Upper Middle Class? Here’s How Much You Should Be Spending On Vacation
Written by
Jake Safane
Edited by
Molly Sullivan
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If you’re in the upper middle class, you might feel like you have plenty of money to spend on vacation. But just because you might earn a high income doesn’t mean you should spend a lot on travel. Otherwise, you can find yourself without much savings or investments, which could leave you in a precarious position if you face life changes, like losing your job.
Plus, what one person considers to be upper middle class might not be the same as another’s interpretation, and it can be easy to get caught up in false equivalencies.
In general, upper middle class, based on having household income in the 75th-90th percentile in the U.S., means earning around $150,000-$250,000 per year. Yet in expensive areas like San Francisco, $150,000 is considered lower middle class, so it’s important to not paint with too broad of a brush.
That being said, if you earn a good income, you might want to reward yourself with a vacation, and there can be ways to do so in a financially responsible manner.
Sticking to Spending Limits
One way to approach vacation spending in the upper middle class is to stick with the same types of guidelines that apply across income bands.
“I don’t believe you should allocate a certain percentage of your income towards travel and vacations. I would much rather see you live off of 75% of your income — your ‘spending money’ — and then save and invest the other 25%,” said attorney and financial influencer Jaspreet Singh, host of the Minority Mindset YouTube channel.
“If you prioritize spending money on a BMW and a nice apartment, that’s your decision. That just means you have less money to spend on travel. If you’re willing to live in a $600 studio and drive a cheap car so you can travel nine weeks a year, that’s your decision. The key is to know how much money you’re allowed to spend and not spend more than that,” he added.
In addition to structuring your expenses, including travel, so that you can save and invest 25% of your income, consider adding another rule for vacations.
“Going on a vacation is a liability and a luxury. It’s not an asset. When it comes to luxuries like a vacation, I like to follow my rule of five which says, if you can’t buy five of them, you can’t afford one of them,” Singh said.
At the very least, you probably don’t want to put travel spending on credit cards if you don’t have the cash to immediately pay off your balance.
“I do not believe you should, under any circumstance, finance your vacations,” Singh said.
Vacation Spending Has Increased
While following these rules can help you live within your means, you might still be wondering what others are spending on vacation.
Based on an analysis of clients with gross income ranging from $350,000-$450,000 annually, Katy Song, CFP, chief financial planner at Domain Money in the San Francisco area, has noticed a sharp uptick in vacation spending.
“Post-Covid, most people’s travel spending doubled,” she said. “The average upper middle class family of four spends around $35,000 per year. This tends to include two larger trips per year plus trips to see family and smaller weekend trips to take advantage of snow.”
If looking at travel spending as a percentage of total spending, then it tends to be in the range of 8%-14% for a broader sample of incomes between $250,000-$600,000, Song said.
But just because some people spend this much on travel doesn’t mean you should.
“There is a sense of entitlement when you are making over $250,000 that you should be able to do what you want. People see neighbors, coworkers and friends constantly on the go and posting amazing pictures to social media,” Song said. “What they don’t know is those people’s financial situation. Are grandparents paying for the trip, is it a family house in a great location, or are those people going into debt to finance a lifestyle they cannot afford?”
Make a Plan
Rather than trying to match what somebody else is spending on vacation, you can make a plan to comfortably afford vacation, adapted to your financial circumstances.
“While travel is usually a non-negotiable part of people’s lives, it is not a monthly expense. I like for clients to set aside money specifically for travel into a high-yield savings account. They either contribute monthly or from bonus income to these accounts. When it comes time to pay travel-related expenses charged to credit cards, they move the money back to checking and pay off the card,” Song said.
Separating these funds can help you easily see how much you can spend on vacation, regardless of your income. And it can make travel more enjoyable.
“By having a clear intent for this money, you give yourself permission to spend it and enjoy it more. The worst is when you put your head in the sand, spend too much on a trip, and then have regrets afterward. It ruins the beauty and fun of travel,” Song said.
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