I wrote about a related topic recently, and some people thought it a little odd or rambling, I’ve no doubt this will have the same effect. But since a big part of the reason behind this blog is to explore thoughts, while helping friends and family travel for free, while hawking credit cards, let’s go!
Here’s the problem:
We’ve been offered another ‘trip of a lifetime’ and after procrastinating on it for several months, pulled the trigger. The trip has a sticker price of around $13,000 (cheapest I’ve seen) and we get it for $2,100. The problem is that it’s a cruise (I know…), and the class of cabin is a bit below what I’d like. The next level up is sold out, which leaves us with upgrading to a Penthouse, for $5,200 extra. This would mean $7,300 all in, for a retail value of about $28,000, (discounted, not brochure pricing) which is a chunk of change.
In terms of value, I know that some might be put off by the $2,100 price, but for now let’s assume ‘it is worth it’. The problem I yet again battle with is that technically I can afford the $5,200 also. But that’s where it all starts crumbling into madness.
What does it mean to afford something?
If you look around, you’ll see countless people driving a fancy car, fancy for you might be $50K, $100K, or more. Can they afford it? One answer is that if they aren’t homeless, and can pay the bills, then “I guess so”. I address that by trying to focus not only on debts, but ‘obligations’. Debt wise, we’re debt free, so it’s easy enough to make an argument that $5,200 is just a couple of month’s mortgage payment for another person in our situation, and therefore, perhaps we deserve to spend?
Obligations is a harder one, because we haven’t saved enough to be able to retire, or for long term care or other such expenses. We’re on trajectory for this, but we aren’t there yet. Therefore, spending does divert from the obligations funding. The final issue here, is that, $5,200 probably wouldn’t matter to that sort of big picture thinking. It’s likely that by the time we die, we will have more than $5,200 remaining, even if you compound everything using magic.
For these reasons, I almost pulled the trigger. The thing that I held back was simply that I’m not sure about the consequences of the decision, the butterfly effect if you will. To draw an analogy, I like to look at people who would rather fly Business Class for 70K miles than Economy for say, 40K miles.
Most people who make such decisions do ‘value’ their miles. If we were to attribute value at say, 1.5cents, then we’re talking about being willing to spend $450 for the fancier class of service. Quite often, it is worth it, in terms of getting to destination rested, and the free booze is a nice bonus. The jump from Business to First is a different topic though, here we might see another $450 on top of Business, and perhaps less value from the seat, and more from fancier booze, and bragging rights.
It’s these Business>First jumps that I ponder. If a person truly values $450, would they consider saving that $450 and instead buying a $450 michelin starred meal for an experience? I feel most will not, because of these same behavioral factors that are pushing me on the cruise.
What to do with $5,200?
Our Business> First jump is valued at $5,200. In some ways, it has elements of the Economy>Business jump, because the cabin goes from 200 sqft to 360 sqft (50 or so being a balcony) so there is some value to the ‘comfort’. The flip side is that horrible 200 sqft cabin is on a 6 star ship with all inclusive food and drink. In short, I’m sure we will be able to tough it out, even if we come back looking like we’ve been in the jungle for a month without food or water.
By cheaping out on that upgrade, we could say that we have a pool of $5,200 to spend on experiences, and at the same time, if we did upgrade, I think our ‘baseline’ would be higher. Since we’re comfortable spending an extra $5,200 on the cabin, we probably deserve to spend that much more on excursions, because we wouldn’t want to feel house poor. Suddenly, the decision to spend $5,200 in isolation is becoming $10-$15K for a vacation.
Crikey! We’re bumbling our way into a budget
I’ve never been a strong proponent of budgeting, I’ve always preferred to get strong income, low expenses, and manage taxes effectively. This might be a tipping point for us though, since a budget for a trip like this could be a powerful tool. Not so much a ‘how much can we afford’ vs a spotlight on ‘how much are we spending’. Getting insights like this are the useful side of budgeting.
We’re now turning the planning into a series of ‘needs and wants’. No different from a lifestyle budget or plan. Technically you could argue everything here is a ‘want’, but I would say that I need to do something fun everywhere, and I also want to: stay in a safari lodge so we wake up to Lions and Elephants (and a nice cup of Tea) and when I do a bit more research we might find that we want to do a few more, once in a lifetime things too.
However, I’m also taking that $5,200 and looking everywhere for where to spend it, so once we’re done looking around the house for things that I’ve neglected, or at improvements to businesses or or elements of other vacations we have planned, I’m sure there will be less to play with.
What I’m starting to realize (or remember) from all this pondering is that there is an order to things. Basic needs, and luxuries. The issue that is nagging at me is that I’m starting to put the need for a Veranda into basic needs, because it does make a difference to me, but the danger here is how much impact that single shift has on all the related other basic and luxury needs, and until I figure that out, perhaps via looking at a proper budget of the vacation, I’m holding off spending.
Make no mistake, this is lifestyle inflation we’re talking about, but unlike many people who are familiar with the term, I think lifestyle inflation is a great thing, we don’t work hard, become educated and cultured to live on baked beans. My only hesitation is what does turn me into in the big picture, if I’m OK with that answer, I’m all for a little inflation.