If I had to vote, I agree with the way Disney has handled it so far.
- Save last years earnings and deposit those earnings in a bank. Then this year withdraw those banked earnings and combine those with this year’s earnings and pay for your vacation without going into debt.
- Use this year’s earnings and take out a loan against next year’s earnings to pay for your vacation.
While there is nothing wrong with option 2, I think most would agree option 1
is more financially prudent.
The reason Option 1 is generally considered more prudent than Option 2 is because of a couple of key things that generally come along with loans:
1) Interest: If your paying interest on the loan, then Option 2 is costing more than Option 1.
2) Security: Depending on how the loan was structured, if you cannot pay off your debt, the debtor may be able to come after your assets. This creates a level of risk in Option 2 that is not there in Option 1.
3) Liquidity: Having cash on hand always lowers your risk. This is the argument for going along with Option 2. Your spending someone else's money, and keeping your money safe.
If the loan has a zero percent interest rate with no fees, or security, then in my personal opinion, I believe option 2 would be the more prudent option because of the liquidity factor.
Now lets look at how these factors affect DVC:
1) Interest: There is no interest on borrowed points. Using borrowed points does not cost more than using banked or current points.
2) Security: The only "pay back" of borrowed points is the experience of missing a vacation the following year. You are not at a risk of losing assets if your financial situation changes.
3) Liquidity: Unlike Personal Finance, liquidity is actually risky in DVC. This is because points have an expiration date, where as money does not. The longer you hold on to points, the increase likelihood you have of not being able to use them.
Again, I know this is somewhat of an apple to oranges comparison, so please do not reply just to tell me that. However, I would like to hear what other member think of this post.
You mentioned it yourself. Personal Finance and DVC Finance are apples and oranges. I figured I'd illustrate what differentiates them, because the differences in the economies is what makes the "prudent" strategy for each different. Without trying to sound too harsh, your not being "punished" for being "prudent". Your being "punished" for being "non prudent" in the DVC economy we are working in.
On a good note, if your following the same strategy in your personal finances (where it probably matters more), your probably going to come out way ahead of the vast majority of others during this current economic climate.