One of the main reasons why people say they don’t travel is money. While I consider myself a very lucky person, I’m not rich and I strongly believe you don’t have to be rich in order to travel (that’s a myth!). But what if you’re not only not rich but you’re also in debt? Should you travel with debt?
Truth time: I have debt. Colin and I have consolidated our money (check out my tips for managing money with a partner) and together we have student loans and a mortgage to pay off. At different points in our lives we have also had car loans, lines of credit and credit card debt. And throughout all of those financial times, we have never stopped travelling.
Here’s how we do it and how you can travel with debt:
Note: This post is 100% based on my own experience and opinion. I am not a financial expert. And I recognize that I’m in a very privileged position with the type of debt I have and have had in the past. I’ve never had to go into debt to be able to afford basics like food or shelter – and travelling with debt like that is a very different challenge.
Different types of debt
Before I get into travel, I want to talk briefly about the different kinds of debt. Now, I am no money expert. Everything you read here is my personal opinion based on my own experience and any knowledge I’ve gained through podcasts and skimming articles people link on Facebook. For the undisputed facts, talk to a financial adviser you trust.
So my very limited financial knowledge tells me there is bad debt and there is good debt. Good debt is any debt that is an investment in yourself and your future, and that has a reasonable interest rate. For example, student loan debt, while a mounting problem for my generation, is a form of good debt. Your education is an investment in yourself and student loans traditionally have one of the lowest interest rates.
Another form of good debt is a mortgage. Yes, a mortgage counts as debt! Technically, by owning our apartment back in Vancouver, we are in debt to the bank. But a mortgage is an investment into our future and it puts a roof over our heads. Most home owners have mortgage payments; it’s the rare person who is able to buy a house outright.
And then there’s the bad debt. Credit card debt is one of the worst kinds of debt to have. Credit card debt isn’t usually an investment in yourself or your future, and the interest rate is usually obscene! Most finance gurus will promote paying off your credit card debt first before any other debt.
Another bad kind of debt is car payments, since new cars are often not considered good investments, especially for young people. The moment you drive off the lot, your car has plummeted in value. And yet you’re stuck paying it off (usually at a pretty high interest rate) for years as it diminishes in value. Unlike a house or your education, that should help you generate money, a car just sucks money and the resale value is never as good.
There’s a lot of research out there about cars and the value (or lack thereof) of buying a new car and needing to make payments on it. From what I’ve heard and read, I would never buy a new car. But apparently, I would join finances with a guy who bought one (love you, Colin!). All jokes aside, some money lessons we need to learn the hard way.
Different types of travel
Just as there are different types of debt, there are also different types of travel. When I hear people say they can’t afford to travel, I know they’re not talking about the same travel that I am. I am an almost budget traveller. I find good flight deals, I stay at budget hotels or apartment rentals, I choose free walking tours and I only splurge on activities or meals that are really important to me.
On our three weeks moms trip through Europe, my mom estimated that she would be spending about $2000 for the entire trip. That includes long-haul flights from Vancouver to Europe and back, three flights within Europe, three train trips, one car rental, three hotels, two airbnbs, activities and food. I know some people who spend that much just on flights!
We were able to do that by finding a good flight deal for the long-haul Vancouver to/from Europe legs, taking advantage of budget airlines in Europe, sharing hotel rooms, cooking some meals at home, staying with friends and prioritizing budget activities.
It is possible to plan out your trip, find the deals and stick to a budget. You do not need thousands and thousands of dollars to travel. If you really want to travel cheap, you can couchsurf, hitchhike and only do free sightseeing activities. But even if you want to be a bit more comfortable, it doesn’t need to cost a fortune.
So if you want to travel with debt, what kind of travel are you talking about? If you’re planning to blow it all on a luxury trip, you may need to rethink your travel plans.
How to travel with debt
The first step of travelling with debt is to think about what kind of debt you have and what kind of travel you want to do. Ideally, you have “good” debt and you’re planning a fairly-budget trip. If your debt is in the bad category, it doesn’t mean you can’t travel. It just means you need to be even more conscious of your options and plan ahead.
Is your debt manageable? And by that I mean, do you have a plan to pay it off? If you want to travel with debt, you need to have a handle on it. Do you have a payment plan? Are you making your monthly payments? Do you have the budget to continue making your payments while also paying for a trip?
Ideally, you don’t want to miss a payment ever. But sometimes, life happens. Things come up and payments get missed. I know sometimes the travel opportunity is too good to say no. While I wouldn’t recommend choosing a plane ticket over a debt payment in most situations, sometimes the flight wins out. When that happens, you still need to make a plan for how you will repay your debt when you return and get back on track.
Look into your options! If you want to travel with debt, talk to a financial adviser and ensure you’re making the best financial decisions when it comes to your debt. I know some student loans allow you to defer until you’re working or even have your loans forgiven if you work in a certain field for a certain amount of time. You may be able to consolidate your debt and pay a lower interest rate or you may be able to pause payments without increasing your interest. Before you give up on travel, make sure you research every option available to you.
The bottom line on debt and travel
By now, you’ve probably figured out that yes, I do think you can and should travel with debt. My golden rule is that you should not let debt stop you from living your life.
Unfortunately in this day and age, debt is a part of life. Almost everyone is dealing with debt in one form or another. And while I definitely advocate trying to eliminate any bad debt and having a plan to pay any debt off, I don’t think you should become a slave to your debt. We get into debt to better our lives – whether that be with a new car, new shoes, university education, or a condo. So we shouldn’t let our debt control us and ruin the life we’re trying to better.
But that doesn’t mean you can totally ignore your debt and travel without a care in the world. As I said above, your debt should be manageable and you should have a plan to pay it off. But just as important, you shouldn’t go into debt in order to travel. Travelling on a budget is possible. If you can’t afford the flight, hotel or tour and don’t have a plan to pay off that credit card bill, it’s time to re-evaluate your travel plan. That’s not to say you can’t put travel on your credit card (of course you should, get those points!), but you should have a plan for paying it off.
Maybe this isn’t the year you fly business class to Tokyo and spend three weeks in expensive Japan. Maybe this year you head to your aunt’s cabin in Hope for a long weekend or grab a cheap flight to Europe, spending time in an inexpensive city like Prague.
Bottom line: Don’t let debt hold you back from travelling, but don’t let travelling put you into debt either.
What do you think? Should we travel with debt?