Topics:Debt Consolidation Debt Payoff Tips Travel Holidays Credit and Debt debt settlement debt consolidation raising your credit score post-debt advice debt facts bankruptcy debt effects Getting out of debt debt management budgeting and financial planning credit counseling Press Releases
Guest Post by Ben Walker Everyone deserves a vacation. Or at least that’s a common sentiment. But travel doesn’t come cheap, and it can seem like an unreachable goal if you’re in debt. According to the Federal Reserve, U.S. household debt balances climbed above $15 trillion in 2021. This included debt from mortgages, HELOCs, auto loans, credit cards, student loans, and more. If you’re dealing with paying off debt from any of these sources, you might find it difficult to understand how you can also work toward other goals, such as traveling. Rather than trying to do both things, consider removing your debt once and for all. It likely won’t be easy, but it’s possible. Here are a few steps to get started: 1. Identify your debt If you want to get out of debt, you need to know what type of debt you have and how much you’re dealing with. Before the start of any journey, it makes sense to get organized so you know how to get to the end. For your debt journey, you want to know exactly what you have to pay to get out of debt. This might be easy if you only have one major debt, such as a home mortgage. You simply have to check how much you’re paying each month and multiply that amount by the months remaining in the loan term. But if you have multiple debts, including credit cards and other loans, it could take more time to gather the information. Write down each type of debt you have and how much you owe. Another detail to add could be to organize each debt by how much interest you’re paying. Depending on your plan for paying down your debt, you might want to pay off the debts with the highest interest rates first (more on this below). 2. Create a budget Now it’s time to identify and organize everything to do with your income and expenses. To properly tackle the challenge of paying off debt, consider how much money comes in and how much money goes out on a monthly basis. This includes identifying all sources of income and your total income amount, as well as finding your total expense amount. Knowing exactly how much money you make and what it’s spent on might give you ideas on how you can spend less of it. For example, you might not realize how many monthly or annual subscriptions you pay for — are they all necessary? Is there another area of your budget where you didn’t realize you spend as much as you do? Take a focused look at your finances by searching bank and credit card statements. This can help you identify where changes might need to be made. Then it’s down to making decisions, such as cutting certain expenses so you can save money. And then your saved money can go toward paying down debt. Learning how to budget provides you with a lifelong resource. In one situation, it could help you pay off debt. But applied in different scenarios, budgeting could also help you avoid getting into further debt, including avoiding debt while traveling. 3. Start a saving habit Now it’s time to save, save, save all the money you can in an effort to be rid of your debt as quickly as possible. Part of starting any habit is setting goals to help you get there. In this case, your ultimate goal is to pay down your debt and, hopefully, stay out of debt in the future. Achieving this goal could pave the way for reaching other goals, such as traveling the world. But what should your saving goals be? It likely depends on your total debt and how much money you can afford to save each month. Because you already know how much debt you’re in and you’ve gone through the budgeting process, you can calculate how long it will take to be debt-free. The key here is to stay consistent, hitting your monthly saving goal or even exceeding it. How can you exceed it? Make more money so you have more savings. Picking up a side hustle or finding ways to decrease your expenses are options to help pad your monthly savings. 4. Choose a plan There are many different strategies and plans for paying off debt. Here are a few to consider: Debt avalanche — Make the minimum payment for each debt you have and then put any remaining funds toward the debt with the highest interest rate. Once that debt is paid off, move onto the debt with the next highest interest rate. Paying down your debts with the highest interest rates first could help you save the most money in interest charges in the long run. Debt snowball — Make the minimum payment for each debt you have and then put any remaining funds toward the debt with the lowest balance. Once that debt is paid off, move onto the debt with the next lowest balance. Paying down your debts with the lowest balances first could help keep you motivated to continue working toward your financial goals. Debt consolidation — With debt consolidation, you typically combine all your debts into one location, which could be a new loan or a balance transfer credit card. The purpose is to help organize your debt, reduce your number of monthly payments, and potentially get a lower combined interest rate. There’s not necessarily a best plan for paying off your debt. The best option for you is typically the one that helps you stick to your goals. Helpful travel tips It’s important to keep a few things in mind if your goal is to travel after paying off debt. Because traveling can be expensive, make sure paying for a trip doesn’t severely change your budget or put you back into debt. Here are some tips to consider: Use travel credit cards. As long as you never carry a balance and make on-time payments, using the right credit card can make all the difference for travelers. The best international travel credit cards offer useful benefits and rewards to help offset your travel expenses and enhance your experience. Use travel apps. Technology, including certain travel apps, can help keep your travel stress-free and more enjoyable. From Google Maps to Uber and beyond, there’s likely an app you can use to find activities, research hotel options, or solve another one of your travel needs. Consider travel insurance. Travel isn’t always predictable, which is unfortunate considering how much it can cost. But with travel insurance, your investment is more protected. The bottom line It’s possible to travel while in debt, but it might not be the best option depending on your situation. Because traveling typically costs a fair amount of money, it likely makes sense to pay off big debts before you travel. This can help remove the burden of debt from your shoulders so the only stress you have is planning a trip to your dream destination. Ben Walker is a credit cards and travel writer at FinanceBuzz who loves helping others make informed and financially sound decisions, especially when it comes to traveling the world. He does this by explaining key principles involving credit cards, budgeting, banking, insurance, investing, and more.
Guest Post by Ben Walker Traveling is an excellent way to broaden your horizons, whether it’s exploring a landscape you’re not familiar with or immersing yourself in a new culture. But it can get expensive. According to a 2021 travel trends report from AARP, millennials plan to spend $4,017 on travel for the year, Gen Xers plan to spend $5,028, and baby boomers plan to spend $6,691. These numbers can vary depending on your destination, the number of people traveling, and your length of stay. But after accounting for flights, hotel stays, a rental car, activities, food, and other common travel expenses, you can easily find that your total trip ends up costing thousands of dollars. Do you want to travel but think it might put you into debt? Here are five ways to approach traveling without ending up owing anyone money. 1. Start a travel budget Budgeting is one of the most effective ways to save money for specific financial goals, which could include saving up money for a trip. There are different budgeting techniques, so you should choose the one that works best for your situation. That could mean taking a certain amount of money out of each paycheck or having a goal to hit each month — just use whatever strategy fits your lifestyle and helps you stay motivated. Regardless of the budgeting method, track your total income and expenses. This will give you an overview of your financial situation and pave the way for making smart future decisions. And tracking your finances is easy with certain finance management tools. Once you know the exact amount of money coming in and going out, focus on the areas where you might be able to cut your spending. This can be helpful if you feel like you have no room left in your budget to start setting money aside. But if you have room to cut back on unnecessary spending, you have room to fund your travel savings. To potentially make things easier for yourself, consider setting up automatic transfers from your main bank account to a specific account for your travel budget. 2. Use the right credit cards You might think that using credit cards would result in more travel debt. And in some cases, that could be true. It’s easy to throw all your travel expenses onto a credit card and then worry about paying it off later. But this type of strategy can quickly lead to racking up credit card debt that soon becomes too difficult to manage. If instead you approach credit cards with the mindset that they’re tools to be used for reaching your financial goals, you might be more likely to exercise some caution. This doesn’t mean you can’t use credit cards for all your travel expenses, but you should only do so if you’re planning to pay off your balances each month. Using this method, it makes sense to use the best travel credit cards to fund your travels. You can earn credit card rewards on all your eligible expenses, including everyday purchases such as groceries and gas. These rewards can then be used to help cover flights and hotel stays, which are often two of the biggest travel costs. Be sure to compare different credit cards and the rewards they earn so you can get the most out of your credit card rewards. 3. Stay flexible with your plans It may not always be possible to have flexibility with your travel plans. You might have one window of vacation time that you can use during a certain month of the year and that’s it. If this is the case, you unfortunately won’t have as many options for decreasing your travel costs. But if you’re able to be flexible with when and where you travel, you can find a lot more budget-friendly options. Peak times will vary depending on your destination. But, for example, many Americans want to travel during the summer months because their kids are out of school and the weather is nice. This causes prices to rise in certain areas for flights and hotel stays because a lot more people want to travel during these peak months. If you’re flexible with your plans, you can avoid traveling anywhere during a destination’s peak season(s), which should cut your travel costs by a fair margin. Being flexible on your destination itself can also help cut costs. If you simply want to visit an area with beaches, you could save a lot of money by traveling to the relatively inexpensive countries of Southeast Asia rather than taking an expensive trip to the Maldives. 4. Do your research Along with having some flexibility in your travel plans, you should also do the proper research on where you’re traveling before the dates of your trip. This includes knowing how you’re getting there and back, where you’re staying, and what you’ll be doing while you’re there. Apart from giving you a plan for your travels, doing research can also offer opportunities for you to save money. For example, it’s easy to book a flight through an airline’s website, but how do you know you’re getting the best deal? To compare flight prices, use tools like Google Flights, Skyscanner, Kayak, and others to see which airline and flight route might offer the most savings. This same strategy can be used for hotel stays and car rentals as well, though the sites you use will likely be different. Even if you’re planning to use credit card rewards to book award flights or award stays, this type of research can help you save points and miles. You can then use your saved rewards on more travel opportunities, further decreasing your travel costs. 5. Consider travel insurance Do you need travel insurance while traveling? Not necessarily, but it’s not a bad idea. In many cases, travel insurance is cost-effective and could help you recoup expenses for unforeseen circumstances that arise during your travels. For example, what happens if you have to cancel your trip? Or what if you incur emergency medical expenses while overseas? Credit card travel insurance can cover certain things, such as trip interruptions or cancellations, but a travel policy from an insurance provider is typically more robust. If a travel insurance plan that costs a few hundred dollars covers you for thousands of dollars worth of medical treatments or pays to replace your expensive smartphone, the policy more than pays for itself. The bottom line Overall, there are plenty of ways to avoid travel debt, though the best ways for you will depend on your lifestyle and financial goals. But before you consider saving up for traveling, you should first pay off any debt you may already have. Traveling will likely cost some money, even if you follow these tips. So going on a trip before tackling existing debt may not be the most financially sound course of action. Learn how to pay off debt beforehand, and you’ll have more financial freedom to start your travels. Ben Walker is a credit cards and travel writer at FinanceBuzz who loves helping others make informed and financially sound decisions, especially when it comes to traveling the world. He does this by explaining key principles involving credit cards, budgeting, banking, insurance, investing, and more.