Why You Don’t Deserve a Vacation: The 33% Rule

Okay, I will admit it, I’ve been known to tell clients “You don’t deserve a vacation!”   I am not a fan of the classic American trend of a family vacationing each summer. Don’t get me wrong, I love taking a vacation every summer, having my kids out at the beach enjoying themselves, and creating memorable experiences. There is nothing wrong with making memorable experiences and no one would argue that a family shouldn’t  seek to create lasting memories during the summer. Well, if you’ve read my blog you know that I love to rant about careless financial decisions that people make. Mainly because it’s totally avoidable and I want to help!

The purpose of a vacation is to enjoy a bit of relaxation from hustle and bustle of daily life. When it comes to vacation, it’s not where you go, or how much you spend that makes a yearly vacation idiotic. It is the lack of intentionality, ignorance, and comparison vacationing, that causes financial hardships. The reason most people don’t deserve a vacation is because they can’t afford it! Your income and affordability ratios are math, the numbers don’t lie when they plainly tell that you that you cannot afford a vacation. Here is a logical ratio anyone can understand. If savings = 0, number of vacations = 0!

With the average American spending $1200 a person per vacation, the cost of a vacation for a family of four can easily exceed $3,000. I know what you’re thinking “Hey Ron, I don’t spend anywhere near that for vacation.”. I would ask you to review those numbers. By the time you paid for amenities, plane tickets, lodging, gas, apparel, rentals, eating out alcohol, and activities; you’re sure to match the statistic. Vacations are purposely excessive and with good reason, however, they should still be within ratios that keep you from touching down back at home with a wallet migraine.

So what is this ratio that I keep talking about? I created an easy vacation affordability ratio that tells you how much vacation you can afford. Simply take your take home pay and multiply by .05 (5%).  Stash those savings a savings account and use it as your vacation fund. This ratio even works with the 50/30/20 budget system I recommend. For those who are new, it works this way.

50/30/15/5 Budget

  • 50% of income to housing needs
  • 30% of income to lifestyle needs
  • 15% of income to savings
  • 5% of income to vacations

So considering this budget ratio,  a person going on vacation should save 5% of take-home pay for vacation expenses for the upcoming year. What this ratio also reveals, is that we should spend no more than 33% of what we currently have stashed in our savings account on vacations. If you have $10,000 saved, your vacation budget should be around $3300. Also, this money does not come from that savings account!

These numbers bring things into perspective, if your take home pay is $1000 per paycheck, you should save $50 per paycheck towards your vacation in the upcoming year. Yup, that’s a measly $600-700 vacation for someone who brings home $1000 a month! That’s waaayyyy less than what people who make that are spending! If you’re having an issue connecting to those low-income figures try a person bringing home $3000 per month. They should save $150 for an annual total $1800 for a vacation.

If you are spending more than 33% of what you have in savings (and not out of those savings) than you are not making wise financial decisions. No one deserves a vacation, we earn vacations. So the next time you make plans to go on vacation, make the decision based on the 5% and 33% rule. Social media, friends, and family can add pressure to the decision making, stay strong and stick to what the numbers say you can afford. Never make a financial decision on your perspective of worth, status, or annual salary. Make vacationing decisions based on how structurally sound your finances are; if this are not stable and you are broke… broke people don’t go on vacation! No one cares how long you’ve been at your job, how rough of a year you’ve had, or your illogical rationalizations of why you “need” a vacation.

Never go on vacation by jeopardizing your stability, never use your savings or credit card.most importantly, don’t justify a vacation because you feel that you deserve one. A vacation is supposed to be about peace, adding debt or plundering your savings will only create regret. So the next time you plan to vacation, make sure you have 3 times the cost of that trip in savings. Hope this helps, please share and follow!

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