Life coach Katrina McGhee traveled around the world for nearly two years despite having a large student loan to pay off. Katrina found that her holiday actually motivated to pay off the debt. “Achieving big goals requires that you not only work on making your goal happen but that you also work on making your current life better/happier,” says McGhee. “So as long as you have a plan and are making progress in paying down your debt, it’s OK to have a side fund where you are saving dollars for a specific purpose like travel. Nothing in life is guaranteed, so it doesn’t make sense to not enjoy the present when you are working toward a distant future goal.”
If you know about finance then you must already know that debt is not a good thing. However, sadly, we live under a lot of debt.
According to the figures released in 2017, Australia’s personal debt is among the highest in the world, standing at a whopping $2 trillion. Based on this figure, the average household owes about $250,000.
This is a huge number that shows just how bad the situation is. It’s difficult to manage money and pay off the debt. Ideally, you should save all that you can and get rid of the debt ASAP so that you can live a debt-free life. But, sadly, it’s easier said than done.
Most of us have a long-term debt repayment plan. It can run for years and you can’t sit at home for such a long time without vacations.
Holidays, after all, are a necessity. According to reports, we should take about eight days off from work every year and go on a vacation. This helps us feel better. Plus, vacationing can also make people more creative, and allow them to rejuvenate.
But, is it okay to travel when you’re under debt? After all, you could use this money to pay off your debt.
This is a very difficult question to answer because the answer depends on your situation, i.e: how much debt you owe and what kind of financial situation you’re in.
For example some entrepreneurs have been known to take out a business loan to travel to a country where operating a online business is considerable cheaper. The return on investment from managing a team of highly skilled web developers at a fraction of the cost in more developed countries can be considerable. Beware taking out a business loan to travel overseas and start a new venture.
Bill Baker from Lend Capital say’s, “If you do decide to take out a loan, make sure you stick to a strict debt repayment plan. If this plan requires you to pay $200 per month towards the debt, maintain this, even while you travel. If this is something you cannot maintain, do not travel”.
In simple words, if you’re doing well financially and your debt is not a burden to you then there’s no need to worry about it. You can easily take a vacation. However, if you’re struggling financially then going on a vacation, especially a long or lavish one, may not be a very good idea.
It all typically boils down to how much extra money you have. You need to find a healthy balance. This is why we suggest you to make a financial plan or budget and stick to it.
A holiday is technically not a necessity unless your doctor has suggested you to take one. This may sound strange to some but your doctor may recommend you to take off from work and go on a holiday.
This usually happens when you’re overworked or depressed. However, your insurance company will not cover your trip. This is why there’s a need for you to sit down and make a strategy.
Create a Plan
The most important thing is to be aware of your revenue and expenditure. Make a list and see how much you can save after paying all your bills, including your monthly debt.
You do not have to pay off all the debt at once. In fact, some organizations may not even allow you to do so. You will typically have to pay a specific amount every month. Your plan must include this amount so that your vacation doesn’t impact your debt.
Now the money that you have left can be used to go for a holiday. Of course, one month’s savings will not be enough. This is why you will have to create a long-term plan so that you can save enough to go on a holiday.
This is the money you’re left with after paying all your bills and contributing to your emergency fund.
Applying for a Loan to Travel
If you have no bank balance and you’re considering to apply for a loan to fund your tip then stop right there. Some platforms can make it easy to find a loan but it’s your duty to be responsible.
Only apply for a loan when you’re in dire a need of money. If you can’t afford a holiday today then postpone your trip until you can.