10.9 C
New York
Sunday, April 14, 2024

Americans say finances are holding them back from traveling

Must read

Although inflation is slowing down, Americans are still finding it hard to save up for their summer travel plans. A recent survey conducted by Ally revealed that traveling abroad is a top bucket list item for 85% of respondents. However, 75% of them admitted that their financial situation is preventing them from fulfilling this and other items on their list.

How inflation is affecting summer travel plans

In June of last year, inflation reached its highest point in several decades. Although inflation has since decreased, the cost of goods and services remains high, causing difficulties for Americans. According to TransUnion’s most recent Consumer Pulse survey, 46 percent of respondents reported that their salaries are not increasing at the same rate as inflation, making it more challenging to save money and affecting their ability to spend on non-essential items.

According to Derek Sall, founder of Life And My Finances, the problem is not specifically the cost of the vacation itself but rather the cost of our daily expenses that prevents us from saving enough money to go on vacation. To provide context, the travel price index (TPI) has only increased by 2.8% compared to last year, according to the latest data from Statista. However, the consumer price index (CPI) has increased by almost 5%.

Sall suggests that because the prices of the most expensive items people buy are increasing by 10 to 20 percent, it’s understandable that individuals are reducing their retirement contributions and opting for less extravagant vacations.

What consumers are doing to cope with smaller budgets this travel season

Despite the effects of inflation on American budgets, many are still planning to travel during the summer. They are finding ways to continue their vacation plans by cutting back on lodging costs and changing their travel dates.

Riley Adams, CPA and founder of Young and the Invested, says that when their family of four, accompanied by their parents, planned a summer vacation to Hawaii, they realized it would be more expensive than their previous trip to the same destination the year before.

Adams and his family had initially planned to spend several days at a hotel waterpark as a start to their summer vacation. This would cost them around $2,000 for food, lodging, and park passes. However, they later decided to make a trip to Hawaii instead, which they felt would be more fulfilling. As a result, they decided to reduce the waterpark trip to just one overnight stay. This would be more cost-effective and not interfere too much with their summer schedules.

By making a small adjustment to their vacation plans, he and his family managed to save around $1,500. This helped to balance out the increased airfare expenses for Hawaii and the cost of renting a bigger car.

Kelly Phillips Erb, a tax attorney at White and Williams LLP, shares that her eldest daughter is interning in Dresden, Germany this summer as part of her college program. They had planned a family visit, but unfortunately, the airfares for the four of them in mid-June are around $10k, which is too expensive for them.

Phillips Erb reconsidered her travel plans due to the increased airfare prices. She rescheduled her trip for later in the summer and opted to visit alternative cities to make the trip more budget-friendly.

Is financing a vacation a good idea?

Before considering taking out a personal loan or using your credit card to pay for your vacation, it’s important to weigh the pros and cons. While both options allow you to pay for your trip over time, mismanagement of these forms of payment can result in significant financial problems.

Sall advises against spending money on vacations if you cannot afford it, even if it is memorable. The interest, debt, and potential bankruptcy risk are not worth it. He also shares that his own favorite family vacation involved staying at a nearby hotel with a pool and game room.

According to him, it is not necessary to assume that your child will have a memorable trip overseas. It is possible to have just as much fun in your own backyard for a fraction of the cost.

More articles

Latest article