More than a third of summer vacationers, 36%, are willing to take on debt this summer for their travels.

The reason that's worrisome is because the average credit card charge is over 20%, which is close to a record high.

I don't want to tell people they can't have any fun, but this represents a lot of people taking on expensive debt.

And this is the kind of thing that can linger.

Globally, 72% of Millennials and 65% of Gen Z's said they plan on spending more on leisure travel in 2024 compared to 2023.

In the U.S., 47% of Millennials and 42% of Gen Z's said they plan to take on debt to go on summer vacation.

There are so many compelling reasons why people choose to take on debt to have these vacations.

If your kids are dreaming of going to Disney World and there's no way the family could ever really swing it without going into debt, it could be a memory the family will have forever.

Parents often can rationalize spending in these terms for their children.

Here's how Americans are paying for their summer vacations.

Credit cards are the most common way people pay for their vacations. 62% of Americans surveyed said they put at least some of their trip on a credit card.

Financial experts say that this can be a risky move if the borrower cannot pay the balance in time to not be charged interest.

The average credit card balance is already over $6,000, according to TransUnion.

If you add $1,000 in vacation expenses to that, maybe it feels like a drop in the bucket.

But it just makes it that much harder.

That's $6,200.

If you make minimum payments at the average interest rate of 20.7 percent, you're going to be in debt for 18 years and you're going to pay more than $9,000 in interest.

So some of this is making a bad situation worse.

The debt feels like this tradeoff for a lot of people.

It's ultimately the interchange between money for these lifelong memories and seminal experiences.

And that's a sacrifice many are not only willing to make, but feel so strongly in doing so, especially when debt is a weight many people are already accustomed to carrying.

Consumers are still out there using their credit cards.

Their credit card balances are over a trillion dollars now.

We're seeing actual delinquencies on credit now rising.

People are dipping into their savings.

But bottom line is that they're still spending.

Not all credit card users are paying interest. 43 percent of Americans said they use their credit cards to pay for their trips, but paid it off in full to avoid interest.

This also comes with the perk of accumulating rewards points.

Use those rewards points in miles.

Put those to use.

But it doesn't make sense to pay 20 percent interest just to get two or three or four percent cash back or airline miles.

In order to avoid interest, while still having more time to pay off the credit card balance, some vacationers choose to open a new credit card that provides them with zero percent interest for a set period of time.

The risk here is that once the term expires, the rate goes way up.

Another option vacationers are considering is taking out a loan for their trip.

Five percent of vacationers plan to take out a personal loan from a financial institution, which typically carries a lower interest rate than credit cards.

The average interest rate of a personal loan in June 2024 was about 12 percent.

Six percent of those surveyed said they plan to borrow from friends or family.

I think both of those represent a slippery slope.

Personal loan rates have gone up a lot.

That debt equals irresponsible is so pejorative and such a simplistic way of looking at this, that there's all different reasons and rationales why we might intentionally go into debt.

People don't think taking out a mortgage for a home and making this a lifelong investment is irresponsible, but it can be a really bad investment in a lot of cases.

So you have to consider where is it important for you to invest your money?

And maybe it is this trip with these lifelong memories with your family that you'll never get back.

Another option is loaning money to yourself out of a 401k account.

A loan is different from a 401k withdrawal.

Withdrawals have different rules and tax implications.

Loans are not permitted from IRA or IRA based plans.

The reason someone may go this route is instead of paying interest to a financial institution, they would pay themselves back over time with interest.

That payment will go back into their retirement account and eventually accumulate compound interest.

Borrowing from your retirement plan definitely worries me because really the biggest predictor of future returns is time in the market.

So even though we don't know what stocks are going to do this week or this month or this year, over the long haul, they've been massive wealth builders.

So I feel like that would be more of a last resort if there's kind of an emergency.

Going on vacation is not an emergency.

It is interesting how while you could say on one hand that it's worrisome that credit card balances are near record highs and the personal saving rate is near a record low, this is powering a lot of economic growth.

But what's good for the economy is not always good for your household finances.

Consumer spending makes up nearly 70 percent of U.S.

GDP, which means a rise in consumer spending can spur economic growth.

But a rising consumer debt can lead to a hard pullback in spending, which can cause what's called deflation.

Deflation is just generally associated with not just recessions, but deep recessions in the economy.

A recession occurs when there's, quote, a significant decline in economic activity that is spread across the economy and lasts more than a few months.

Historically speaking, deflation means that prices are actually coming down.

And the reason why prices are coming down is because people aren't spending money.

The reason why people are spending money is because they don't have jobs and they can't afford to go out and take a trip to Hawaii or go out and buy a new Lexus or do those kind of things.

They're just kind of trying to tread water and they're not even doing that.

So therefore, prices are going to have to keep coming down.

It's important to remember that there's not just one consumer story.

You have the same consumer that might be out there spending on travel, going to events, you know, whether it's concerts or sporting events, which we are seeing very, very clearly and that's driving some of these travel trends.

And they're doing it in a way that's really strategic.

At the same time, that same strategic consumer might be walking into a store and really thinking carefully about how they're spending, looking for the best promotion, the best discount.

So it's not one story for the consumer.

And I think that's really important because it creates a lot of complications in the narrative because you have consumers looking for discounts, you have consumers looking for promotions, and you have consumers that want to make their dollars work the best they can in the way that works for them.

Financial experts say the key to affording a vacation is to plan ahead.

Advisors say the first step is figuring out what you want to spend and to set a budget for the trip.

This is our allowance for food and this is our allowance for trips or activities.

So you can kind of make sure your behavior is consistent with your values.

Because money on trips can feel like monopoly money.

I had a client I worked with who decided they were going to stay in an Airbnb and they were going to cook all of their food.

So they were going to save on food and they were going to splurge on this boat trip they were really excited about.

And it felt like a compromise.

The next step after establishing a budget would be making a plan to save.

You can start small and daily.

Maybe you're going to set aside a little bit of money each day or each paycheck to this dream vacation.

And it can be helpful to have kind of a calculation set up.

On top of setting aside the money, you can also find small ways to save on costs to make the most of your trip.

There are plenty of ways to save.

You can have fun on a budget.

You can use your frequent flyer miles or credit card points.

You could be open minded about when and where you go.

Kind of zig when others zag.

Maybe travel in the off season or the shoulder season or drive instead of fly or travel midweek instead of on the weekend.

If you can let the deal dictate the destination, that can really help you out.

Flexibility is key.

There's times when you just have to be realistic.

If you financially can't swing a vacation, can you get creative?

Can you find a way to take a break from your life or mimic a vacation without the big expense?

Maybe even do a staycation.

I think that's an underrated option.

This idea of playing tourist in your local area.

So there's a way to have fun without busting the budget.

Nearly half of Americans said they plan to skip their summer vacation, with 65 percent of them saying affordability was the main issue.

I kind of worry about both of those extremes.

You know, you have the people that are paying 20 or 25 or 30 percent extra to go on vacation, which is not great.

But then you also have a lot of people skipping the trip entirely, which may be regrettable later on.

There's a ratio between the money being spent and the amount of time of your trip.

And only you can decide if that experience, the memories of the five-day vacation, is valuable enough to commit to having to worry about hanging off for months in the future.