Travel and the U.S. Economy

You might think that your 2013 international travel plans hinge solely on your personal financial situation this year, but the truth is that much of your ability to afford a vacation abroad depends on the U.S. economy.

 

The wealthier the United States is as a country, the more money you’ll likely have to take a trip to some exotic, far-flung location. So let’s take a look at some of the economic factors that may affect your personal travel budget in 2013.

 

Taxes

 

At the end of 2012, we were facing a fiscal cliff with a steep tax drop off. December 31st marked  the end of many tax cuts that, if they weren’t extended, could have crippled the discretionary spending of our country. Thankfully, many of them have been extended including the one that spelled relief for the marriage penalty tax. However, couples making more than $450,000 per year will see their 35 percent tax bracket increase to 39.6 percent, as will individuals earning more than $400,000. These two sets will also see an increase in long-term capital gains rates (jumping from 15 percent to 20 percent), however they will not rise to the levels of ordinary income tax rates.

 

In addition, the temporary cut in Social Security taxes has expired and will result in a 2 percent tax increase in the first $110,100 of income for wage earners. While we recently enjoyed a 2-year reduction in this expense, the Social Security tax has actually been steady at 6.2 percent since 1990, so it likely won’t make a huge impact on your travel budget.

 

Inflation

 

Inflation can surreptitiously squeeze a budget by spreading its misery broadly across all consumer goods. When inflation rates are high enough, consumers quickly notice they’re paying more for everyday purchases. When they’re lower, one might not notice the individual pricing but will notice the cumulative effect.

 

In December, the Bureau of Labor Statistics reported a 1.8 percent increase in the 12-month average price of all goods on the Consumer Price Index. This is a lower rate of inflation than we had in 2011, which means it won’t have quite as devastating an affect on your budget.

 

Interest Rates

 

Being able to secure a low interest rate on loans allows many to afford to divert some of their income toward vacation planning. Right now, our mortgage interest rate is still extremely low and USA Today reported that The Federal Reserve has no plans to raise interest rates until the unemployment rate drops to 6.5 percent.

 

Currency Exchange Rates

 

Exchange rates for currency can be an important factor in determining whether to take a trip abroad. As the U.S. economy strengthens, so too does the dollar’s exchange rate against other currencies. It’s difficult to anticipate how the dollar will look against other notes as the year progresses since there are many different factors at play. With that said, the United Kingdom’s, Economy News reported in early 2013 that improvements within the U.S. economy had strengthened the dollar and that they expected the pound’s value to weaken further, allowing the U.S. dollar to be exchanged more favorably against it. If this is a sign of things to come, it’s a very good sign for would-be international travelers.

 

Trip Insurance – For Your Personal Economy

 

No matter what the U.S. economy is doing, it’s important that all travelers secure trip insurance before booking a trip abroad. One of the biggest concerns of travelers in any economy, especially a shaky one, is that the travel service and lodging providers they pay in advance won’t make good on their reservations when the time to travel comes. Some travelers have even been stranded abroad after a small, specialty service line declared bankruptcy during their trip.

 

Trip insurance helps secure the funds you spend on your vacation so that economic problems here or in other countries can’t cause you financial damage when they negatively impact certain aspects of your trip.

 

No matter what tax hikes or economic woes are facing us in 2013, with careful planning and research it’s likely you can squeeze an international vacation into your budget this year just as you have in the past. And with the added security of trip insurance, you’ll be able to protect any investment in travel that you make.

 

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