Should I Take a Vacation or Save for Retirement?

Summer is here, and with it comes a familiar financial question: should you spend money making memories today or save more for the future? Austin Wilson, Josh Robb, and Jordan Shaw explore the trade-off between taking vacations and adding to retirement savings. They also share a practical framework of questions to help you make the decision confidently. They discuss when spending on experiences may be the right choice, when delaying gratification could be wiser!

For the video version, show notes, or transcript, visit thewealthmindsetshow.com/s2e38

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Transcript

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You’re listening to The Wealth Mindset Show where Hixon Zuercher Capital Management’s team of finance professionals, portfolio managers, and a life coach come together to tackle complex topics in finance and retirement planning so you don’t have to. From investment strategies and wealth management, to tax planning, retirement income, and aligning your money with your values and purpose, the Wealth Mindset Show offers the tools to thrive.

Austin Wilson:

All right. Hey, hey, hey, welcome to The Wealth Mindset Show, where the Hixon Zuercher team will have conversations on managing wealth, navigating retirement, making smart decisions for a secure, meaningful future. I’m Austin Wilson, Chief Investment Officer at Hixon Zuercher Capital Management.

Josh Robb:

I’m Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management. And joining us today is Jordan Shaw, one of our advisors here at Hixon Zuercher Capital Management. And we are going to be talking about the trade-offs between spending now and same for the future, and mostly focusing on vacations now versus future spending on those type of events and activities.

Austin Wilson:

Spoiler alert, Josh is going to say, “It depends,” at some point.

Josh Robb:

It does depend.

Austin Wilson:

But we’ll get to that. So, yeah.

Josh Robb:

When we get to this podcast.

[1:07] – Life Updates: Warmer Weather, Bike Rides, & Miracle League

Austin Wilson:

So it’s late spring. We’re getting there, weather’s warming up. What’s going on with your families?

Josh Robb:

Well, we are in the middle of baseball and softball season. Starting of the year, it’s been very cold and wet and rainy, which is normal spring weather for Ohio.

Austin Wilson:

True.

Josh Robb:

So you go from one day having shorts and a T-shirt to a winter coat on and it’s all over the place, but spend a lot of time out on ball fields.

Austin Wilson:

Yeah. Jordan?

Jordan Shaw:

Outside, going on walks, bike rides. Anything you can do to get kids outside with the warmer weather, that’s where you’ll find us.

Austin Wilson:

Yep, same here. Kids are loving swinging outside on the swing set, a lot. Falling off of things on the swing set, some. Yeah, we’re doing Miracle League baseball.

Jordan Shaw:

That’s always fun.

Austin Wilson:

Our oldest one is in the Miracle League, she plays for the Cubs. She, stud. She just is straight up on the base every time, hits the ball every time. She’s great.

Josh Robb:

Yep. We got a great announcer there too.

Austin Wilson:

We have a great announcer there and his daughter plays on our team as well, I believe. So yeah, super fun. We love the Miracle League, but yeah, Miracle League baseball on Saturdays and we’re just enjoying being outside like Jordan. We see the Shaws out quite a bit.

Josh Robb:

Are you there this weekend?

Austin Wilson:

Yeah, tomorrow.

Josh Robb:

What time?

Austin Wilson:

Noon.

Josh Robb:

Okay.

Austin Wilson:

So we’ll be there tomorrow.

Josh Robb:

All right.

Austin Wilson:

Go see the Cubs. But yes, as Josh pointed out, it’s summer. It’s going to be summer here. So group chats are blowing up, talking about, “What beach trip we take. And oh, I found a cabin deal in Montana. Ooh, I could go to Europe for $10,000.” The question is, you might also be comparing that to, “Oh, well, my retirement app. Markets are at all time highs, or wait, a couple months ago, markets were down 10%.” Your retirement app’s staring at you. What’s the right move? Do you start plowing more money into retirement? Do you spend the money now? Take the vacation? The question is that we’re going to be answering, which one’s right? And again, we said it’s going to really depend.

[2:56] – The Facts on U.S. Summer Spending

But one thing that’s interesting is that statistically speaking, the summer is heavy spending season. So specifically here in the United States, our vacation time is generally concentrated because a lot of the countries peak weather time is summer and no school time and all that stuff, concentrated in the summer. About half of Americans, 52% tend to overspend in the summertime and that could be called things like fun-flation, right?

Josh Robb:

There you go.

Austin Wilson:

It’s true. But the question is, what is behind our thoughts behind all of these free-for-all spending habits? And then I guess a lot of it could just go down to mindset, right? A lot of people think, “Oh my goodness, I need to make the most of this summer.” Two thirds of Americans say that they’d like to do that, but what that does is it causes their spending to go through the roof. And then there’s just activities in the summer that cost a lot more, there’s a lot of FOMO going on. So, that’s what we’re going to be talking about today is, is this a good thing, for one? And is it something that you need to be balancing in your overall financial picture, along with of course being responsible as well?

Josh Robb:

Yeah.

[3:59] – The Wrong Question & Shifting Perspective

Austin Wilson:

So the question is, you can either enjoy life now or retire well later, but the question is a little bit more nuanced than that. It’s a little bit more, well, we need to be able to balance this, because financial planning is all about balance. So Josh, talk a little bit about that balance.

Josh Robb:

Yeah. So really what it boils down to, and this is a picture of a lot of the financial planning that we do, in that you are balancing a short term need or goal or desire versus a long term goal, need, or desire. And you don’t have enough money always to go around to fully fill all those things up. And so you’re balancing between current spending and future needs. And the hardest part about this whole thing is, that future need is an unknown in that, what will I feel like health wise? What will I be able to do? What will my situation be?

Austin Wilson:

Yeah. How long am I going to live?

Josh Robb:

How long? All those things, there’s a lot of unknowns factored into that. So sometimes it’s easier to default to the, “Well, I know I’ll enjoy it now. Might as well do it.” You mentioned the fear of missing out. Well, what if I don’t ever get this opportunity again? So it is a balancing act and one of the things we do as advisors is we help you at least understand the trade-offs because it’s always a trade off. And that’s something we talk about all the time as advisors is, there’s not necessarily always a clear right and wrong answer, but there is a trade-off between those two choices and you need to understand it before you make that decision.

[5:28] – A Simple Framework of Questions to Implement

Austin Wilson:

Right. So Jordan, talk a little bit about a couple questions you should ask yourself when you’re discussing maybe spending on a vacation versus looking at your long-term plan.

Jordan Shaw:

Yeah. So there’s two different categories that people are going to fall into that are asking these questions. One is, we’re not retired yet. So it’s truly a matter of, maybe you’re a young family and, do I take a vacation, make more memories with my young family and put a pause on or reduce or whatever it looks like your savings for retirement? Versus someone who is in the other category who’s already retired and it looks more like, “Can I afford to do this? Does it work well with my retirement plan?”

So, and that’s one of those questions is having that plan, looking ahead and saying, if you’re a young family and you’re trying to save and save and save for retirement, you’re going to regret not taking those trips if all you do is save for retirement. But there’s a way to build that into your budget and say, “Okay, maybe I’m just taking one month off of retirement saving, or it’s, I’ve already given myself plenty of heads up. We’ve known we were taking that year up trip for three years and we’ve been saving for it.” So, asking yourself if it aligns with your goals that you currently have. You don’t only need a long-term plan, you also need a short and a midterm plan to make sure-

Austin Wilson:

Yeah, that’s right.

Jordan Shaw:

… that your life is being fulfilling.

Josh Robb:

And that’s the thing is when you’re retirement planning, I mean, it’s down the road, 20, 30, 40 years. And if you don’t have little short-term goals along the way and celebrate progress, you’re going to get burned out-

Austin Wilson:

Totally.

Josh Robb:

… and have a harder time reaching those goals. So yeah, you do have to balance that out. And those questions about, you mentioned it, if it’s a bigger trip too, is this spur of the moment? Did I just come up with this, or is it something I’ve been wanting and planning on doing? Right?

So my wife and I, we had wanted to go on an Alaskan cruise. We were going to do it at our 15 year anniversary, COVID happened, we didn’t take the trip, but we had been talking about that for a while. Then we had another five years to talk and plan for and we ended up doing it at our 20 year anniversary. It wasn’t a last minute decision. We had been talking and planning about that and saving for it along the way.

Austin Wilson:

Totally.

Josh Robb:

So that’s one thing is, because again, it may not even derail your long-term plans if you can do it side by side, but even if you have to make some adjustments temporarily, it may be worth it still.

Austin Wilson:

I think that if you do impulse driven spending for a vacation, that’s a very, very dangerous spot to be in, right?

Josh Robb:

Yes.

Austin Wilson:

Because-

Josh Robb:

Then you’re paying catch up.

Austin Wilson:

You’re playing catch up, you didn’t plan for it, you didn’t put money aside for it. A lot of people, what they end up doing is falling on poor funding methods-

Jordan Shaw:

Credit card.

Austin Wilson:

Also known as credit card debt, right? Almost anyone can go to Europe for three weeks and drop 15 grand because their credit limit will probably allow it, but how are you going to pay for that once it’s actually due? Not a great idea. So funding it is obviously, so plan for it, plan ahead. Can you pay for it without stressing out the rest of your plans really the answer? Or are you just going to say, “YOLO, I’m going to figure it out later”?

Josh Robb:

Yeah. Who cares?

Austin Wilson:

Don’t YOLO, people. That’s usually how people end up paying 30% in interest. So, was your $10,000 trip to Europe really worth, after you pay it off, 20, $30,000? Probably not.

Another thing is just, what are you using this for? Right? Are we trying to be really intentional about planning for this and what it’s going to mean to us, right? That would be, are we creating memories with our kids, like Jordan talked about? Are we creating memories with our spouse, like Josh and Steph did? Are we using this just for a break that we’ve been planning for? These things are really important. One thing that we all know and we all have kids, is your kids are only home, permanently, for a short period of time relative to their life. About 18 years or so. And so, you got about 18 summers and there’s a handful at the beginning that it’s like, probably not going to be doing a lot of traveling.

Josh Robb:

Or won’t remember.

Austin Wilson:

Or they won’t remember it. And there’s a handful at the end where they’re probably going to be too busy. So, the window’s actually smaller than you think. So make some memories while you can, that’s worth investing in a lot of ways if you do it the right way. Those memories can actually matter more than the dollars, or same things with you and your spouse. There’s a great period in your life where you need to go make memories while you can because maybe when you get a little bit older, it’ll be a little bit harder to do that. You won’t have the energy or the availability to do that. Or if your kid situation is challenging, you might not have the availability to do that there. So, if you’ve got the time and you’ve got the money, it might be worth it.

Josh Robb:

Yep.

Austin Wilson:

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Jordan Shaw:

Yeah. And this is definitely something for someone who has not retired yet, who is looking at these sorts of things as an expense coming up that I have to look at the budget or the cash flow or whatever throughout the year. And this exact instance is where, or one of the reasons why I think it’s important to build intentionally into your budget, if you have one, or just understanding what your cashflow situation is like, some margin that is not accounted for. Just say, “This is extra savings. I’m not putting it into a retirement account that I can’t touch for 20 years. I’m not putting it towards known bills that I have to pay. I’m just saying this is extra savings outside of anything,” because you might come across that family vacation and you have an opportunity, it’s only three months away, and you don’t normally have three months worth or that’s not enough time to save for it perhaps, but you’ve got this extra slush fund. It’s not an emergency fund.

It’s literally extra savings and I love it for stuff like this, because it gives you some freedom to say, “You know what? If that happens, I don’t have to change my retirement savings, contributions, whatever, at all. I’ve got this extra put away.” I understand not everyone can do that, but if you can, or if you’re someone who like me likes to have every single dollar, have in a certain place, maybe it’s okay to have a, “This isn’t assigned to anything,” to allow for this flexibility.

Josh Robb:

And that’s the key is if you can plan ahead, you can, in a sense, budget for a trip, vacation, those types of things, that’s the preferred way to do it, like you said, Jordan. And then if you are maybe a little bit tighter on money, it’s the trade-off of saying, “Okay, if I reduce maybe a little bit of my long-term savings and I bring my savings rate down to free up some of that cash, what am I trading off? Oh, I may have to work two more years longer in my career if I’m willing to then be able to take some vacations periodically along the way.” If you’re comfortable with that trade-off, that’s not a bad decision.

Austin Wilson:

Right, absolutely.

Josh Robb:

It’s not like there’s right and wrong. It’s just, am I willing to accept the difference between doing this versus doing that? And so if you say, “You know what? I’m willing to sacrifice a couple more years of working so that I can every couple of years take a vacation with our family,” that’s a perfect trade-off-

Austin Wilson:

Absolutely.

Josh Robb:

… if you understand and are willing to do that.

Jordan Shaw:

And I’ve actually seen clients do that and do it well. So many clients that we’ve met with, Josh, are not… I’d say the majority of them, they don’t come up to their retirement date and say, “Oh yeah, definitely, I can’t wait to be done.” Most of them, yeah, “I can’t wait to be done.” But there’s a level of, “I’m willing to work a little bit longer if it means making those additional memories possible a few years ahead or throughout retirement.” That is definitely something that has helped focus in my own perspective on all of this. Working an extra year or two can have a dramatic impact on your portfolio.

Austin Wilson:

Absolutely.

Jordan Shaw:

And it’s maybe a small price to pay for those memories.

Austin Wilson:

I mean, I guess the key question when you’re looking at this from a financial perspective is, does it break my financial plan for me to take this trip? And if the answer is no, and hopefully you’ve planned for it, you’ve put some money away, go for the trip. Enjoy yourself, because we’re going to talk about some reasons why, but yeah, the answer is, yes, probably not great time to take the trip. We probably need to plan ahead for the next trip. Maybe that’s another year or two. Right? You can, just like delaying retirement, you delay the trip and you can still take it, just plan ahead for it. Right?

[14:05] – When Taking the Vacation Is the Right Answer

So then let’s talk about some instances where taking the vacation is the right answer, and then we’re going to turn the page over and say, well, whoa, whoa, maybe when waiting might be the smarter choice. So, when is taking the vacation smart? Life milestones, right?

Jordan Shaw:

Yep.

Austin Wilson:

One of those is, kids growing up. Like I mentioned, you have a finite amount of years to have those trips with your kids. A lot of those could be reconnecting with family that’s out of town. A lot of those could be special trips, anniversaries, like Josh talked about. So these life milestones, if you have financially prepared for it, great opportunities to take the trip. So take the trip, you probably won’t regret it again.

Other ones, opportunities that won’t come up again. Maybe there’s a great organized trip with another group of friends and it’s just well planned out and everyone’s been thinking about it. Maybe that entire group going on the same trip for the same week isn’t going to be able to happen again, or your family or whatever. Go for the trip if you financially prepared for it. One thing that we’ve seen is with clients and friends and all this is, tomorrow is not a guarantee. This is why the answer is not simply, sock the money away. Sock the money away is the mathematical answer.

Josh Robb:

Yes.

Austin Wilson:

But the-

Josh Robb:

It’s weird, financial advisor is saying, “Spend the money now.” But the truth is, most people that we work with are going to end up with more money than they had planned for.

Austin Wilson:

Exactly.

Josh Robb:

That’s just how it happens, where people who have a good plan and stick with it, and so there is some cushion built in.

And then the other thing, like you said, is there just isn’t enough guarantee for the future to completely sacrifice all of the short-term things that you want to do.

Austin Wilson:

Yeah. I mean, we know people where spouses have died young. They’ve had issues with their kids or kids sometimes aren’t at home and they didn’t take as many trips as they could. And there’s a lot of reasons why that could be, but tomorrow just isn’t promised. So if you can, it’s really healthy to take some trips. Enjoy yourself, enjoy your family, enjoy your loved ones. So, those are reasons why taking the vacation might be the right choice.

[15:59] – When Waiting for a Trip Might Be Smarter

Austin Wilson:

There are reasons why it would not be the right choice, and this is where your financial numbers are going to start kicking in. One of those is, like we mentioned, if you have to go into debt for it, high interest debt particularly, not a good idea, like that trip-

Josh Robb:

Or if you have high interest debt.

Austin Wilson:

Period. Yeah, that’s a good point.

Josh Robb:

Pay that off because it’s really hurting your long-term success-

Austin Wilson:

It is.

Josh Robb:

… before you start then incurring some of those other costs.

Austin Wilson:

Yep, or if you just don’t have a plan and you haven’t thought about these things, maybe you’re looking at things impulsively, you’re not planning far ahead. You don’t know if you’re on track to meet your financial goals, probably not good to go on that trip and pay for it until you have all of that figured out.

Josh Robb:

Yeah. And definitely don’t borrow from your emergency fund to go on that trip, because that’s there to protect you.

Austin Wilson:

Absolutely.

Josh Robb:

It’s not there for vacation.

Austin Wilson:

And of course, there’s just often times where there’s competing priorities, right? Especially when you’re a young family I feel like, having babies is expensive. Raising little ones is busy, that’s a competing priority. Maybe just wait a little bit. It might be a little easier. It might free up some cushion in the future. Buying a home. Has anyone tried to buy a home? Interest rates are high and home prices are high. So, your down payment requirement and saving up for that is a lot harder than it used to be. So that is a competing thing where you just need to choose which one’s more important. If you want to buy a house, that’s great, we hope you do. You need to be planning for that and that can delay vacations or vacation could delay the house. You’re just going to be doing one or the other. And then just other major upcoming expenses, it could be weddings, could be other, whatever you need to do, college for your kids if you’re helping out with that. These are things that could be a competing priority. So if you have competing priorities, it’s not just so simple.

Jordan Shaw:

And I would also add to that something that’s a little harder to quantify. This is The Wealth Mindset Show, right? So there is a mentality and a behavioral piece to this, where leading up to the vacation if you just don’t feel good about it or you’re not aligned with your spouse or whoever’s going on a trip with you really about it, or you’re just not settled about the financial aspect of it, that might be a yellow flag right there or even a red flag that says, maybe this is not the right time to be doing this. Plan it out a little bit better. Even if you call this number and you get a 50% discount on a trip, there’s usually some strings attached to stuff like that. So, let things settle and make sure that you and whoever else is involved feels good about it and is looking forward to this trip to make it worth that extra five or 10,000 or whatever it’s going to be.

Austin Wilson:

That’s good. Any other thoughts on trip or retirement savings other than, it depends?

Josh Robb:

It depends.

Austin Wilson:

It depends.

Josh Robb:

I mean, it really comes down to, you’ve heard it here many, many times. You will probably have a pretty good feel on what the impact will be. And if you’re willing to accept that trade off, it’s probably worth taking that trip. If you’re uncomfortable or saying, “You know what? It just seems like a little bit more than I’m willing to compromise on,” it’s probably worth waiting.

Austin Wilson:

Yeah, absolutely. Well, that is, should you save for retirement or go on vacation. And the answer is, both, maybe.

Josh Robb:

Yes.

Jordan Shaw:

Where are we going? Are we taking a vacation?

Austin Wilson:

Yeah, are we taking? Wealth Mindset Show trip.

Jordan Shaw:

On the road.

Austin Wilson:

On the road.

Jordan Shaw:

Well, I’m younger. I have to raise little kids, so I’m going on your dimes. Is that all right?

Austin Wilson:

It’s all right.

Jordan Shaw:

We’re good with that?

Austin Wilson:

That’s right. All right. Well, if you found value in this conversation, don’t forget to subscribe to The Wealth Mindset Show on whatever podcast platform you’re listening to, that way you don’t miss any episodes. Also visit us at thewealthmindsetshow.com for more resources or if you’re ready to invest with Hixon Zuercher, head over to hzcapital.com, we would love for you to check us out. And then follow us on social media, we’re pretty active on there and we’d love to catch up with you and stay in touch with you there. Otherwise, we’ll be in touch and we’ll talk next episode.

Josh Robb:

All right. Talk to you later.

Austin Wilson:

Bye.

Thank you for joining us at The Wealth Mindset Show, where we tackle the complexities of finance and life planning to help you align your wealth with your values. We hope today’s conversation provided value and clarity as you navigate your financial journey.

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