Taking a vacation is expensive these days. Once you factor in flights, accommodations, and eating out every day, your little trip can come with a tremendous price tag. But with your heart set on an imminent getaway, you may not be ready to give up on your flights of fancy.
If you have a credit card or emergency fund, you can rely on these financial safety nets to help you afford the trip of your dreams. Right? Wrong! Find out why below.
Your Emergency Fund is for Emergencies
Your emergency savings look pretty enticing when you’re shy of your holiday bill. After all, they’re just sitting there, not doing anything.
But here’s the rub — they are doing something very important; they’re providing a safety net, a personal insurance policy in case of unexpected expenses. This fund gives you extra cash to cover an unanticipated car repair or dental emergency you wouldn’t ordinarily be able to pay out of pocket.
Financial advisors recommend having three to six months of living expenses in this fund. But these days, you’re lucky if you have a few thousand. Most people would have trouble coming up with $2,500 in a pinch.
When you don’t have that much tucked away in an emergency fund, you’ll notice the loss of any withdrawal you make. Even a small withdrawal to cover your vacation could hinder your ability to handle the unexpected out of pocket.
Remember That Credit is a Loan You Have to Repay
Like many vacationers today, you probably pull out your credit card to book flights and hotel rooms. It’s a necessary step in the process, as many places will only accept credit cards as a form of insurance.
Since you’re already using it anyway, you might be tempted to put a huge vacation on your credit, nearly maxing it out. But this can get you into hot water if you can’t pay off your balance by the due date.
Every time you fail to bring your balance to zero, you carry over this balance into the next billing period. It will earn interest and finance charges for as long as it remains on your card. This interest will make an already costly trip more expensive.
Maxing out your card to cover a vacation also removes this safety net until you manage to pay off your balance. In other words, you might not have any credit available to help in case of an emergency.
What then? If you don’t have any room on your credit card, you can go to a fast and transparent website like Fora to see if you qualify for a line of credit. If approved, you may make convenient draws against a Fora Credit line of credit and use these funds instead of your typical credit card in emergencies.
A line of credit works just like a credit card, offering you a flexible way to draw as little or as much as you need, paying only what you use. Similarly, these financial products should not finance your vacation.
Are There Better Ways to Finance a Trip?
Here are some better ideas to cover your upcoming trip.
- Postpone your trip to a later date so you have more time to save up what you can.
- Maximize your savings by putting them in a high-interest savings account.
- Research budget holidays that help you stretch your budget.
- Redeem travel rewards points to cut down on what you have to pay out of pocket.