How to pay for a $5,000 vacation?

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Q. I’m planning a $5,000 vacation. I have an emergency fund worth $7,000. Should I pay cash, or should I put it on a credit card?

A. You’re working a risky balancing act with your question.

You mentioned your emergency fund, but not any savings account that was specifically earmarked for your vacation.

“I strongly recommend that you establish one, much like the old Christmas Clubs we used to utilize,” said Debra Morrison, a certified financial planner with Empowered Retirement in Lincoln Park.

She said an emergency fund is a fund that folks maintain for a financial emergency, such as a job loss, reduction in salary, temporary disability or unforeseen new expenses like a new car. It’s meant to be used for a large expense item that wouldn’t be able to be paid for without discomfort from regular earnings.

The vacation expenses and the emergency fund are totally different entities, so your emergency fund should not be used for a vacation, Morrison said.

“A $5,000 vacation sounds wonderful, and also I tend to think you’ve been planning it for a while due to the size of the expense,” she said. “So what strategy did you set up to pay for the vacation?”

She said she would never recommend putting a vacation, least of all a $5,000 vacation, on a credit card.

“A vacation, by definition, is very important, to rejuvenate, to reflect, to relax, etc., yet I might suggest strategizing how you may postpone this very expensive vacation until you have saved enough to pay for it in cash — and not by withdrawing from your emergency fund,” she said.

Instead, go on an exhaustive search for very fun things to do and places to see that are local, or where you may have friends or family to stay with to avoid hotels, she said. That would allow you to take a vacation, yet one you can pay cash for, right now.

“Perhaps the $5,000 vacation could be taken in a year, after you’ve saved about $417 each month,” she said.

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This story was first posted in September 2015. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.