New TikTok trend claims you'll 'make the money back'—how to balance spending now and saving for later

There's a new trend on TikTok that involves people encouraging their viewers to spend all their money to travel and have memorable, life-changing experiences, especially when they're younger. While previous generations might have felt pressure to spend money on expensive cars and clothing because of their neighbors and peers, Gen Zers and millennials may be tempted to spend more because of influencers and celebrities on social media.

The popular "I'll make the money back, but I'll never be in my 20s traveling to [insert exotic location]" trend features videos of young people embarking on grand adventures around the world — swimming in the Mediterranean, scootering through the streets of Paris, hiking up volcanoes in Guatemala and, as shown in the video below, running through fields of flowers in Iceland.

It sounds great but with inflation at a 40-year high, record student loan debt, interest rate hikes and rent prices soaring across the country, it's hard not to view all these glamorous trips with some skepticism.

Should you really be spending all of your money on a vacation to Europe instead of saving or investing it? Or is it better to take that dream trip while you're still young and able to? And how does watching other people take those trips on social media influence our own spending behavior?

Travel blogger Isabelle Lieblein thinks it's better to just take the trip. In her last semester of college, Lieblein studied abroad in Germany before beginning her full-time job. During her time abroad, she tapped into her savings and visited 19 countries, including two of her favorites, Norway and Poland.

"I'm never going to have so few responsibilities again and be able to travel like this," Lieblein says. "When am I going to be able to go to Luxembourg [just] because I can? So, I decided to spend that money [and] left myself with barely enough for two months rent until I got my first paycheck."

With that first paycheck, Lieblein ended up earning back the money she had spent on traveling. However, Lieblein does acknowledge the privilege she had in being able to take the trip to Europe and in having a job lined up for when she returned home.

Though Lieblein has no regrets regarding how she spent her money, Vivian Tu, the personal finance content creator behind the popular Your Rich BFF Instagram and TikTok account, believes this trend is problematic, mostly because social media itself encourages a fear-of-missing-out mentality.

"Instead of keeping up with the Joneses, you're keeping up with the Kardashians, and suddenly all of this unimaginable wealth is visually ready for you to consume on social media," Tu says. "And so suddenly you think it's normal for a 20-something-year-old to be going on trips six times a year."

According to a 2019 Credit Karma survey, nearly 50% of millennials said they had spent money they didn't have in order to keep up with their friends — with most reportedly overspending on food, clothing and travel.

What to watch out for when you overspend

Overspending doesn't just have short-term consequences, you also sacrifice saving up for something else arguably more important over time. For instance, when you skip out on saving for retirement in the present, your future self loses out on compound interest.

Priya Malani, founder and CEO of Stash Wealth, a millennial-focused financial-planning firm, tells Select that there's a significant difference in the amount of savings she sees in those of her clients who started saving when they were young versus those who started later in life.

Let's break this down using real numbers. Say you want to save $1 million by the time you're age 65; you would have to invest $530 per month for 40 years starting at age 25 (assuming a 6% annual return). If, however, you waited another ten years to start investing, at age 35, you would have to invest $1,050 per month for 30 years to end up with $1 million (again, assuming a 6% annual return). This means your monthly investment would have to be nearly twice the amount if you waited 10 years to start investing.

Overspending can also be costly if you're using a credit card to fund your way through and you aren't paying off your bill each month. Latest Federal Reserve data shows that the average APR for credit cardholders who pay interest (i.e. those who don't pay off their balances in full) is a whopping 16.65%.

When you find yourself spending more than usual just because your friends are, Tu recommends offering a more affordable option. "It's important to offer an alternative so it's clear to people that you want to hang out with them just as much as they want to hang out with you," Tu explains. "It's just that you're not able to do that activity."

If someone in your group wants to go to an expensive restaurant, you could suggest some affordable alternatives such as grabbing takeout or cooking at home together so you don't have to give up hanging out with your friends to save some money.

It's easy to feel tempted to spend money to do things with friends — or to want to travel because we are flooded with images of others on vacations. Your best bet is to first make a budget that's based on your personal values. Creating a budget is about making trade-offs, so spending more in certain categories means spending less in others. For example, if you prioritize travel, you might forgo eating out with friends to save up for a flight to Maui.

Malani believes that it's possible to both spend money on experiences while you're young and simultaneously prioritize the future financial you.

"If you want to balance experiences while pursuing long-term financial goals like retirement or buying a house, then balance it," she says. "Dedicate some money to each, even if that means a domestic vacation instead of an international one. If you want to be able to do both, make sacrifices to both so that you can achieve that balance without over-stretching."

People can try to find more affordable ways to travel so they're not sacrificing their emergency fund or retirement savings, explains Tu, which could mean using credit card points or airline miles to fund hotel stays and flights, plus opting for cheaper, closer vacation destinations.

This is where travel rewards credit cards can come in handy — many of them have low or no annual fees, come with generous welcome bonuses and include plenty of travel-related perks. Note, however, that these types of cards do typically require applicants to have a good or excellent credit score to be approved. 

For instance, the Capital One Venture Rewards Credit Card comes with a $95 annual fee and lets you earn 2X miles on all eligible purchases. New cardholders can also earn 75,000 bonus miles after spending $4,000 within the first three months of opening an account. (See rates and fees).

While the redemption value for Capital One miles varies, if you book travel directly through the Capital One Travel portal, one mile will be worth one cent toward airfares, hotels and other award redemptions. That means that you'll get at least $750 worth of travel from the welcome bonus alone. And those who know who to maximize their points by transferring them to the right partner (i.e. airline or hotel) can double or triple the value of their redemptions.

Another popular travel rewards option is the Chase Sapphire Preferred® Card, which has a $95 annual fee as well as a welcome offer of 75,000 bonus points when new cardholders spend $4,000 within the first three months of account membership.

When you use this card, the redemption value ends up being 1.25 cents per point if you redeem them through Chase Travel℠, meaning your welcome bonus could be worth over $900 in flights, hotels and other travel expenses.

If you'd prefer a no-annual-fee travel rewards card, the Discover it® Miles lets you earn 1.5X miles on all eligible purchases (Discover Miles are worth 1 cent per mile). The card also comes with a unique welcome bonus: Discover matches all the miles you earn in the first year, so if you ended with 20,000 miles, you'll get an additional 20,000 miles as your welcome bonus.

We know it's tempting, but before signing up for any of these credit cards — especially if the lucrative welcome bonus is your main motivation for doing so — make sure you'll be able to pay off your balance each month on time and in full to avoid paying late fees and high interest. The cost of these charges will outweigh the value of any points or miles you may receive.

Don't apply for too many cards at once either, as each submitted application will result in a temporary ding to your credit score, although ultimately a new credit card can help raise your score in the long term when managed responsibly. 

Lastly, make sure you're signing up for a credit card that aligns with your regular spending habits. And if you don't think you can spend (and pay back) the minimum amount required within the timeframe to earn a welcome bonus, it's not a good idea.

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For rates and fees of the Discover it® Miles, click here.