Question: I am a 44-year-old single woman. I work as a nurse and make a decent living. Every year I keep my sanity by treating myself to a trip that usually costs between $1,000 and $2,000. I know I should probably be investing my extra money, but I cherish these vacations. What do you think I should do?
Suze: Being a nurse is a demanding job, and if all it takes to keep you sane and happy is a $1,000-to-$2,000 vacation once a year, I say go ahead and take those vacations. Remember that the first law of money states, People first, then money, then things.
Since you are writing to me, however, I wonder if you have a problem you're not mentioning. Do you have credit card debt that you can't pay off at the end of every month, little or no savings, or monthly expenses that you can barely meet? If any of these things is true, my advice will be different—because purchasing temporary sanity at the cost of permanent insecurity is no bargain. Permanent insecurity is what you'll have if by the time you retire, you haven't saved enough money to live on. The issue then won't be vacations; it will be finding money to pay your mortgage or rent, buy food and medicine, and cover your utility and telephone bills.
Saving small amounts can make a big difference—especially if you allow time for those small amounts to grow. If you took your $1,500 a year, for example, and invested it at just 6 percent a year, you would have about $60,000 in savings when you turn 65—almost double the amount you would have put in. At retirement that $60,000-again yielding just 6 percent annually—would earn about $300 a month in interest, which could make a difference between retiring in comfort and retiring in fear.
What you have to do is this: Take a long look in your financial mirror and decide if you like what you see reflected there. Continue to take your trips and enjoy every minute if you are debt-free. If not, you may want to make an adjustment—perhaps spend $700 a year on your vacation instead of $1,000, or just stay home and have a great time for free. Only you can know the truth about your money. Facing that truth will set you financially free.