How To Pay Off Debt And Still Take Your Dream Holiday

How to Pay Off Debt and Still Take Your Dream Vacation

When I was in deep in debt, I knew the smart thing to do was pay it off. But I also wanted to travel. It's tough: you want to keep paying off debt, but don't want to give up your travel dreams while you still have time for them. Or heck, maybe you just want a holiday.

Most experts recommend paying off debt before you travel, and it makes sense. You don't want to get deeper into debt, and it's a lot more fun to enjoy a holiday when you know you're financially secure. Still, there are ways you can balance both goals.

Two Rules For Travelling While In Debt

Travel and money site Nomad Wallet suggests two golden rules for travelling when you're in debt:

  1. Don't take on more debt to travel.
  2. Stick to your debt repayment plan.

Solid advice. Your travels shouldn't set you back, and they shouldn't undo how far you've come with your debt payoff. And keep this caveat in mind, too: Nomad Wallet suggests making sure your debt is interest-free when you're travelling:

Some banks offer balance transfers into loan products, charging 0% interest for a set period of time. For example, the bank may let you transfer your loan balance into their credit card without charging any interest for the 18-month introductory period. If you choose this option, keep in mind that the interest will kick in at the end of the introductory period. Double check your debt repayment schedule to make sure you'll be able to pay off the balance before then -- especially if the non-promotional interest rate is higher than your current interest rate.

You may or may not be able to snag zero per cent interest. But this tip brings up an important point: interest matters. And because different types of debt come with different interest, this also means the type of debt matters when it comes to planning your travel around debt.

Prioritise Your Debts

If you're already paying off debt, you probably already know how to prioritise your debts in general. But if you're planning to travel, you also want to prioritise with your travel goals in mind.

For example, if you have $5000 worth of credit card debt earning interest at 15 per cent, you definitely want to knock that out before you do any globetrotting. But HELP debts for university are a different matter, since they don't rise at anywhere near the same rate, so paying them off at the minimum level is often a popular choice.

Here's how one personal finance blogger explains her decision to travel while in debt:

I have student debt but it's my only debt...Yep, I could give my wanderlust the cold-shoulder and put every penny towards my debt to pay it off as fast as possible. But is being debt-free my top priority? Nope! It also doesn't mean I ignore it either. I manage my money so that I can live the way I want to live AND contribute regular monthly payments towards paying my debt off. It's a balance between my responsibilities and the things I enjoy in life.

She says she'll carry that student loan debt for a while, and she argues it's unreasonable to put off her travel dreams for that long. Some agree with her justification; others won't. Either way, in revealing that student loan debt is her only debt, she makes an important point: some debts should definitely be paid before taking a dream holiday.

Find Your High-Priority Debt

In the full article, she advises that "bad debt" should take priority before travelling. Generally speaking, bad debt is debt that's not considered an investment. But good or bad might not matter as much as the interest rate on those debts. Whether they're good or bad, you want to pay off debts that are eating away at your finances most -- but these debts are usually bad debts anyway.

But you also want to consider the length of your payoff. For example, I only had about $10,000 in student loan debt, so I decided to knock it out before I travelled. Both my credit card debt (bad) and student loan debt (good, depending on who you ask) were priorities because I knew they wouldn't take long to pay back.

Everyone's situation is different, so how you decide to plan debt around travel may vary in some ways. Make a list of your debts, then come up with a plan for which should be paid first. When you're planning, just make sure to prioritise any high-interest consumer debt. Beyond that, consider how long you'll be in debt repayment, how much you'll pay in interest, and above all, you want to follow those two golden rules mentioned above.

Plan All The Costs Of Your Holiday Ahead Of Time

Over at Get Rich Slowly, writer April Dykman offers some thorough tips for planning a debt-free dream holiday. It boils down to the following:

  • Decide how many days your trip will be, and where you'll go
  • Price the costs of transport, accommodation and attractions
  • Budget for food and souvenirs
  • Add it all up, then calculate how much you'll need to save monthly to make it happen

Again, you should tackle your high-priority debt before putting this plan into practice. But once you're ready, you can start saving for your dream holiday, as you'll already have a plan in place. And planning it gives you something to look forward to, too.

Take a "Debt-Cation"

If your dream vacation is just too darn expensive, it might be time to compromise. Maybe you can afford a more modest, smaller getaway. Consider what Debt Roundup calls a "Debt-Cation:

What I mean by a debt-cation is when you create a vacation away from your usual life and don't spend much doing it. My debt-cations were usually camping trips or trips to the beach to stay with relatives. These usually only cost me about $100 (gas and food) for a 3 day trip and you will be hard pressed to find something that cheap, even on the internet.

Even a staycation can be plenty of fun. Most importantly, though: they're cheaper. And when you're in debt, you might have to find a cheap way to scratch your travel itch.

Travel And Work At The Same Time

There's another option if you're intent on travelling while you're still in debt: get a job abroad. It might not make sense for a short trip, but for longer excursions, you may consider applying for jobs in other cities. As Nomad Wallet adds, you'll want to make sure the job pays enough to cover your living expenses, including your debt repayments. If you're fortunate enough to have a job that allows you to work wherever you want, that may be an option, too. Instead of taking time off work, you could work while on holiday -- but that might not be so dreamy.

Debt can feel really stifling. While there are certainly bigger and better priorities in life than getting out of debt, the goal is financial security. It's sounds boring, but the point of financial security is actually pretty exciting. When it comes down to it, it's about being free to not worry about money so much. And travelling is a lot more fun when you're worry-free. Still, there are ways to find a happy medium between both goals, and these tips should help you get there.


Comments

    IMO, if you have debt, you simply can't afford to go on vacation, much less your "dream" one. If you must have a break from work, have a staycation. Don't like it? Well, don't get into debt in the first place. And welcome to being a responsible adult.

      So people with a mortgage can't have a holiday for 20+ years? If I was 30 and took out a mortgage on a house, I would be stuck without a holiday until I was 55-60.

      People that have a HECS/HELP loan also wouldn't be able to travel until that's paid off.

      So anybody that's been to Uni and has a HELP loan, you're completely screwed if you want to own a house.

      Last edited 04/06/15 12:36 pm

      Pretty dumb generalisation. Manshrew's comment covers it pretty well - some life debt is unavoidable for the masses, and asking someone to say no to any vacation for 25+ years because of a mortgage is silly. If you have $10k in credit card debt, then maybe you should rethink the trip, but otherwise it's about smart money management, not deprivation. How s**t would life be if you stayed at home from 30 through 55. Why even live at all?

    I had a poor holiday when still short of money.

    Had great holidays later when the money was there.

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