Canceled a Trip This Year? Here Are 2 Smart (and 2 Fun) Things to Do With Your Unspent Travel Money
Turn your 2020 bucket list into a budding bank account and more.
It’s the year 2020. International borders are closed, airports are empty, and you’re sitting at home with your suitcase and passport wondering, what now? That question is starting to feel rhetorical—as if it's activating a real-life Jumanji board or setting up a catchphrase in an infomercial. But as coronavirus cases continue to rise to nearly 25.7 million around the world, as reported by the World Health Organization (WHO), you're likely extra-determined to hunker down with your favorite banana bread recipe and Netflix subscription, and consider any major 2020 vacation plans canceled (or at least postponed).
But let’s be optimistic for a moment, because there is a silver lining to this situation. With expensive travel plans off the table this year, your bank account is now filled with unexpected funds that can be re-budgeted to serve you in other ways. Just write down a list of your financial goals and you’ll realize the perks—like being able to pay down your credit card debt and splurging on a kitchen renovation—for yourself. (A sense of relief may even wash over you, much like it would after spreading out a towel on a lounge chair.)
As for that question: What now? Financial experts weigh in on smart (and fun) ways to allocate the money you saved up for all-inclusive resorts and cocktails on the beach. Follow their practical tips to get the most out of your green.
Opening a retirement account may not pump your adrenaline like seeing a world wonder, but your future self will thank you for it. Brittney Castro, CFP at Mint, recommends “looking at your bigger financial picture before deciding what’s best for you.” And if saving for the future reigns supreme, contribute to your employer-offered retirement plan first—enough that you can receive the full match from your company.
In fact, not contributing enough would be like leaving free money on the table, says Felicia Gopaul, CFP, ambassador for the CFP board, founder of Financial Control Mastery, and the creator of the Financial Freedom Fundamentals course. If it’s feasible for you, Gopaul says to forgo current tax deductions and invest in a Roth 401(k) option if you don’t have a company-matched plan. This option allows you to make withdrawals, say if another pandemic or economic recession hits. Just be aware: the tax deductions now may require you to make payouts later. Strategize with your own certified financial planner.
Self-employed? Opt for a Solo 401(k) plan for greater rewards. It’s specifically designed for those who are hustling in their home office or own a business with no other employees. A recent article from NerdWallet notes you can contribute up to $19,500 in 2020 as an “employee” of yourself, with an additional $6,500 if you’re 50 or older. As an “employer” you can continue making contributions “up to 25 percent of your compensation.” Of course, there are catches with this. The limit applies to every retirement plan you have. So, if you’re participating in an employer-sponsored plan as well, double-check how close you are to the limit before setting aside your moola.
Building up your cash reserve may be a better route, according to Marguerita Cheng, CFP. Your desire to plan for the future comes from good, proactive intentions—and a cash reserve, or rainy day fund, will have those same intentions, and only has to be about three to six months worth of income. On the same token, your current travel savings can also go toward what Gopaul calls your “Financial Freedom Fund.” This is similar in concept to a retirement fund, where you’re paying yourself. “This money is designed to help replace a portion of your income so you can continue to travel throughout your life,” she says. “It might be put into dividend paying stocks, REITS, or other income producing assets.”
Ah, credit card debt. It racks up quickly and takes forever to bring down. Luckily, your travel budget can make a serious dent in your outstanding balance, especially if you follow the snowball method, coined by radio show host, best-selling author, and businessman, Dave Ramsey. Although it may be against your natural instinct, Ramsey’s method suggests paying off cards with the lowest balance first. This builds “rewarding, focused momentum,” Gopaul says. After paying off those smaller debts, the money you typically spend can go toward other minimum payments.
Castro suggests one adjustment to this strategy: Have a cash reserve in place. “That way, the next time you need immediate money for things like a medical bill, job loss, etc., you can pull from your cash account and not have to use the credit card you worked so hard to pay off.”
We’re in the middle of a pandemic, on a planet that seems to be spinning at warp speed. Prioritizing self-care is more than necessary and will cushion the blow of having to cancel your trip.
Cheng recalls one of her friends who bought a bike after realizing virtual workouts weren’t working out for him. “After conference calls and web meetings, he goes out for a bike ride.” A worthy investment that's now a bright spot in his day. If biking isn’t your thing, you can invest in learning a new language for when you do eventually jet-set, or bring the local foods to you by dishing out some cash for a cooking class or cookbook you’ve had your eye on.
“How you spend your money reflects your values,” Gopaul says. Ultimately, investing in things that make you feel good, whether it’s a blowout, new bike, or another at-home experience sends a love note to yourself that says, “Hey, you’re important to me.”
First things first: Your 2020 travel plans may have been moved or canceled, but you should still take time off from work this year and keep that future bucket list alive. Resting and recharging are still essential—especially these days. PTO is an employee benefit and yours for the taking, so embrace any free time you get, even if you’re not traveling. You can even spend it researching and budgeting for a bigger, better trip. (For now, you can plan a relaxing staycation.)
According to the U.S. Travel Association, in 2018 Americans skipped out on 768 million vacation days. This number is up 9 percent from 2017, and has likely grown drastically since. Learn from this statistic: Save, plan, and invest in amazing future experiences.
“While the pandemic makes it seem like we’re stuck in an endless cycle, eventually life will return to a normal,” Castro says. “You don’t have to book tickets right now, but you can spend some time researching your perfect destination, building a budget, and planning out your activities.”
Gopaul suggests following other travelers on Facebook (I’m a big fan of The Solo Female Travel Network) and Instagram (check out Lee Litumbe, Lauren Bullen, and Amy Seder.), or through travel podcasts that will keep you up-to-date on the latest travel credit cards, flight sales, and hotel discounts.
“[You’ll find] travelers like to share the places, deals, and experiences they’ve had,” she says. “Soon you’ll be traveling the world at a fraction of the cost.” Instead of asking what now, you’ll be exclaiming, “Where to next?” with a pocket full of travel money.