Cruising with Paul and Becky
Vacationing tends to be a very expensive item in a doctor’s spending plan. We work very hard and our time off is precious. Last week’s blog was about doctors needing more vacation time off when comparing to the average worker. So when we go on vacation, there are two things pulling us to spend more than we should; the perceived need to “live like a doctor,” and the desire to make the most out of the precious little time off we get. I can understand the drive to make it a nice vacation. Sometimes this drive is a bit over the top though.
Nice vacations come in all sorts of cost ranges. There are lots of savings to be found in this category without sacrificing your fun, relaxation and rejuvenation time. I once took my family, plus one of my youngest son’s friends, on a vacation to Disneyland. We were looking over the schedule and had one more day to fill. We had a choice to make: one more day at Disneyland or go to Universal Studios for a day. Since we already had a multi-day ticket at Disneyland, adding one more day was $25 each, or $125 total, before added sales tax. To go to Universal Studios would be $95 each, or $475 total, before they add the taxes.
So I asked the kids if we would really get $350 more fun by going to the other park for one day, not including the two-hour round trip drive across the valley, as we were staying a few blocks from Disneyland. They all agreed that playing one more day at Disneyland was the best option. That small choice of park for the day, taking into account my 40% income tax, was a difference of $585 in the amount I would have to earn to purchase the tickets, not including sales tax. Switching amusement parks would not provide $585 more fun. Another day at Disneyland was a blast. We will go to Universal Studios on the next trip to southern California.
There are many other ways you can take great vacations for a lot less money. Look into options that will give you what you are looking for—the same experience—for less outlay of cash. If you are looking for a relaxing time at a sandy beach, will you really be more relaxed on the French Riviera than lying on the sand in Florida for half the cost? Is the sun warmer in France? If you wanted to go to France to also see the Cannes film festival, then you will need to go to France. But if you just want to relax, save some money and relax at a less expensive alternative.
What is the real cost of expensive vacations? A one week cruise on the Mississippi river would cost my wife and me $10,000. If we chose instead to cruise in the Bahamas, the tickets would be $3,000. Assuming the other cost of the trip are equal, i.e. air fare, then there would be a $7,000 savings for the week by simply choosing a different cruise destination. Both will have equal value in getting me away from work and giving me time to relax and recharge.
If we lowered this difference to an average of $3,000 savings on every vacation and took 3 big vacations a year and the forth we won’t count as it was used to visit relatives. That would be a $9,000 a year savings simply by choosing smarter. If that was invested and earned an 8% return over a 35 year career we would have an additional $1.7 million dollars. That is an extra $68,000 a year in retirement if we were to withdraw funds at a rate of 4% a year.
Let that sink in a bit. Saving and investing an extra $9,000 each working year will give you an additional $68,000 each year in retirement. That is an impressive difference. Was that slightly different vacation plan really worth an extra $59,000 a year during retirement?
I’m not saying to eliminate vacations to get this return. I’m saying to spend less on the vacation and get better value. The benefit of the vacation will not be lessened by cruising the Bahamas in comparison to cruising the Mississippi. But the $7,000 difference in ticket price will make a big difference when it is compounded throughout a career in medicine. If that $7,000 from a single different choice was invested in the first year of practice on the same terms noted above, it would add $114,000 to the retirement account.
Choose wisely, as the choice has much more effect than an increased expense this year. The compounding of this choice year after year is unreal. Give us your comments about choices you have made that decreased the cost of a vacation without decreasing its value. I’m sure we could all benefit from some good ideas we can take advantage of on our upcoming vacation.
Vacation smarter while you work to live better when you retire.