Personal Finance Series: No 13 – Why Vacations Are Sacred Spending
People thinking about vacations and holidays have a wide variety of choice, from family budget vacations, budget breaks, luxury destinations, stay-cations, and many more but the common factor driving this form of goal setting is emotional stimulation. People want to ‘get away’ and even though there are so many choices – the way the brain works through the decisions to spend money is pretty much the same for everyone. It is known as Away From Home Horizons spending and is one of the 14 ways in which the brain compartmentalizes or thoughts about spending money.
Very few people get out the family budget worksheet or the personal finance spreadsheet when considering away from home horizons spending because there is an emotional distance between the two experiences. It is this distance which make this category of expenditure so lucrative for the businesses and people who influence you money.
There are 4 Primary ways in which the mind works regarding away from home horizons spending;
1. Away from Home Horizons: Planned Experiences
It has been well documented in the field of social psychology that the primary motivation for a holiday or vacation is one of pleasure seeking – the pursuit of emotional arousal. Often therefore, there is a great deal of emotional involvement in the decision making process of choosing where to go, which mode of transport to take, where to stay and to some extent a loosely outlined itinerary.
More often than not, a significant proportion of the cost of these choices is spent long in advance of the enjoyment of the experience, and by using a credit card rather than cash to pay for it. This produces a gap in time, and during that gap, the brain justifies the spend by imagining the feelings, the memories and the experience in advance of getting there.
Vacation time is experienced as a life event.
2. Away From Home: Stay-cations
Since travel planning and itineraries have visible up front costs, and only imagined benefits, many people perceive that the costs can be too high to travel abroad to expand horizons, but the driver of emotional arousal is still there, giving rise to an increase of staying at home, known as staycations. These can involve planning trips out from the home, or they can involve local resorts, because the up-front aspect of cost is perceived to be significantly less. However, because there is a higher degree of familiarity with places that are already known, than when travelling abroad, the pleasure and experience for many people is just not the same because the level of new variety and difference is not the same.
3. Away From Home Short Breaks, Home and Abroad
Vacations are important to the well being of people because of stressful lives, difficult jobs, illness, depression and routines. ‘Getting Away” is recognised as so valuable, that many charities donate vacations to the long term sick, the terminally ill, and their carers. It is not surprising therefore that the equivalent to food snacking exist for vacations – the short break. These times allow for just enough variety to deliver the desired perception of freedom, sensation, novelty and connection with others before returning to the usual routine.
4. Holiday Spending Money
Something strange happens with the way people think about spending money on holiday. Some have a specific credit card, travellers’ check, or fanny pack with which to regulate the spending while on holiday, but what no-one thinks about is that whatever notional amount people set aside to spend, whatever they think about their ability to resist – holiday money is always spent before you get on the plane. There is a reaction to the normal constraint of common sense, known as psychological reactance. Basically, people don’t like being told what they must do or cannot do, so when on holiday – there is a degree of abandonment of normal societal rules – people drink too much, sleep with people they wouldn’t normally even talk to, and give very little consideration to how and where they are spending their money. Spending and decisions are taken in a light hearted, unconsidered way because the money in the mind has already gone, and half the fun of a vacation is spending it with abandon.
No-one who really enjoyed a ‘classic vacation’ ever came back and compared actual spend to planned spend in the financial planning worksheet, or the family budget worksheet. This is why, as part of the preparation, the planning of a vacation, it is very useful to have included financial goal setting motivation theory, or rather goal setting smart. By investing in a personal finance online software, it is possible to track and maintain financial goals, and these can and often involve away …