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How Much Should You Spend on a Vacation?

Everyone Deserves Some R&R, but Don't Let Your Vacation Break the Bank

By Suze Orman

As far as I am concerned, vacations are a necessity, not a luxury. But where I see so many people take a wrong turn is when they spend money for a luxury vacation that they can’t afford.

While I think one of the best things you can do for yourself, your family, and yes, the quality of your work, is to take a break every now and then to recharge the batteries, it makes absolutely no sense to book a vacation that will blow your bank account. You end up spending one week enjoying yourself, and the other 51 weeks of the year stressing over the huge new load of debt you racked up by putting the plane tickets, hotel, and restaurant bills on a credit card you have no way of paying off any time in the foreseeable future.

Or even worse, you think it’s totally okay to pile up the credit card balance for your vacation, because you think you deserve to indulge yourself given how hard you work!

That’s the story I got the other day at the hairdresser. The woman washing my hair and I were chatting and she tells me she has just returned from the most wonderful vacation…that cost her $4,000. Now this is someone who is probably lucky to make $7 or so an hour plus tips. She then tells me she’s got it all under control; she just put it on her low-rate credit card, like all her other vacations. Turns out she thinks 12 percent is low, and, worse, seemed unconcerned about the $25,000 balance she’d rung up so far.

There’s no telling what type of reaction I might have had if it weren’t for the water hose she had aimed at my head. I remained calm and simply asked her if she could do it all over again, would she try and take less expensive vacations. I was expecting a moment of revelation when she would see the danger of what she was doing. Instead, here’s what I got:

“Suze, I work so hard I deserve to treat myself to a great vacation. I don’t care what it costs.” I asked her if she ever worried about the hole she was digging and she told me, “Only when I think about it. So I just don’t go there or I would get too stressed out.”

That approach stresses me out! Come on, people. I get that everyone deserves a vacation but here’s what you also really deserve: a secure life where you aren’t buried in credit card or home equity debt, and the confidence that you are on course to be able to retire comfortably.

If your vacation spending is compromising any of your financial goals I am sorry to say that your brain is already on permanent vacation.

In Five Signs You Should Stay Home, I spell out the major money moves you need to take care of before you start booking a big-time vacation at a five-star resort.

But here’s a great rule of thumb: if you will need to pay interest to finance the vacation—meaning if you can’t pay off the whole credit card charge when it comes in—the hard truth is that you can’t afford the vacation.


It’s Not in the Cards, or On the House

If you don’t have the cash to pay for the vacation you have in mind, the solution is simple: you need to scale back your plans. Look, if you put $2,000 for a vacation on a credit card charging 15 percent interest, and then only pay the minimum balance due each month, by the time you paid for it the actual cost of that vacation would be $3,758. That’s because you will ring up $1,758 in interest payments in the 15 years—yes, you read that right, 15 years—it will take you to get the balance paid off. Hmm…15 years to pay off a one-week vacation. What $2,000 vacation is worth that? more...


Sidebar: Five Signs You Should Stay Home

If any of the following are true, you might want to reconsider your vacation plans because you are already at serious financial risk. more...

Vacation Budgeting Checklist
To keep yourself on track to healthier personal finances, start here by printing out this checklist of important to-dos.

Start Now!

Suze Orman has been called “a force in the world of personal finance” and a “one-woman financial advice powerhouse” by USA Today. She is the author of four consecutive New York Times bestsellers, including The Road to Wealth. Suze Orman, a Certified Financial Planner Professional®, directed the Suze Orman Financial Group from 1987-1997, served as Vice President of Investments for Prudential Bache Securities from 1983-87, and from 1980-83, was an Account Executive at Merrill Lynch.

Watch Suze every Saturday night on CNBC. Check www.suzeorman.com for TV listings. More great advice on Suze's blog.

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