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Ask Dave

Take A Reasonable Vacation

Daisy wants to take a warm vacation. She presented it to her husband, then she got a part-time job to pay for it. Her husband wants to save the money and pay off the house. Who's right?

QUESTION: Daisy in Anchorage wants to take a warm vacation next February. She presented it to her husband, and then she got a part-time job to pay for the vacation next year. Her husband wanted to save the money and pay off the house. Daisy looks at that as a long-term goal. Who’s right? Dave thinks she should go on vacation.

ANSWER: If you save up money to go on vacation, I think you should. I don’t see any problem with that at all.

We call a fully funded emergency fund Baby Step 3. Baby Step 2 is being out of debt except for your home. Once you’re debt-free except your home and have the emergency fund, that’s the point that you can kind of let off the gas a little bit in terms of trying to plow through your financial goals. That’s the point where, if you need a new couch, you save up and buy a new couch. You can move up in car—save up and buy a new car. If you want to go on vacation, then you save up and go on vacation. But unless you have an emergency fund in place and while you’re working your way out of debt, you don’t need to be doing frivolous things—luxurious things, I guess I should say. I consider a vacation a luxury.

Once you’re on Baby Step 3, if you can save up and pay for a vacation, that’s fine. All of the money you make in the household does not have to go toward paying off the mortgage. Of course, we keep in mind that the more we put toward the mortgage, the faster we can pay it off. This is the point in the process where I suggest folks do a couple of things to enjoy their money a little bit. That doesn’t mean going and buying a ridiculous something, and it doesn’t mean an $80,000 vacation. But a reasonable vacation that you save up and pay cash for at this point in the process is what we recommend.