Travel and vacation time is something we all love to do at every age and stage of life. For millennials however, finding affordable travel options is something that remains a challenge, particularly with other financial obligations consistent with life in your twenties or early thirties. It should be common sense to avoid buying a timeshare while they are in this critical part of their lives but unfortunately they fall victim to the resorts pitches just like everyone else.
It wasn’t that long ago that timeshares exclusively targeted seniors for the ‘pitch’ and financial obligation of timeshare ownership. That approach seemed to make sense, as retired Americans typically had both the financial ability to manage the expense of ownership (and it is expensive) and the time to use the allotted weeks that timeshares provide.
Today however, the timeshare industry is shifting its focus increasingly to young adults and professionals between the ages of 25-35 years, to secure what they consider to be their next ‘big consumer market’ with an opportunity that presents more as a financial liability than an advantage, to smart millennials. Here is what we want millennials to think about, if they are considering the purchase of a timeshare, or if they already own one.
Saving to Buy a Home
In many American housing markets, owning a home is a lot more affordable than paying rent. It makes sense to plan to be a home owner as soon as possible, as it is one of the most important investments for adults. Did you know that a timeshare can actually make it harder to purchase your first home?
Lenders view timeshare ownership as a financial liability that impacts your affordability ratio. No matter what timeshare sales people tell you, a timeshare is never viewed as an asset for accounting purposes, and lenders do not consider it to be a positive indicator for lending decisions.
Read more about how home mortgage qualification can be impacted by timeshare ownership.
Labor Mobility Needs Can Change
Millennials are some of the most highly educated professionals in America, who are challenged with gaining industry experience in a very competitive work force. Baby Boomers are delaying retirement, which means that shift in job vacancy isn’t happening (yet) for young and educated professionals. What that also means is that Millennials frequently have to move “where the work is”, which can include relocating to another state, or even working internationally or overseas.
When you own a timeshare, you will feel obligated to use it, otherwise those monthly fees and expenses will start to make you resent owning a timeshare at all. If you travel a lot for business, will that impact how eager you will be to travel again to your timeshare? If you live in another country, will you be able to afford expensive flights to use your timeshare? Can you rent it to family members or friends? Keep your options open, and think about how viable a timeshare ownership opportunity is, if you decide to move elsewhere.
Starting A Family
Before making any major purchase, including a timeshare, financial advisers ask consumers to consider not only their present financial needs and circumstances, but those in the foreseeable future. If starting a family is high on your list of priorities within the next few years, some backward budget configuration should happen, to determine the affordability of your timeshare now, and five to ten years from now, when you may have other financial obligations.
If you are not sure how your budget might look after having one or more children, your best resource is a family member or friend who has children under the age of five years. They can give you some accurate estimates on the monthly cost of expenses including childcare, food and health costs, supplies and other incidentals that can significantly put strain on your budget. Think “now and later” when it comes to making a decision about buying a timeshare.
Burdening Your Personal Credit
Student loans. The two words that strike fear into any millennial or professional adult. Did you know that the average American adult incurs about $25,000 in student debt, and it takes between 5-25 years to pay it off? If you have leveraged student loans to acquire your diploma or degree, the weight of repayment will be something you have to factor into your personal finances for years after graduation.
Consider that every financial obligation that you add, can create hardship for you. Certain costs and expenses of course are fixed; housing, groceries, entertainment, transportation, but other types such as a timeshare contract are optional. Given the fact that timeshare maintenance fees can accelerate without warning, and double or triple your monthly expense, is it worth the risk and worry to own a timeshare, when you can simply rent one, whenever you want to vacation?
Defaulting on a timeshare purchase loan, or membership and maintenance fees can result in damage to your personal credit. A timeshare is as legally binding as a mortgage, and the timeshare organization doesn’t really care if you have student loans, health concerns, or other unforeseen expenses and burdens. Once payment is in arrears to a timeshare company, and a collection agency has become involved, your good personal credit can be impacted for up to seven years, during which time car loans, mortgages or other important purchases may not be able to occur, with damaged credit.
Do the Research
Millennials are the most digitally fluent consumers on the planet, who are avid online researchers when it comes to making large purchase decisions. You know where to find the facts and weigh whether sometime is ‘too good to be true’, and on average, we find few millennials are interested in the long-term financial obligation of timeshare ownership and are smart enough to avoid buying a timeshare.
However, since we all love the idea of taking regular vacations and having fun, being presented with an affordable timeshare opportunity can be hard to resist, particularly if sitting through a sales presentation gets you a great perk, like a free dinner, cruise or tour or other incentive. We love ‘free stuff’ too (who doesn’t?).
What we encourage is that millennials read online reviews about consumers who have owned timeshares for a period of time, and learn more about how the opportunity is as legally binding as signing a mortgage. Consider your financial preferences and goals, before buying a timeshare.