Should You Spend Your Stimulus on a Vacation?
Do you need an escape? The stimulus may buy you one, but is this the right way to spend that money?
Many of us have spent the last 12 months indoors or otherwise living close to home. And if you are the type of person who likes to travel, this is a difficult place to be.
You may have canceled your travel plans last year for a variety of reasons, from coronavirus concerns to lack of money. But if you make a $ 1400 check now, you may be tempted to use that money to buy the vacation you longed to make. The question is whether this is the right move or should you use your direct payment for something else?
It’s all about priorities
When luring, as you may be spending your money on holiday stimuli, you should first ask yourself two questions:
- Do I have a fully loaded emergency fund?
- Do I transfer unhealthy debt (like a credit card balance)?
If your answer to the first question is no and the answer to the second is yes, you may need to pause your vacation plans.
In a period like this, it is especially important to have enough money in savings to cover unplanned bills or a period of unemployment. This is why you should aim to have an emergency fund with enough money to pay for three to six months of living expenses. If you have, say, only a month’s worth of living in the bank (or, worse, if you have absolutely no savings), then you probably do not have the financial means to spend your holiday incentive. Instead, this money should go directly to the bank.
Now, let’s talk about debt. If you are transferring a mortgage or car, you do not need to rush to repay it. This type of debt is intended to be repaid over a longer period of time. But if you have a credit card balance, you should absolutely use your funds to eliminate it – or reduce it as much as possible. The more you stick to this balance, the more interest you will accumulate and the more damage your credit score can get, depending on how much debt you owe.
Similarly, if you owe money on a personal loan, it pays to use your incentive to avoid it. Although not as bad as credit card debt, it is even better not to owe money on a personal loan debt.
Now, if you do not have unhealthy debt and are doing well in emergency savings, there is nothing wrong with using stimulus control to close an escape. That said, consider the potential pandemic constraints and travel hazards. If you have not even been vaccinated and want to travel very quickly, you may want to stay in a destination where you can drive rather than fly. And you may want to rent someone’s private home instead of booking a room at a resort or hotel.
It was a difficult year for many people. Even if you are not sick or have lost your job, you may still be struggling with the effects of the pandemic. And if you need a vacation to improve your prospects, so be it. But before you make a reservation using your cash, make sure you do not have a more pressing use of that money. I’m glad you got away with it, preferring to use your extra funds for financial security if you do not have savings or are in debt. You can save your travel plans later when your finances improve.