Younger travellers are going on "no-budget" trips, and it's leading to massive debt. Photo / 123rf
Younger travellers are going on "no-budget" trips, and it's leading to massive debt. Photo / 123rf
Research suggests younger generations are choosing to go into debt - all for the sake of fun and travel.
“No-budget” travel, glamorised on social media, involves travelling without a strict budget, leading to overspending and accumulating debt. This trend has gained traction in recent years, especially after the pandemic lockdown and the rise of digital nomads and travel influencers.
Numerous surveys and studies by finance websites and organisations show that younger travellers are risking debt for a good vacation.
For instance, surveys from Wallethub, Credit Karma, Bankrate, and Bank of America reveal that at least 25% of Americans find it reasonable to accumulate debt for a trip, whether domestic or international.
Bankrate’s report, which surveyed 2360 US adults online from March 18 to 20, shows that this trend is most popular among the younger generation, with 47% of millennials and 42% of Gen Z leading the charge. Similarly, Credit Karma’s survey found that 40% of Gen Z and millennial travellers prioritise paying for travel over managing their finances.
This behaviour is often linked to “doomspending,” where people spend recklessly as a coping mechanism, particularly in uncertain times like the post-pandemic era.
According to Elizabeth Currid-Halkett, author of The Sum of Small Things: A Theory of the Aspirational Class, the current trend began during the financial crisis in the 2000s, shifting the mindset from travel being an “optional” expense to a “priority” expense.
The pandemic and the two-year long lockdown that caused a pause and a drastic shift to domestic and international travel has amplified this trend.
Currid-Halkett explains this phenomenon with CNN, “We wouldn’t have been able to predict it, the way the pandemic affected different generations in different ways, but the idea that our friends matter, living life matters, how important living a good life is - that has led to a change in how people spend their money.”
She connected it with Australian real estate mogul Tim Gurner’s viral and highly criticised claim that millennials could not afford major purchases, such as buying a home, because they spend their income on avocado toast.
People online criticised Gurner and made fun of him for not truly understanding the reason why there is a decrease in millennials owning houses, which was due to higher home prices and stagnant wages.
Currid-Halkett explains its similarity with people going into debt for travel by explaining the mindset: “‘I can’t buy a house, I’m not sure I can afford college or grad school, so I might as well go to Spain and backpack. It’s barely a dent in the debt I’m going into for other things.’”
Recent studies show that the younger generation would rather splurge on travel than save up for major life investments. Photo / 123rf
However, recent studies also show that people who get into these kinds of debt know that it is wrong and highly dangerous, but they would rather put financial goals on hold in order to have fun now.
Experts suggest that this may be because of the sudden hit of the pandemic, where the entire world was put on hold, pausing life as people know it. A few years before the pandemic, millennials and Gen Zs were teenagers or young adults, dreaming of their future life - from college applications, travelling, and even work opportunities.
However, all of that drastically changed because of the pandemic, and studies suggest that this may have caused the shift in mindset among people this age: from planning for the future, to living in the moment.
Additionally, the digital age, with its endless stream of enviable travel photos and videos, fuels FOMO (fear of missing out), compelling people to keep up with what they see online. And with the rise of limited-time sales and deals, a sense of urgency pushes people to book trips on impulse.
The rise of “buy now, pay later” schemes has made it easier than ever for people to travel without upfront costs.
Aside from the accessibility that it gives, from having easy registration processes to having the luxury of spending lavishly and paying it off later, these “buy now, pay later” schemes also have various instalment programmes which often offer three, six, 12-, and even 24-month long payment programmes.
Because of the instant and stress-free mindset it brings, many travellers are opting to cover their travel expenses through credit cards, racking up high-interest debt that can take years to pay off.
Trusted financial websites following this trend have found that it is particularly strong among younger generations, who are more likely to book international trips, even if they lack the financial means to do so. Even worse, the studies found that, compared to the older generation, millennials and Gen Zs indulge more on longer and more expensive travel.
Buy now, pay later schemes can be helpful for funding trips, but it can also lead to massive debt. Photo / 123RF
Repercussions
The younger generation often finds themselves in a frustrating situation where they cannot invest in major lifestyle changes, like buying a house or a car, because banks won’t grant them a loan.
When financing for bigger projects, banks undertake a deep review of the borrower’s financial history. The standard procedure will include a review of the person’s income and their debt history. More often, those who have accumulated higher debt over the past few years are rejected across multiple bank applications.
These travel trends also affect even those who do not want to buy a home, since those who indulge in this kind of no-expense-spared travel often face long periods of financial hardship afterward, struggling to pay off massive debts that accrued while having a good time, may of which continue to gain interest over time.
How can you avoid going broke while travelling?
It’s easy to splurge and feel like money is not relevant when going on holiday, especially when you want to experience everything on offer.
However, understanding that a no-budget trip can cause future problems is essential.
Grasping the concept of “Monopoly money” is key - it’s easy to treat vacation money as if it isn’t real, especially when you’re focused on enjoying every moment.
Experts recommend adopting a more mindful approach to spending, and it starts months before you even think of booking a flight.
Just like any major expense in life, saving up will greatly help. Experts suggest setting up your own savings plan, where you can list down all of your financial goals, such as holiday budgets, home savings, and emergency savings. After doing a financial inventory of your assets and liabilities, you can decide and allocate a specific per cent of your income for these goals, and make monthly contributions to it every month. Financial advisers recommend establishing smart financial goals and researching methods and platforms that can help you make better financial choices.
Determining your financial goals and preparing for future expenses can help fund your next holiday. Photo / 123rf
Compromise
Planning a trip can be hectic, but you need to account for everything if you don’t want to overspend. Financial advisers and travel experts suggest knowing what parts of the trip you want to splurge on, and which parts you can give up or compromise on. This may look like giving up good food and cooking at your Airbnb to go on a luxury boat trip, or skipping out on a few excursions to stay longer at your hotel.
List things as a “need to have” and another list detailing “nice to have”, and prioritise the former.
Sometimes, making a holiday compromise can mean travelling during the off-season, when prices for flights, accommodations, and activities are typically lower.
