Thursday, February 22, 2018

Vacation Loans? A Sure Sign Your Finances Are In Trouble!

Borrowing money is never a good thing.  Borrowing for frivolous things is even worse.

I wrote before about borrowing money and why it is never the "answer" to anything and should be approached with trepidation - and only for the serious things in life.   I touched on vacation loans in that article, but realized I never expounded upon it.  Borrowing money for a vacation is akin to borrowing money for a restaurant meal.   But people do both.  And people end up in credit trouble as a result.

Driving through Orlando, Florida, I wondered what the cost of a "Disney Vacation" for a family of four would be.  And I imagine, with airfare, car rental, hotel rooms, park admission, meals and souvenirs, it could easily run $10,000 or more, particularly if you stay "on property."   It is an expensive way to have fun, to be sure.

But even lesser vacations can be expensive.  A simple cruise that costs "only" $199 can run $2000 as I noted before.  A "$799 cruise" can run $7000 when you add in all the extras and costs.  Vacationing isn't cheap - at least the way the vacation industry wants you to do it.  There are cheaper ways to have fun.   But to some folks, unless the money meter is running (and an internal combustion engine is running somewhere) it ain't fun.  I feel sorry for them.

Borrowing money for a vacation is particularly idiotic.   You spend $1 on a vacation and pay back $1.25 with interest.  Why not just save up the money for vacation?  Oh, right, utter lack of financial discipline.  The same emotional thinking that decides you "need" an expensive vacation or are entitled to one, or worse yet, you need to take one to have bragging rights with your neighbors.  Oh, yes, that.  Old status rears its ugly head once again.

But long after the memories have faded, and you've pooped and peed out all that vacation food and drink, the vacation loan payments keep coming.    At least with a car loan, you have something in your driveway to show for it - even if it is depreciating faster than the loan balance.   But a vacation loan?  It is like buying a Big Mac on a credit card, spending a year paying on the balance, then refinancing it over 30 years with a home equity loan.

Any by the way, paying for a vacation on a credit card and then taking a year to pay it off, is no better than the vacation loan - in fact, it is the same thing.

Americans complain the are taken advantage of, and that the "evil 1%'ers" took away all their money.  But the reality is, they give away all their money to the 1% in terms of buying stuff and spending on stuff they don't really need and then paying interest on these purchases, often doubling the price.

This is not to say you shouldn't take a Disney Vacation.   No, please go ahead.  You see, I am a shareholder, so if you run up ten grand in debt to see the "magic kingdom" then I make a few bucks in the deal.   And since I own stock in the bank, I make a few bucks on the interest you pay.

You see how this works, now?  Please send me more of your money!

Now, I have been to "Did-ney" myself, a couple of times (which is about enough, really - it doesn't change much, and people who form Disney "gangs" or clubs or have annual memberships are not very bright people - or they enjoy repetition).  It was fun, but we didn't borrow money to do it.  Similarly, we've been on a couple of cruises, and they were OK, but we didn't borrow money to do it.   These things are costly enough, without adding to the cost by borrowing.

Can't afford to go?   Borrowing the money doesn't make it "affordable" but only even more unaffordable.   Either find a cheaper way to go, find a cheaper vacation, or realize that your finances are in no shape to be "treating yourself" to anything.

A vacation need not be expensive.  Maybe it isn't the orgasmic experience of Disney, but we enjoy camping in our RV, which we paid $8750 for, more than ten years ago.  Camping out along the Blue Ridge Parkway and hiking is a lot of fun - and doesn't cost much.   Certainly not enough to require a loan.

I dunno.  Borrowing money to go on vacation just seems so wrong.  And it is a shame so many Credit Unions promote this sort of thing.   But I guess they have to make money, too.  And the easiest way to make money is from other people's lack of financial acumen.

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