Dear Emily,
How do you decide whether you can really afford a vacation? I’m talking with a friend about taking a trip from New York City to Japan in the fall, which will probably set me back at least $2,000. On one hand, I can’t really afford it, in the sense that I could put that money toward building up a six-month emergency account or paying down student loans or otherwise being a responsible adult. On the other hand, I have the money in my bank account—so technically I can afford it, and you only live once. Is there a certain percentage of your income that you’d recommend spending on vacation (the same way people figure out how much to spend on an engagement ring)? Or other rules of thumb you might suggest
– Potential jet-setter
Bad news first: There is no rule of thumb for how much to spend on a vacation. Worse news for other readers: Rules of thumb about spending on an engagement ring are also ridiculous. If your goal is to optimize your happiness via spending (and it should be!) then rules of thumb like this are very unlikely to lead you to the right answer.
The better news is that there is a structured way to think about these choices, albeit one which is a bit more involved than the two-months-of-salary rule.
The central question to consider: What is the value to the alternative use of your $2000, if you do not take the vacation? You need to trade off the happiness you get from the vacation to the anticipated happiness from other uses.
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