation like this don’t derail your plans/savings. Now if you were buying $3 drinks every day of the year, we’d be talking. I’m a sucker for getting whatever strikes my fancy on vacation – even $8 hotel beers and $3 Snapples/Starbucks.
HH,
Yeah, looking back, I should have just bought it. But then again, my girlfriend bought it for me so I got in anyway. But it still was fairly unnecessary to not spending $3 for something I would have enjoyed on a vacation that I only take once every 2-3 years. I go back and forth on this and on a lot of things. It’s hard work living this way, really…
Hey Kraig,
How did you get to that conclusion that $25,000 is required in investments to earn $1, 000 income in financial independence? I clicked through the link but didn’t see it explained in the linked post either.
Donnalee,
This is based off a 4% withdrawal rate, meaning living off of 4% of your investments per year. This is an amount that over the long term, should allow your investments to last. And to work backwards to get the amount needed in principle, you just have to take your annual expenses and multiply them by 25. Doing this is the same as taking $25,000 and multiplying by 4%. In other words, 4% of $25,000 is $1,000. Make sense?