Opportunity Cost and Holidays: Should You Stretch Your Budget for a Longer Vacation?

by Stacy Francis, CFP®, CDFA

During the latest Savvy Ladies teleconference, the topic of conversation was much rosier than the typical ones these days (unemployment, recession, and ways to cut spending). One member had just quit her job to realize a long-lost dream: to spend a year backpacking through Asia and Oceania. By staying in hostels and eating out of grocery stores, she wouldn’t use more money per month than a family visiting Disneyworld burns in a weekend. She was very proud of her calculation, and it does make a lot of sense …except she forgot to consider opportunity cost.

 Since she won’t be making any money while traveling, she will also miss out on a year’s worth of salary. Whereas the family spending the big bucks during the weekend or while on paid time off wouldn’t face any loss of income.

 Now, whether a weekend at Disneyworld is as much of an experience as a month trekking the Himalayas, I am going to leave up to you to decide. But considering how often people forget about opportunity cost, I always feel obliged to point it out.

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