After over a year of the pandemic, are you itching to take a guilt-free expensive vacation? I know I am! I plan on spending more than ever on a nice Airbnb or family resort stay for my family. After all we’ve been through, a guilt-free expensive vacation would be nice! It’s revenge spending time, baby!
There’s only one problem. We are super frugal, despite seeing our net worth grow tremendously since I retired in 2012 and my wife retired in 2015.
The Key To Taking A Guilt-Free Expensive Vacation
Americans have a problem when it comes to taking vacations. In a “Vacation Deprivation” study by Expedia, Americans reported receiving 12 days of vacation a year and were expected to take only 10. The Japanese are even worse by taking only five of their 13 allotted days.
Meanwhile, the Europeans are living it up with the majority expecting to take all 25-30 days off in addition to their respective national holidays! Taking time to relax is deeply ingrained in the European culture. Whereas working to get ahead is part of American work lore. The European attitude of work life balance is one of the main reasons why I’ve visited for 2-3 weeks a year for the past three years. It’s been nice learning from the happiest people on Earth.
Since the day I started work post college in 1999 I’ve always felt tremendous guilt in taking vacations. Wall St. is an intense industry where if you leave your PB&J sando on the table for a second, someone else will snatch it away. How could I take vacation when I didn’t know much about anything? The only way to get ahead was to work more. For the first two years of my career I think I only took 10 days off.
By the time 2009 rolled around I began wondering why not take vacations when the world was coming to an end?! I decided to take four weeks off in 2009 and then six weeks off in 2010 and 2011. The dream was to take two weeks off every single quarter but I knew it was impossible. By 2012 I made up my mind that 52 weeks of vacation a year would be even better so I left!
Money Still A Concern While On Vacation
I had overcome the guilt of taking time off by the end of my career. But I had not yet overcome the guilt of spending lots of money taking a guilt-free expensive vacation. Instead of paying 50 Euros for the hop on/hop off buses, I decided to walk in the 93 degree heat for 8 hours while in Naples, Italy. Instead of paying an extra $50 for two to eat at one of the cruise ship’s finer dining establishments, I stuck to the main dining room where the meals were included.
While in Amsterdam, instead of finding a $200+ hotel in Amsterdam’s city center, I decided to find another hotel for $130/night that was a 10 minute walk away. The list goes on and on.
Being frugal has always been a part of me since I was a kid because my parents were frugal. They never ordered drinks other than water while eating out and we always had at least a five year old second hand car. I knew my parents could afford more given they were US Diplomats with expat packages.
Knowing this made me admire them even more for their thrifty ways. I wanted to be like my parents so I ended up saving 50-70% of my after tax income on average for 13 consecutive years before retiring.
My four week 2013 summer vacation finally altered my frugal ways. I spent a total of about $9,200 just on myself and I don’t feel a lick of guilt! Here’s the spending breakdown use my Chase Sapphire Preferred Credit Card, the best travel rewards credit card today.
Summer 2014 Vacation Cost Breakdown
Airfare to NYC, Switzerland, Mallorca, Frankfurt, San Francisco: $2,350
Food, Entertainment, Transportation in NYC for 9 days: $1,500
Lodging in NYC: $0. Stayed with friends and family.
Hotel in Zurich, Lucerne, and Hergiswil for 6 nights: $1,100
Food, Entertainment, Swiss Pass Rail in Switzerland: $1,200
Share of Villa in Mallorca for 7 nights: $1,000
Food, Entertainment, Transportation in Mallorca: $1,500
Two nights hotel in Frankfurt: $300
Food, Entertainment, Transportation in Frankfurt: $200
Normally I try and keep my vacation budget to around $1,500 a week per person. But with this trip I increased my budget by 53% to $2,300 a week without much concern at all. “Expensive” is different for everyone. If you are spending 50% above your norm, I think that counts as expensive. Let me tell you what changed.
How To Get Over Spending Money On Vacation
The number one way to get over spending guilt on vacation is to trade funny money for experiences! I’ve already suggested everybody turn some of their funny money stock gains into real estate.
When I was working 12 hour days I would sometimes breakdown the cost of the vacation with how many hours I needed to work. A $10,000 vacation for two would require me to work 50 hours if I made $200 an hour. That made me feel queasy because work was often stressful.
If I could save $1,000 in hotel costs a week, that would mean five hours less of work. Of course, things don’t quite work out this way for salaried employee with a bonus, but you get the idea. There was even a time when I would compare the cost of my expenditure with my old $5/hour salary days. It would take 35 hours at McDonald’s to buy a pair of Air Jordans. Forget it! My mind was stuck in the past when obviously my finances were much more advanced.
Stock Market Returns And Vacation Expenses
Money is money however way you want to store or earn it. The breakthrough occurred when I coupled vacation expenses with stock market income. After I did this, taking a guilt-free expensive vacation was no problem.
I came close to losing over $8,000 in a six month Apple structured note this summer. Because it closed barely higher than the $415 barrier on the strike date, I was able to earn $1,400 in interest income plus my original $40,000 investment back when I first bought in at $530. Just four days earlier the stock was below $415! And now that Apple is over $450, I would have seriously kicked myself in the face if for that one day it closed below my barrier strike price.
In the past I’d reinvest the entire $41,400 into another investment product, thereby completely negating any type of utility that could have been gained with the proceeds. This time I allocated $10,000 to four weeks of travel and was determined to spend every single last dime! I got close and it felt great!
Money made in the stock market is funny money to me because it requires no physical labor or time in the office. All it requires is capital, guts, brains, and research. When things go well, it’s like making money out of thin air. When things go poorly, you end up starting a blog in 2009 and writing your heart out to understand why, WHY?!
Money must be converted to something real to be appreciated. Otherwise, there’s really no point making money whatsoever. Given experiences are appreciating assets while material things generally always depreciate, if you can convert funny money into experiences, you’ll be able to melt away any guilt. You might actually start feeling deliriously happy that so little work can provide so much wonderful experiences.
Establish A Funny Money Vacation Surplus Fund (FMVS)
Funny money stops being funny once you start losing. As a result, it’s important to create a Funny Money Vacation Surplus to overcome taking a guilt-free expensive vacation.
My goal is to now travel for 10 weeks a year and spend on average $2,000 a week for a total of $20,000 per person. If my punt portfolio returns $50,000 one year, I plan on spending the full $20,000 and saving the $30,000 for the next year. The $30,000 will serve as a buffer when I inevitably lose money.
Hopefully the Funny Money Vacation Surplus grows so that when a really bad year occurs, I still have money left over to go on a nice long trip. If the FMVS gets wiped out, then I will decide whether I should be punished for not managing my risk well enough and take no vacation, or say screw it, and just use my various income streams to go on vacation anyway.
If you are feeling guilty about spending money on some of your most precious times of the year, then follow my advice of coupling stock market income to vacation expense. The magnitude of income and expense is different for everyone. What matters more is that you have investments and that you actually spend some of the proceeds on life. If you’re always breaking down your upcoming expenses by how much you have to work you will always feel guilty!
As a practioner of what I write, I’m off to go fishing and hiking in Tahoe starting today for nine days. Maybe I’ll even bust out the old Mizuno irons as it’s been a while since I last played. Comments and e-mails might just be delayed longer than usual. Hope the week is going well!
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[…] For example, I spent about $20,000 on myself during the summer of 2013 traveling even though I was making less money. The most I ever spent on travel before was roughly $10,000 for two for two weeks. I was able to get over my frugality by compartmentalizing my money, creating a business plan, and telling myself that now was the time to go all out because I might not have this chance to travel so much again. Given you will maintain your financial habits, you’ll start saving aggressively again or figuring out ways to make more money when you return. (See The Key To Taking Guilt-Free Expensive Vacations) […]
I still feel guilty, but my wife receives $21,000 (after taxes) from a retirement plan. We live off our other monies and spend this “fixed” amount on vacations each year. At least I’m not having to draw from a 401k or IRA to pay for a vacation (if I had to do that I do not think I would go on vacations). I tell myself this retirement payment my wife receives is like a gift so why not use it on something that is totally fun!
Funny how we work hard our entire lives and still find it hard to turn loose and live a little…..
I am retired and now out of the market. All investments are fixed interest with total income streams about $175,000 per year (including SS and pension). Net worth is about $3.5 million and I have no debt. I have always felt guilty when vacationing (thinking I could give that money to family members or buy a better car or upgrade the home even more, or invest the money to make even “more money I will never spend”). I have been thinking about setting up a $22,000 vacation fund and spending that every year. Do you think that is to much? Several of my friends have about what I do and they feel that may be too much money to spend on vacations. I have a long bucket list and even at $22,000 a year I’ll never finish the list……………….
Stringer Bell says
My wife and I love traveling, and I am fortunate to work for a company that gives me 4.5 weeks of vacation per year. We also have the ability to roll it over, so I have 6.5 weeks to use this year. And our bosses definitely encourage us to use it.
On the flip side, this generous vacation policy may be hurting my career progress. I’ve been reluctant to look for a new job because I keep telling myself my next company may have a poor vacation policy. Reading these horror stories on this blog from others is not helping either.
Financial Samurai says
If everybody is taking 6-7 weeks a year go for it! If your managers are saying go for it but only taking 4-5 weeks off, taking 6.5 weeks is a career limiting move no matter what they say.
I’m in the US (Consulting) and currently working with a client with offices in the UK and Canada, and over the last few months, just about everyone I’ve been working with has taken at least 2, if not 3, weeks of vacation. I’m so jealous. My firm provides enough vacation time, and really don’t keep track of it. It’s just hard to use it, and when on vacation, it’s hard to be fully disengaged.
I’m hoping to find a new job back in industry where I’m not in the “service” business.
Anyway- you should really get into the miles and points game- you could rack up 100,000s of points for free airline tickets and hotel stays through credit card bonuses and manufactured spend.
Financial Samurai says
Getting a travel rewards credit card is exactly the next step on my agenda!
Good luck on your journey to a more balanced lifestyle. July and August really are the peak months for European vacations. I see it in the online business for sure.
I am lucky to work where boss’s and the culture have no issue with taking vacations. However, even with that I hate taking more than a week at a time because I tend to work more hours prior to the vacation ensuring things are covered when gone, and then when I get back work longer hours to catch up on what got missed. The longer the time off the more prep and post hours I end up putting in so a lot of the times the vacation comes at a cost, but I still think it’s more than worth it.
To take a lot of the guilt out of money spent on vacations I just made a vacation fund and started putting money into it every paycheck. The purpose of that money is to be spent on vacation related items, so while we still try to be frugal, as long as we stay under the fund total I’m okay with it. We spend it, it builds back up, we spend it, etc. it works for us.