ARE VACATIONS GOOD FOR YOUR FINANCES?

“I haven’t been anywhere, but it is on my list.”

–Susan Sontag

FRENCH VACATIONS AND MONEY

I just returned from a vacation in France, and I must ask: Can expensive vacations improve your bank balance in the long run?

I hesitate to ask the question. As a tightfisted blogger, I have always been skeptical of people who claim you can make a costly decision, like spending money on an indulgent vacation, and expect to become rich. That kind of logic usually does not work. It is like claiming that eating chocolate eclairs every meal helps you lose weight or that being a couch potato will make you look sexy.

However, there are reasons to think vacations are worth the expense. But first, let’s look at the costs.

VACATION COST ELEMENTS

If you only look at the money spent, using our recent vacation as an example, our vacation cost us a lot. There are two different financial costs:

  • Direct cost: Travel is expensive. There are airline tickets, hotels, food, transport, and other expenses totaling thousands of dollars.
  • Opportunity Cost: If we had decided to invest conservatively instead of traveling, we could have earned about $600 annually in annual interest income.

But there is more to the equation than just subtraction and cost. Here are a few other things to consider.

VACATIONS ALLOW REST AND “REFUELING”

Breaks from work matter.

Breaks from work help you recharge. When you’re well-rested, you can think better and work more efficiently. In turn, rested performance could lead to better job performance, promotions, or even new opportunities that increase income. So, there is a lot of potential gain.

In general, leisure is essential. Vacations aside, certain other leisure activities are not pure expenses either. They are networking and social opportunities, too, and can grow your personal brand and business. See here.

VACATIONS DIMINISH YOUR MENTAL RUTS

It is easy to get into a rut.

Not only do ruts burn you out mentally, but they can cost you, too.

New experiences during vacations can spark creative ideas. If you’re an entrepreneur or need to solve problems, these new ideas could help you make or save more money in the long run.

Here is an example: in France, we learned about the creative innovation resulting from travel that helped French artist Claude Monet develop impressionism. During his visit to London in the 1870s, Monet was exposed to the works of British landscape painters like Turner, who used light and atmosphere in groundbreaking ways. Inspired by their techniques, Monet began experimenting with capturing fleeting moments and light in his work, which helped lead to the birth of the impressionist movement.

Monet’s Garden

Monet’s experience of different landscapes, weather conditions, and the new artistic methods he encountered abroad sparked a radical shift in his approach to painting. This insight allowed him to break free from traditional French art conventions and inspire a new movement.

His travel experience ultimately helped him to make a very comfortable living as a groundbreaking impressionist painter.

A far more direct example related to pasta entrepreneurs is Marco Polo’s trip to China in the 13th century.

Polo did not bring pasta to Europe after his travels. It turns out that pasta existed in Europe when he went, but not in the form we know today. After he returned and noted that the Chinese had the same good idea, making pasta became far more widespread.

Of course, today, it is common and revered as a dish beloved by every entrepreneur who manufactures pasta or sells Italian food.

VACATIONS INCREASE EXPOSURE TO ALTERNATE APPROACHES

Sometimes, seeing how different people from different cultures approach a common problem is helpful.

For instance, we met with a local family during our tour of Japan on a previous trip. Their son was living at home and going to college.

That prompted some posts from me about how the cost of rent during college inflated student debt.

Another blogger I respect expanded further on the idea. A college education is possible without breaking the bank on extra housing costs. You can read about that here.

VACATIONS CAN PARTLY PAY SOME DIRECT COSTS

A discount to direct costs does not always apply, but it is worth noting. Here are a few examples:

  • Holiday shopping/Gifts—not only are items overseas that are not readily available at home, but sometimes they are far cheaper when you buy them overseas. For instance, if we wanted to buy wine as a gift, it was cheaper in France. Pottery from Uzbekistan is relatively affordable and high quality, but it is unavailable here. We made them gifts to others after a trip there. Note: bring a big flexible suitcase if you decide to try this. We often pack light and get an empty duffel bag to purchase local items.
  • Sometimes, being overseas can be cheaper than home. This circumstance can occur if there is a big arbitrage gap between the cost at home and the countries you travel to. For instance, spending $120 on a typical weekend might cost a third or less in cheaper countries for the same activity.

Of course, you must consider the cost of getting there, but an inexpensive destination is sometimes a significant factor in offsetting vacation expenses.

THE REWARD OF GAINING AN IRREPLACEABLE TRAVEL EXPERIENCE

Capitalism is all about rewards. The idea of capitalism is that if you are a superior worker in a competitive environment, you should get a superior financial reward. Travel is one of those rewards. The experience can be part of a memory forever, whereas expenditures on physical objects last only as long as the objects do.

In other words, rewarding yourself with travel experiences or other activities is essential.

Travel is one of the most popular activities of the rich.

SOMETIMES YOU CAN COMBINE WORK AND PLEASURE.

Some entrepreneurs can offset travel costs by claiming much of the expense as deductions. Of course, this amounts to discounting the activity, but it does not relate to how it benefits you.

CONCLUSION

Vacation costs are easy to calculate, while benefits are hard to quantify. However, I have always found vacations to be a source of rest and inspiration. When I return, I feel better and am more willing to tackle challenges. That benefit alone makes a vacation worth taking.

Disclaimer: consult with a financial fiduciary before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.

Photo: Author