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Financial Face-Off: With soaring gas prices and inflation, should you take a vacation or ‘staycation’?

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Hello and welcome to Financial Face-off, a MarketWatch column where we help you weigh financial decisions. Our columnist will give her verdict. Tell us whether you think she’s right in the comments. And please share your suggestions for future Financial Face-off columns. 

The face-off

Summer is here, and so is your chance to get away from it all while the days are long and the weather is warm — especially if you have school-age children. 

But financial pressures are buzzing around Americans like mosquitoes at a barbecue.

Record-high inflation means we’re feeling the pain of higher prices on everything from eggs to airline tickets. Gas is currently hovering around $5 a gallon. The job market is strong, but there’s talk of a possible recession, and the markets are bleeding red.

You may want a break from all this uncertainty and gloom — but a vacation probably won’t feel like much of a reprieve, given the potential price tag. Rental cars, lodging, restaurant food and entertainment costs are all up, according to NerdWallet. Domestic airfares have jumped 47% since January. Not to mention the new strain of COVID-19 that’s hitting places like Florida.

Is now really the best time for a vacation, or should you stay at home and take a “staycation”?

Why it matters

People are stressed and burned out. Travel lifts you out of the drudgery of your daily routine and gives your brain a chance to reset. Leaving home can give you valuable perspective on your life and your problems.

But it’s also true that some people simply do not have the money in their budget for travel. One of the things Americans are stressed out about is their financial well-being, and spending money on a trip may heighten that stress.

The verdict

Take a modest mini-vacation where you leave home, even if it’s just a trip to the next town over for a night or two.

“Of course a staycation may be great for your financial health, but we need to plan for overall health,” said Marguerita Cheng, a certified financial planner and the chief executive officer of Blue Ocean Global Wealth in Gaithersburg, Md. “If you have been working from home, helping your kids with distance learning or caregiving for others, it’s important for your emotional, mental and even physical health to expand your horizons.”

Cheng recommends planning a budget for your destination, and if you have kids, enlisting their help in searching for coupons and deals. Look for creative ways to save money: Use public transportation; get food at cheaper local eateries instead of expensive restaurants; and check out local travel and tourist bureau websites for discounts (here’s just one example in Maine). It’s a good opportunity to teach kids some basic budgeting and project management skills, she said. But don’t go into debt; you don’t want a “holiday hangover,” Cheng said. 

Other cost-saving tips: Rent a cabin at a state- or county-run recreation area; use discounts you might be entitled to if you’re a member of a certain group; and check out travel sites such as Hopper, The Points Guy and Scott’s Cheap Flights for deals.

My reasons

Having a trip on the calendar gives you something to look forward to, and it’s well-documented that spending money on experiences tends to make us happier in the long run than spending on objects. 

“Financial stress often comes when we are not spending money on what is most important to us,” said Sean Pearson, a financial adviser with Ameriprise Financial Services in Conshohocken, Pa., who focuses on the financial needs of the military and veterans.

“Start by making a list of what items are the most important things in your world, and then look at your annual budget to see if you are allocating money to the right places,” Pearson said. If travel is near the top of your list, but all your money is going to housing and your new car, look for ways to better align your spending with your goals.

Reasons to hit the road: A change of scenery has been linked to enhanced happiness, according to a 2020 New York University study that followed people with GPS trackers and asked them to rate their moods. “The results showed that on days when people had more variability in their physical location — visiting more locations in a day and spending proportionately equitable time across these locations — they reported feeling more positive: ‘happy,’ ‘excited,’ ‘strong,’ ‘relaxed,’ and/or ‘attentive,’” the researchers wrote.

Travel to places we haven’t been before may also help give us “greater emotional agility, empathy and creativity,” wrote psychology professor Todd B. Kashdan with the Center for the Advancement of Well-Being at George Mason University. “By spending time in unfamiliar towns, cities, or countries, you become tolerant and even accepting of your own discomfort and more confident in your ability to navigate ambiguous situations,” he wrote in Harvard Business Review.  

Another factor to consider: If you’re lucky enough to get paid vacation days at your job, you’re being paid to take time off. Sadly, many of us don’t take advantage of this benefit. Back in the pre-pandemic 2019, Americans left 768 million vacation days on the table, equal to $65.5 billion in lost benefits. 

Is my verdict best for you?

On the other hand, travel is most definitely a want, not a need.

The cash savings that Americans accumulated at the height of the pandemic has dwindled. Some 29% of Americans say they’ll go into debt to take a vacation this summer, and that worries travel-industry watcher Christopher Elliott, he wrote in a recent post about debt and travel.

“The travel industry likes to present its products as ‘must-haves,’” Elliott wrote. “They offer once-in-a-lifetime tours and bucket-list cruises. That’s promotional hype. Yes, travel is important, but it’s not essential.”

Staycations save money, and if you make the effort, they can be very relaxing, said John R. Power, a certified financial planner in Walpole, Mass. He took a great “staycation” when he lived near the Jersey Shore, he said. He spent the time off playing golf and tennis, visiting beaches and going out to dinner or lunch.

“It was a lot of fun and surely gave us our ‘mental health’ break,” Power said. “I believe you must not cheat yourself of everything to save for the future, or you’ll feel cheated.”

Think of the vacation vs. staycation decision as a chance to focus on your overall financial goals and whether you have a solid plan in place for achieving them.

“If a staycation allows you to save for a down payment or check out a few more concerts this summer, that may be right for you,” Pearson said. “Or you can skip the concert and save up for an even fancier vacation next year. Make a list of places you want to go, and things that you want to do. A dream without a plan is a wish.”

Tell us in the comments which option should win in this Financial Face-off. If you have ideas for future Financial Face-off columns, send me an email.

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