The fact that we're overstretched, tired and ready to dive into the nearest swim-up bar means that most families are planning to take a holiday in the coming year, according to a recent Hotels Combined survey.
The only problem with this scenario is that we're not factoring those family holidays into our budgets. The research found that 53 per cent of families escaping the daily grind over the next year will borrow money to do so.
The question is, does this put a rain cloud over that sunny escape you've dreamed of?
Is going into debt for holidays ever a good idea?
Holidays definitely fall into the category of "bad debt". That means that the only one who benefits from your debt lag (sorry, it had to be done) is, you guessed it, the bank.
Or is it?
"One of the principles of building wealth is to minimise bad debt - that is, it doesn't result in an investment that will grow, and it isn't tax deductible," says Natasha Janssens, founder of Women With Cents. "So, no, it's not wise to go into debt for a holiday.
"But, as a parent, I know how hard it can be to save up for a holiday, and I know that having a mental health break is important for your sanity."
So, if borrowing for a holiday is something you think is a necessity, you have a couple of options.
Travel loans
Lenders know that you're itching for a holiday, and they know you're feeling the FOMO (fear of missing out) after seeing your friends' latest holiday photos on social media.
"If only those social media posts came with a little price tag, showing the cost of the debt that goes along with it," Janssens says.
So, lenders have set up what they refer to as travel loans, with which you can borrow anywhere between $1000 and $60,000 for up to seven years.
Behind all the posters of beautiful destinations, the truth is that these are stock standard loans. "Travel loans are just unsecured personal loans with a clever marketing campaign behind them," Janssens says.
There's one big consideration to make before applying for a holiday loan: if you've struggled to save up for a holiday, can you afford to come home to the repayments?
If you're still keen on the idea of borrowing in order to get away, give some thought to:
- what the repayments will be;
- how long it will take you to pay the holiday off, and
- whether it will be paid off by the time you'll be ready for another holiday (you don't want multiple holiday loans compounding; this can spiral out of control very easily).
Janssens suggests, "Do a budget and, if you are going to go into debt, figure out what is a reasonable amount that you can afford to pay off. Then book in a holiday that suits the repayments you can afford.
"Do this before falling in love with an expensive destination. Otherwise, you go to the bank and get approval for more money than you thought - and suddenly you're planning an extravagant overseas trip that you'll be paying off for years.
"If you're going into debt for a holiday, I'd be inclined to go with a personal [travel] loan instead of a credit card; you're committing to set repayments that force you to actually pay off the holiday within the set timeframe."
Credit cards
One in three families who are travelling over the next year will return from their much-needed break with a whole lot of credit card repayments to be made.
If you're going to use your credit card to get away, you'll need to be very disciplined. "Credit cards are tricky because it's easy to become in the never-ending cycle of debt," says Janssens. "You'll pay off a little bit, then spend a bit more, and you never pay it off."
Ultimately, it's best to save up for your next holiday - but if the need for a holiday is too great to resist the loan or the credit card, go into it with your eyes wide open.
The last thing you want is to return from The Land of No Bills with more bills than ever.
Five ways to make your holiday fit your budget
Amanda Behre, travel specialist from Wotif, shares these tips for making your next family holiday affordable:
- Look beyond cheap airfares. The flights might be cheap, but is there affordable accommodation available on those dates?
- Monitor exchange rates. If you're travelling overseas, shop around for the best exchange rates online. As a rule, never purchase your international currency at the airport, where exchange rates are notoriously bad. It may seem small, but the difference between getting 1.3 or 1.4 $US to $A can mean an extra $50-$80 in your pocket when you're spending $2000.
- Get off the beaten track. Consider going to less travelled destinations; for example swap Bali's Seminyak for the quieter, cheaper and more family friendly Canggu.
- Search for value-adds. Look for hotel inclusions like breakfast, parking or kids staying and eating for free.
- Stay local. While cheap flights to exotic destinations are tempting, another option is to skip the long-haul airfare and enjoy an Aussie holiday. There are incredible destinations to explore in our own backyard.
