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How to Decide to Travel (Or Not Travel) When in Debt

If you’re carrying debt, summer can be a time for weighing options.

On one hand, it’s warm out and getaways are calling — it’s enticing to use vacation time away from work to travel to a new destination. On the other hand, it might be better for your long-term finances to have a “staycation”, saving money and chipping away at your debt while staying close to home.

In Ontario, families have the added challenge of expensive childcare weighing that decision toward the latter. A new study from the University of Toronto found that an average family in Ontario with children under the age of four would need to spend 24 per cent of its after-tax income to pay for licensed childcare. Using 67 per cent of your net income on giving your child a place to stay during the day makes debt payments more difficult, and certainly affects whether a summer vacation is feasible.

With this challenge and other costs of living to consider, how do you make a choice that’s right for you? Here are some questions you need to ask as part of your planning process.

What kind of debts are you carrying?

Financial writer Christine Drummond at The Wallet Diet provides advice on whether to travel when in debt, and this is the first self-critical question on her list.

If you have debt like a student loan, a mortgage, or a car loan, you can categorize this as “good debt” and assume there’s going to be some value created for you down the road. On the other side of the spectrum are forms of “bad debt”, like credit cards and cash advances. There’s no value created here and leaving unpaid balances while you travel can set you back, especially considering the 18-20 per cent interest rates.

As Drummond puts it, you shouldn’t travel with bad debt because it’s “a flashing warning sign that you’re likely spending more money than you’re making.” Vacation would only add to this dilemma.

Are long-term financial goals on your mind?

For families considering vacation, it’s equally important to consider whether paying off debt now can get you to your long-term financial goals more effectively. Retirement savings, needed home renovations, or car repairs shouldn’t be put on hold for vacation spending. By making a travel budget using online debt calculators, you can figure out what you can afford without eating into your regular savings contributions and debt payments.

What about a destination with obvious savings?

If you have an opportunity to go somewhere that provides you serious savings, that can change your decision-making process. Financial writer Barry Choi talks about this in his Money We Have series, pointing out that if you have friends or family living abroad, you can cut the accommodations cost out of your trip entirely. This is obviously a huge chunk of whatever budget you’re creating and can be the difference between vacationing while in debt or staying home.

If you can find other obvious forms of savings like this, it can help you satisfy your desire to travel without adding to your need for debt relief.

By being mindful of savings opportunities, long-term goals, and what kind of debts you have, you can go into the summer months with a better plan for balancing debt and the desire to get away.

Do you have tips for a cheaper vacation? Share them on social media, using the hashtags #BudgetTravel and #FamilyFinances.

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