One of the weirdest money phenomenons I’ve noticed is people spending way outside their normal limits while on vacation. It’s as if we enter a casino where money has no value because everything is clay chips.
During the first week of our two week European business trip, we stayed at reasonably priced 4-star hotels. We figured, let’s focus on hotels in the best locations since we’d only be visiting each country for 2-3 days.
For dinner, we budgeted 50 € ($60) or less for two. This amount was reasonable as boiled beef and potatoes didn’t cost too much, nor did pizza, pastas, and salads. A buffet breakfast was always included in our hotel stay so we never spent very much on lunch if anything at all.
Like with everything, we spent well within our means because we’re frugal that way. After all, it’s very hard to achieve FIRE without aggressively controlling your spending. When we arrived at our hotel in Paris from Budapest it was about 7:15pm. We were given a tour of all the facilities. This is where our money discipline began to unravel.
Disclosure: Financial Samurai has partnered with CardRatings for our coverage of credit card products. Financial Samurai and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
Living It Up Like A Boss
To welcome us, our hotel left a bottle of champagne on our coffee table. Wonderful! We drank the entire bottle. We were having so much fun that we didn’t realize it was already 10:45pm when our stomachs started gurgling. But it was too late to go out for some food.
Instead of holding out until the morning by going to bed hungry, we ordered 38 € spaghetti bolognese through room service. We figured, it was worth spending a 18 € premium to have food delivered so late in the evening. The rationalization of spending lots of money had begun! To the hotel’s credit, the bolognese was exquisite. We left a 5 € tip.
The next morning we moseyed down to the hotel lobby for what we thought would be another delicious buffet breakfast since we had had one every morning the week prior in Czech, Austria, and Hungary. To our surprise, breakfast was not included.
Before we could pretend we weren’t hungry to save some money, we were ushered to a breakfast table by an eager hotel staffer who suggested fresh mango and multi-berry juice. Sure, why not. I love fresh juice! When we got the breakfast menu, there were no prices, a sure sign that we’d be in for some pain.
Since we ate late and didn’t know any of the prices, we decided to eat light to hedge ourselves. We could always eat more later. This was an establishment where it is embarrassing to ask for the price of anything. As they say, “If you have to ask, you can’t afford it!” We didn’t want to look like paupers.
It turned out that only sharing a french toast was a wise move because our breakfast bill came to 41 € ($50) with the two juices! At least the French toast was damn good in Paris, just like how Peiking duck is damn good in Beijing. You see, things really are much more expensive in places like Paris than San Francisco, the cheapest international city in the world where all foreigners should buy real estate.
Having spent 46 € including tip on breakfast, we figured we might need to increase our dinner budget from 50 € to 100 – 150 € per meal. Paris is more expensive than the Habsburg Empire countries, and we wanted to eat well, so we absolutely did.
The French Open
Before arriving in Paris, I e-mailed the hotel concierge about French Open tennis tickets. They wrote back:
580 € Category I (best seats)
460 € Category II
390 € Category III
I was shocked because I remembered eight years ago getting tickets at the stadium entrance from scalpers for 50 €. Thus, instead of buying the tickets through the concierge, we decided to try our luck getting some scalped tickets.
We walked around the entire Roland Garros complex and there wasn’t a scalper to be found! It seems like all the scalpers have moved their business online as it’s more efficient, safer from the police, and probably more profitable. Have you too figured out how to build your brand online? If not, it’s time to get going.
Disappointed, we decided to make the most of our outing by eating some wonderful patisseries at the Molitor/Auteil area before taking a train ride to the Eiffel Tower. From there, we walked to the Invalides and then back to our hotel.
The concierge greeted us and asked if we had any luck. I told him “no” and requested two, 390 € Category III tickets to the French Open for tomorrow. He apologized and said the tickets were now 420 € each. Drat. We had rolled the dice and lost.
I had been delaying my purchase because of uncertain weather conditions. If there was rain, we’d have to wait. And if the day got rained out, we were told we wouldn’t get our money back because we were buying the tickets on the secondary market. I’m glad we waited because the French Open was actually delayed for 2-4 hours the first two days we were there, and got completely rained out for the first time in 16 years on May 30 when we left to go watch the Warriors win game 7 of the Western Conference Finals at home!
Paying 8X the face value of tickets is absurd, but I rationalized it as a “foreign visitor’s tax” and a necessary premium for buying at the last minute. If I came all the way to Paris for the French Open and didn’t attend, I would feel like a complete idiot even though I knew that back home, I’d never pay more than face value for tickets! In the end, spending close to $1,000 for a couple tickets was worth it.
Why Do We Spend So Much More On Vacation?
I’ve thought long and hard about why frugal me spent so far over budget while on vacation and here are the reasons I’ve come up with. Let me know what I’m missing.
1) When will we ever come back? Given I’m on a mission to see a new country every year, the chances of me going back to France within the next five years are small. The last time I was in Paris was when I visited my mom for a week in 2008. Since we never know when we’re going back, we might as well live it up right? We may never return! The attitude is kind of like knowing you’ve only got so many years left to live. Time to spend to the max because we can’t take our fortune with us.
2) Business expense. I don’t travel for leisure. I travel for business. If I happen to experience some pleasure while on business, so be it. There’s no law that says you can’t have fun while working. Given most of my travel expenses are deductible, I often rationalize that the cost is free because my business entity is paying. The reality is, I own my business, so there absolutely is a cost. I’m just getting about a 30% discount because that’s my effective tax rate.
3) Proving others wrong. Given I put myself out there online, I’m often subjected to judgement by others who think I’m too frugal or too cheap for my own good. Every time I get judged, I get a little annoyed because how I spend my money is a personal decision. Telling me I’m too focused on money when I write a Personal Finance blog is stupid. Are you going to tell a travel writer she’s too focused on travel? Telling me I don’t stop to smell the roses enough is ridiculous since roses are all I’ve been smelling since I engineered my layoff at the age of 34! Telling me that I’m cheap because I drive a Honda Fit is insulting to Rhino because he’s the best car a driver could have in the city. I sometimes catch myself spending more than normal to “show them” I can blow money and not give a damn with the best of them.
4) Sunk Cost, Proper balance. I’m a big fan of discovering financial harmony through ratios. For example, I’ve got a fiscal responsibility ratio (FS-FR) that is measured by taking the value of your house divided by the value of your car. The higher the number, the more fiscally responsible you are. You don’t want to be the guy renting a one bedroom and driving a Porsche at age 35. Given my suite cost over five figures for seven nights, it’s silly to keep food and entertainment spending at normal levels. I already did that while I was in Czech, Austria, and Hungary so it was time to open up the wallet in France. When you’ve already sunk $10,000 into a vacation, what’s another $500 right?
5) Telling ourselves “We’re worth it.” Perhaps the biggest reason it’s easy to spend so much more on vacation is because we tell ourselves we deserve it. Justifying our spending because we’re worth it is how many people get into massive consumer debt. Credit card companies make huge money off the “I’m worth it” crowd, and a whole fintech lending niche has emerged to also capitalize on excessive spending. I told myself that spending ~$1,000 for two French Open tickets was OK because I was able to get to a 5.0 USTA ranking so late in life. Less than 3% of players are rated 5.0 or better. Most played college tennis and started with a 5.0 rating and then as they aged trended downward, not up. Ain’t I worth it? Finally, I told myself that I’m working every day in Paris, so why not live it up a little.
Controlling Vacation Spending
Controlling vacation spending is different from controlling day-to-day spending. The average American worker has 16 paid vacation days a year but only takes four days off according to the US Travel Association. Whereas in France, they get 31 paid vacation days a year, and they probably take most of them. Therefore, there are really only 1 – 5 weeks in a year during which the average person can blow up their finances and get into major credit card debt! While this time period is relatively short, you can still do a lot of damage.
Here are some no-brainer tips to control your vacation spending.
1) Write out a budget in Excel. Start with an overall budget and then break it out with each line item expense. For example, my total travel budget for two was ~$5,000 a week. From there, I broke down everything in an Excel spreadsheet for flights, hotels, food, entertainment, and transportation. I made my budget fit what was available and not the other way around. You may still go over budget, but at least you have a general idea of how much you can spend. I know a $5,000 a week budget equals $250/night for hotel, $150/day for food, and $200/day for entertainment if I take economy class. Now, I just review my cash flow online to look at the big picture.
2) Take out enough cash to pay for all food and entertainment. Presumably you will pay for your flights and hotels with your credit card. For everything else, take out the amount of cash needed to cover your budget and lock your credit cards away. To further control your spending, prepare separate envelopes of cash. Any money left over from each envelope may be placed in the next day’s envelope. Not only will you save on 2 – 3% foreign credit card transaction fees, you’ll also save yourself a trip to the ATM, which also charges a fee if you aren’t a premier banking member.
3) Look for local alternatives. Hotels and tourist hot spots charge premiums because they can. If you want to save max money, then your goal is to be as local as possible by reading all the guide books and online reviews available. If you have a friend who lives where you are vacationing, definitely reach out for food and entertainment advice. Consider renting an apartment through Airbnb instead of a hotel. If you can stay with a local, even better. I never eat at Fisherman’s Wharf in San Francisco because the prices are 30% higher and the food quality is 30% lower than comparable restaurants. I know all the secret gems in our neighborhood. Our goal as travelers is to find out where those gems are.
4) Analyze your previous credit card bill before departure. Hopefully none of you have revolving credit card debt. Credit card interest rates are higher on average than what Warren Buffet has returned a year in his illustrious career. I’ve found it’s very helpful to not only be aware of your previous credit card bills, but the exact line items that made up the bill. The more you are aware of your spending habits, the easier it is to control. You don’t want to be saddled with long term debt thanks to temporary joy.
5) Multiply everything by 1.7X. For day-to-day spending control, it’s good to multiply the potential spend by 1.5X to get the amount of gross income required to afford the item, service, or experience. Given there are foreign exchange and transaction fees when spending money abroad, multiple everything by 1.7X after you’ve completed the exchange rate calculation. The goal is to make you aware of how much you need to earn so you don’t go overboard. Heck, multiply everything by 2X to make the math easier!
You Only Have So Many Vacation Days To Enjoy
Despite highlighting how easy it is to overspend on vacation, I’ve never once regretted the money I spent. Have you? The only thing I adjust is the amount of vacation time spent traveling because traveling can get tiring sometimes.
The experiences we gain from vacation or business travel are priceless. The key is to make sure our experiences don’t fade too quickly by creating picture albums or writing posts about our experiences. Having a blog is my perfect solution. When I’m old, I’ll be able to still reminisce the good times.
I used to dread those 10+ hour international flights, but now, I see the time as a great opportunity to write a couple posts in between a movie and a nap. If you can turn vacation travel into business travel, you’ve got yourself a winner!
Best Travel Rewards Credit Cards
Looking for the best travel rewards credit cards so you can travel to more great places for free? Here are my favorite out of over one hundred I’ve reviewed so far. I’ve traveled to over 60 countries in my lifetime and always use travel rewards points to get free airfare.
1) Capital One® Venture® Rewards Credit Card
This popular travel rewards card waives its annual fee for the first year and offers flexible 2X miles rewards on every purchase. I’ve partnered with Capital One on several occasions and have always been pleased with their product offerings and customer service.
- Get 50,000 miles (=$500 value in travel rewards) when you spend $3,000 in the first 3 months
- Earn unlimited 2X miles fast on every purchase you make
- Transfer miles to any of Venture’s 10+ travel partners
- No foreign transaction fees
- Get a $100 application fee credit for TSA Pre or Global Entry if you use your card
- Built-in coverage and purchase protections
2) Chase Sapphire Preferred Card
I’ve been a happy Chase customer and cardmember for over 10 years. The Chase Sapphire Preferred Card is one of my favorite travel rewards credit cards.
- Get 60,000 points (=$750 value in travel rewards) if you spend $4,000 in the first 3 months
- Earn 2X points fast for travel-related and dining purchases
- 25% extra value when you redeem for travel bookings
- No foreign transaction fees
- Built-in coverage and purchase protections
- Frequent travel point transfers 1:1
- Invite friends for up to 75,000 extra bonus points
3) Wells Fargo Propel American Express Card
If you’re looking for a card with no annual fee, the Wells Fargo Propel American Express Card is a great option.
- Get 30,000 points (=$300 value) if you spend $3,000 in the first 3 months
- No annual fee to worry about
- No foreign transaction fees
- Earn unlimited 3X points fast on travel, gas, ride-sharing, transit, eating out, ordering in, and on popular streaming services
- Points don’t expire as long as your account is active
- No travel black out dates if you redeem using Go Far Rewards
- Built-in cell phone protection
Disclosure: Financial Samurai has partnered with CardRatings for our coverage of credit card products. Financial Samurai and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.
Updated for 2020 and beyond.