Bridget Sullivan Mermel CFP(R) CPA
Vacation and Happiness
Since COVID restrictions are being lifted and people are wanting to do something--anything--we talk about how we think about vacation. Is vacation an investment? So, it makes things better and improves things. Or is vacation an expense? One of those things you spend money on then easily forget.
Here are our key take aways:
Vacation can give you a sense of happiness and meaning.
Don't be afraid to spend money on it, although spending money is not directly associated with how memorable the vacation will be or how you think about it later. Unlike regular investments where the more money you put in, the more you get out, vacations done frugally can be memorable.
Research indicates that happiness with vacations can be most reliably found in the anticipation of a trip. So, don't be afraid to relish thinking about a trip before you take it. During a trip, the mosquitos may bite. After the trip you may move on to other things. But before the trip you can improve your mood today by thinking about how great your vacation may be.
For more on the research, check out:
John: Vacation season is upon us here. Is it an expense to take a vacation or is it an investment? That's the debate that we'll have on today's episode of Friends Talk Financial Planning. Hi, I'm John Scherer. I run a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: And I'm Bridget Sullivan Mermel. And I've got a fee-only planning practice in Chicago, Illinois. John, I'm interested in your idea that vacation is an investment. I have to say that I generally put it in my budget and think of it as an expense and not as an investment. So tell me how you approach it.
John: Yeah, that's great. I talk with clients and myself about investing – when I say an investment, of course, we're taking money out of our pocket, putting into somebody else's. But when I think of it, I think of it as investing in memories. That's the thing when you think about it. It's not – stuff doesn't provide a lot of value generally, but it's those memories and those experiences. So I think this is really interesting as we've talked about, is that where does it go on your budget? And when you just said budget there for a second, I thought, well my savings goes into my budget, it goes out the door, but it's still an investment, right. If we wouldn't argue put money into the Bank is an investment, right? But I think of it like, what better place to use my resources? Some of the money that I have, than in sharing things with the family and friends and people that are really important to me.
And it's interesting. I just took a trip with my dad and my brother up to play golf at this really nice resort. And as it happened, it was not cheap. It was a pretty big expense from that standpoint. But this makes me think that literally my brother and I use the term investment. We said that was a really great investment because of what we took out of it. We weren't talking business or anything else. It was like, these are things that we’ll never forget.
John: And so from that, that's the standpoint. When I talk about an investment, that it's those memories and where we are today, right. Nobody's been able to go out and do very much now. It's kind of pent up. And I think this is a really great time to be thinking about and whether we categorize as expense or investment, like what to do about that. I'm interested on your side about because, of course, it's an expense, but you think about it a little bit differently, perhaps, than I think about it as an expense side of things. What do you tell when clients and for yourself when you think about it?
Bridget: Well, I love vacation, and I love travel. So I think that might be part of my looking at it as an expense because I could spend a lot of money on it. And I have in my life spent a lot of money on travel, and it's something that I really love doing. And so to me, I kind of have to portion it off. I don't have to try to encourage myself to do it or spend more money on it. I really…yeah, I have to kind of curb it.
But I have to say that what's interesting to me is that in my life I've had times I've had times where I'm flush, and I've had times where I don't have much money at all. And I since – I think I remember things equally, my most memorable vacations were when we were staying in a cottage, when I was a kid. And these places were particle board shacks. [laughter] They did have plumbing, but they were not luxurious by any means. And we went to play mini golf, and maybe when we were older, we try to swim across the lake. But this was not an expensive vacation. I mean, my parents could afford it. And this is emblazoned on my memory. And I think all of my siblings have a lot of the same reaction to that particular memory. I can't speak for everybody, but I would say at least some of them do. I know some of them do. So those were something that my parents did, and they were inexpensive. And I've had other experiences that camping is just fine with me, and it's inexpensive.
But again, I like expensive vacations, too. I recently got the experience of a good view, which I hadn't had before, because I don't really care. But it was nice. I have to say, I liked it. So that's my take on it. So for me to call it an expense, I have done it so inexpensively in my life that it barely costs any more than my regular living expenses. And I think that that's a possibility. And you can still get out of town, get your head out of the usual game that you're in, and enjoy it with the people that are important to you. That's one of the things that I was really struck by when you were talking John, was how intertwined your relationships are with your sense of investment and money. And you really think about, “Oh, if I spend money on a vacation, I'm really investing in my relationship with people.”
John: Yeah. Yeah. And that is having meaning for the money. Right. It's really important to me. There's a couple of things – thanks for sharing that – I wanted to unpack just there's two things. 1 is that idea, and I had not thought about it, it can be a slippery slope, right? As far as I can pack some money into a vacation, there's nice things that's just for this short period of time, sort of treating yourself that you do need to monitor. I can see that from the expense standpoint, that it can't be a free for all, right? It’s dangerous precedent to perhaps set for yourself; that I thought was really useful.
And then the other thing was that the amount that you spend is not correlated necessarily to that the investment side, as I think about it from your return on that experience, unlike if you put a certain amount of money into a traditional investment, it goes up 10%. Well, if you put more money into what you make more. Right. Like, okay, the more you spend, the more you get, the more you invest, the more you get. And vacations are not, the more you spend, the more you get necessarily, right? That's a really great point on that. And I guess on my side when I say investing in some fashion, don't be afraid to consider spending more, but then you've got to be mindful of that. It's not a direct relationship, right? I think it's a really important takeaway to think about with that.
As we're thinking back on some of these memories, I've got another trip coming up, and it's going to be an inexpensive one, driving around and seeing some sites. The other thing that strikes me about this whole idea, as I think about it from an investment in vacation, is that the anticipation of going on the trip doesn't cost anything right? Just the anticipation part. But that's a really big part, I think, for everybody on the thinking about it. And I know that I try to intentionally like, oh no, I've had trips where I haven't spent the time and allowed myself to anticipate it, and I think – and you've done more homework on this than I have – there's some evidence, right? There's some science behind this?
Bridget: Yeah. There's research on it that shows that there's three steps of a trip. There's anticipation. There's taking the trip, and there's how you recall it. And anticipating the trip, it can be the most bang for your buck, for sure. It's like that's the part of the trip you actually might enjoy the most is fantasizing about it. So why not, you know, take advantage of that. That's great. If that's, like research says, like, thinking about it ahead of time is the most fun, because you know, once you're actually in the trip, things come up or you might be tired or things aren't going like you want them to. And then after the fact you move on to something else. So that's why anticipating it. I think it's all perfect in your anticipation.
Bridget: Might as well enjoy it. That's what I tell people.
John: Yeah, that's great. Well, from a financial planning standpoint, maybe to wrap things up is to think about – and I guess as I hear this, we can think about it in two different ways. Taking a vacation this summer as we can go back out and move around again; it’s an expense. So you got to spend the money on it, right? And be mindful of how much you spend because there's not a direct return on investment. But you can also think of it as an investment in your relationships and in your mental health and the things that are important to you. So you can look at it from both sides. And then the other takeaway that I have from this is let yourself anticipate and think about it. And then fantasize about what it's going to be like, because that's not just something, but it's really part of the fun.
Bridget: Exactly. So to wrap it up, there's two things we want to make sure to say. One is we're both members of ACP or the Alliance of Comprehensive Planners, which is a not for profit group of planners that operate all over the country. And all of us share a lot of the same values and ideas. And the website is ACPlanners.org.
John: And then, as always, make sure that you subscribe to Friends Talk Financial Planning. Subscribing helps other people find us and find this branch of Holistic Financial Planning. So thanks for the conversation, and with that let’s wrap up.
Bridget: Alright, thanks John, have a great vacation.
John: Alright, bye-bye.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.