I feel like I shouldn’t be saying this, but I do think it’s possible to get into debt to travel the world and still call yourself a responsible adult. (I admit that it can be a slippery slope, though.)
The only time we ever got into debt to travel was when we were in a long-distance relationship. Cheesy had the money upfront for the airfare to visit me and he was staying at my place, so accommodation was sorted. He also had some cash, but he still maxed out his credit card during the trip.
Once he got back home, he immediately started throwing as much money as he could toward that credit card balance and got it paid off within a couple of months. The debt doesn’t affect us in the long term, so I would say that we handled that like responsible adults would.
(Of course it would’ve been even more responsible to not max out the credit card in the first place. But we only saw each other twice that year, so…)
How to responsibly get into debt to travel the world
The sentence above may seem like an oxymoron, but it doesn’t have to be one.
I think one of the best things about being an adult is having the freedom to bend the rules. You know you’re supposed to do A, but you decide you’ll do B instead and it’ll be okay because you know what you’re doing.
The challenge is to make sure you really do know what you’re doing; you have to be 100% confident that the risk you take won’t land you in a bigger trouble than you can handle.
When it comes to getting into debt, the most important thing is to understand the implications of that debt. Simply put:
- You’ll have to pay interest on that debt.
- It will take you some time to pay off that debt.
Once you understand what getting into debt entails, it’s up to you to decide whether the risks and rewards are acceptable.
Paying debt interest
When you get into debt to travel, you’re essentially saying that you’re willing to pay more for the privilege of traveling now rather than at some other time in the future. For example, the trip may cost $2,000, but because you pay for it with a credit card and you don’t pay off the balance immediately, it ends up costing you $2,500.
So consider this question for a minute: is there a good reason why you need to take this trip now rather than later, when you’ll have saved up enough money?
And if you do have a good reason, weigh that up against the extra amount you’ll be paying in interest costs. Is it worth paying that extra $500 to travel now instead of three months from now? Visualize yourself holding a $500 travel coupon that you can only use three months from now — would you wait to use it or would you go now anyway?
Credit card debt should not be your go-to method to fund your travels. Think of all the money you’ll have to fork over to the bank — what are some ways you can put the cash to better use?
Doing the time
Once you get back from the trip (or once you start working at your destination, if you plan to travel full time and work overseas), you’ll have to start making payments toward your debt.
Don’t even think about just cruising by, only making the minimum payments. The longer you take to repay that debt, the more money you waste in interest. Sure, you’ll eventually pay off the debt, but that wouldn’t be very responsible of you. And we are talking about how to responsibly use debt here.
As you make these repayments, you may have to sacrifice your lifestyle. You may have to move back in with your parents, delay home ownership or put off your education.
Of course, this will only be a temporary setback if you take debt repayments seriously. But you need to know beforehand how long this temporary setback is going to be for you.
- How much money can you set aside for debt repayment each month?
- How long will it realistically take for you to completely pay off this debt?
- How do you feel about having to adopt an ultra-frugal lifestyle for that amount of time?
So should you get into debt to travel the world?
Before you take off to travel, sum things up in one sentence:
I’m going to take on a $___ debt, which will cost me $___ in interest and take me ___ weeks / months / years to pay off, because I urgently have to visit ___ to do ______.
(Here’s a link to that calculator again.)
Now, does it still seem like a good idea? If it does, then go for it. (Unless you already have a debt problem, in which case your priority should be to pay off your existing debt and you should only travel if you can pay for it upfront.)
Check out these interviews to read about other travelers’ experiences with debt:
- Anne took out a loan to travel and ended up spending 2 years to pay off that debt. After that experience, she decided to never get into debt to travel again. Click here to read Anne’s interview.
- Megan has gotten into credit card debt multiple times. She thinks it’s okay because, in her own words: “I always had full-time employment waiting for me once I came home from each trip and never spent what I knew I couldn’t pay off.” Click here to read Megan’s interview.
Image credit: Modified from an image by Wimena Kane (CC BY 2.0 License)
In my situation, it’s for my mental health. I’m currently in a toxic living situation (at my parents’) without a job, and I’ve realized that if I’m going to leave, I might as well travel instead of trying to establish myself elsewhere. I tried the establishing thing and it was like pulling teeth. I’ve had excellent credit up till now, always paying my credit card balance off in full, but at this point I need distance and to do something that makes me happy so I can decide my next step in peace. It’s either stay here and be miserable and stressed, or get myself to a safe place where I can breathe. Basically, I’m going into debt for survival.
I found an ultra cheap plane ticket and I’m leaving next week.
Eventually I plan to establish an online income (I already have a website and a decent sized social media following for my photography) and work my way up from there.
That’s exactly what I’m talking about. If you know all the risks and you go into it with both eyes open, then why not? To you the risk of debt is less important than your mental health, as it should be. Racking up credit card debt for travel can be part of a healthy personal finance plan, as long as you fully intend to only temporarily stay in debt. All the best with building your online income and enjoy your travels!
I did exactly this and although I don’t regret it (I had an amazing time travelling) I do regret not taking a bit more responsibility! I’ve actually just posted on my blog about the struggle I had to get OUT of the debt! http://lifeasabutterfly.com/how-i-went-from-verging-on-bankruptcy-to-being-in-credit-in-three-years-and-travel-was-to-blame/
Great story! This is what I mean, it’s an incredibly personal choice. Only you can decide whether the experience is worth the debt. Someone else, having gone through the exact same thing you’ve gone through, might end up with regrets. But you didn’t. It’s all relative!
We live in a society that is driven by the need for instant gratification. Our impatience is destroying our ability to appreciate both the little and large ‘payoffs’ in life. Sometimes it seems so very difficult to achieve a longer term goal like buying a house or traveling around the world. Let me tell you, it is difficult! It requires not only patience, but also sacrifice, planning, intelligence, hard work, and a little bit of luck. Once achieved, however, the satisfaction will be more than worth the effort.
I would argue that there are 4 ways to travel around the world indefinitely, and sleeping on park benches is not what I have in mind.
A) By being rich (unfortunately not the case)
B) By working as you go (teaching English, odd jobs, writing, etc.): Problem with this is that your pay will be inconsistent, fairly low, and likely take away from the enjoyment of travel, at least to some extent given the stress and time commitment.
C) By having passive income (real estate, owner absentee businesses, dividends, etc.): This is IMO the best strategy, though not the easiest.
D) By borrowing the $: Sure you can take out debt and travel, but you’ll have to pay the piper eventually. Much like our government, you’ll only be delaying the inevitable, you’ll have to work and make money/pay off debts at some point in your life in order to survive.
I have personally chosen the passive income route through businesses and real estate, and at 35 yrs of age, have currently reached the 75% mark of achieving my full-time job income from passive sources. It gets easier and easier to pursue investments as your income increases, as long as your expenses remain relatively fixed. It also helps to have a fairly high paying job of course, or else your time frame will be quite elongated. I believe that in 3 or 4 years I’ll be able to achieve enough passive income to quit my full-time job, or perhaps stay on part-time while traveling since much of what I do can be accomplished from anywhere. I will tell you, it has not been an easy 6 or 7 years, and it will be a difficult road to the finish line, but it’s also been a fulfilling experience that has taught me a great deal.
My biggest advice to someone starting out would be to not rush into an investment. You must analyze every $ you invest because today’s real estate/business/stock market is built to separate you from your $. Because we’re at the latter stages of an economic cycle, it’s truly become a zero sum game. Growth is anemic. Unfortunately, one mistake in today’s market can cost you years to recoup. And btw buying a house is NOT an investment, so don’t confuse home ownership with an investment property. In fact, I would argue that buying a home is the greatest hurdle to financial success and independence. With a partner, I own a small commercial building, an owner-absentee business, an industrial warehouse space, and a multi-family home, fully paid, and I rent a 1 bedroom apt lol. And the biggest reason I’ve been able to accomplish this is because I haven’t purchased a home. I’m happy to give advice if anyone is interested; I received plenty from nice folks myself along the way.
Thank you so much for sharing your story, Sammy. It seems we agree on many things.
I’m building my real estate portfolio as well. I’m not where you are yet, but as you say, it gets easier and easier. Like you, I’ve learned a lot over the past few years. It sucks that sometimes I have to make costly mistakes to learn my lessons (one of them was buying an apartment to live in myself), but it’s all part of the journey.
I recently published a new page on all the ways full-time travelers can support themselves, by the way. Being rich and borrowing the money are not in it because rich people probably don’t need to read something like that and borrowing the money is not sustainable for long-term travel. :D
I found your website just today, so I have plenty of reading to do. You have some great articles and ideas, thanks for taking the time to help others!
One thing I’d like to see written about (not sure if you have already) is the cost difference of traveling to different countries/regions. For example the cost of rental/food/transportation in Australia vs. Italy vs. Japan…whatever countries you’ve traveled to. Would be interesting to compare, especially for those on a budget. Perhaps commentors can also contribute their personal experiences.
Thanks for the compliments, Sammy. I hate to burst your bubble, but my motives are not entirely altruistic. :D Working on this blog satisfies my own curiosity about how people manage their finances while traveling and I also do get writing clients from here.
That’s a great idea and I’ve thought about it before, but I’m not sure how to execute the idea. There are just so many variations and destinations. I’ll continue to think about it and hopefully I’ll come up with something.
No I wouldn’t get into debt to travel. Not for travel, love, anything or anyone. I believe that saving up to achieve the dream of travel is a real winner and makes travelling stress free if you’ve sensibly budgeted enough.
But each to their own, I wouldn’t bash your ideals.
I also believe that saving up to travel is the best way to get a stress-free trip. That said, there may be a combination of little notice + urgent once-in-a-lifetime trip + not enough savings that would compel me to swipe the credit card, knowing that I don’t have the cash to pay it off right away. Personal finance is personal, as they say. :D
Deia, thanks for a thoughtful article about whether to go into debt to travel, and thanks for also linking back to our interview!
I think this is one of those grey areas – everyone has their own opinion and sometimes you might be able to justify going into debt to travel if it is a short notice opportunity. But at the end of the day you still need to pay the money back – and then it will take that much longer before you can afford to travel again. So you can easily get into a cycle of borrowing money for EVERY trip and never getting out of that cycle, especially if the travel bug bites you regularly.
But if before your first bigger trip you save the money, you know you have already done the hard work and you can relax while away and not worry if you are going to blow your budget (and if you do blow it a bit it is not too big a deal) and know when you get home that you can then start saving for your next trip and be able to afford it within a reasonable timeframe. And keep moving forward in that cycle – and put that ‘$500’ towards your next trip instead of paying it to the bank!
That’s a good point about the short notice, Anne. If there’s enough time to prepare before the trip, then there should be enough money saved to pay for it upfront. We did have some savings and part of the reason the debt wasn’t a big deal was because we paid for a big chunk of the expenses upfront, so it wasn’t a huge balance.
Maybe age has to do with it too? We have enough money in savings to cover most trips we want now, but we wouldn’t dream of spending it all in one go, so it’s quite unlikely that we’ll get into debt to travel any time soon. At that time, though, we were younger and had little to no savings. (If I’m not mistaken, this was also the case at the time you got your loan to travel.) It’s easier to bounce back from debt when you’re younger.
Also love your point about the cycle. That could get really expensive quickly!
That is an interesting question Deia! Having been raised in conservative Germany, I have learned to say no and save the money first. But after living in the US for a while I realized that people are raised with a different attitude towards credit cards and accumulating debt. It really is a slippery slope and as your example shows, you are paying for it in one way or another. And I personally rather spend that interest money on another trip… :)
I’m pretty conservative myself when it comes to consumer debt, perhaps it has to do with my upbringing as well. There are just so many better ways to spend that interest money! :D
Let me help you with an answer. No, it’s not OK. And your argument why it might be, is a bit confusing.
The example in the first part of your post is misleading. Your boyfriend visiting you is not leisure travel. It’s love. I can see myself going in debt to visit a person I love, but again, it has nothing to do with leisure travel.
Maxing out one’s credit card is bad for more reasons than one. If this is your only card, that might considerably lower your score. If it’s not, why would he max out one card in the first place?
Paying $500 in interest on a $2K loan means using a card with 25% APR (provided you are going to repay by the end of a 12-month cycle). I hope you just threw at your readers the first number that popped into your head, and that you are not really advocating borrowing money from a credit card with an interest rate that is THAT atrocious.
I’ve clicked around your blog, and it seems to me that you are familiar with the concept of travel hacking. I must say, I can’t understand for the life of me how you can imply that going into credit card debt for travel might be OK, while there are perfectly good ways to get that ticket and hotel stay close to free.
Credit card debt is toxic. And it makes no difference whether or not your job is waiting for you by the time you come back to reality.
I agree that going into debt to visit a person you love is easier to justify than traveling for leisure. The line between leisure and non-leisure can be blurred, though. For example, we also visited other nearby cities, which really wasn’t necessary. It was unlikely that we were going to be there together again for a long time and we decided to do it anyway. It was indeed his only card and he paid it off in two months, so I doubt it affected his credit score much. If it did, we weren’t planning on taking any big loan anyway at that time. It’s been years since then and I still have no regrets.
I don’t see this issue strictly as the right vs wrong way to fund a trip. There are many factors at play and I don’t know the specifics of anybody’s situation. It’s really something people should decide for themselves. If someone understands the implications (interest, credit score, missed opportunities) and decides to do it anyway, then it’s okay because that would be an informed decision made by an adult.
I think credit card debt is a tool and it all depends on how you use it.
To answer your questions:
Yes, that $500 interest is a random number. I never mentioned any specific interest rate or repayment period, so I don’t know how you got the idea that I was advocating any credit card. I provided a link to an online calculator, which should be more useful than hypothetical figures that probably won’t apply to any specific reader.
And yes, I’m aware that people can use points to travel. There’s a reason why it’s not very popular outside the U.S., though. Travel hacking is generally not very rewarding for the rest of the world. Both Anne and Megan, whose interviews I link to in this post, are Australians.
Thanks for your thoughtful response! :)
EDIT: After some back and forth with Andy, we both agree that credit card debt is a bad thing, but there may be times when it’s acceptable to use it responsibly. The problem comes from our different definitions of “debt” and “travel”. I use these terms broadly, whereas Andy interprets “debt” as carrying credit card balance for a prolonged period of time and “travel” strictly as an unnecessary leisure activity. In case it’s not clear, I do not encourage this kind of “debt” or “travel”. This post is about having a good reason to travel and paying off the debt ASAP.