Many folks gave up vacation plans due to COVID-19, and in turn, spent less. Here are 3 ways to use the money you saved.
With COVID-19 continuing nationwide, many are staying home instead of traveling to see family and friends. While that may be heavy on many people's hearts, less travel means more money in your pockets. So if you are sitting on more savings than you usually would during this time of year, here are some things to do with that savings.
Strengthen Your Financial Situation
Knowing what to do with saved money can feel daunting. You went through the trouble of working hard to earn the money and held back from spending it, so the last thing you want to do is waste or squander it.
If you stayed home for the holidays and find yourself with extra cash, there are fewer things more vital than shoring up your finances in case you lose your source of income. COVID-19 has caused many businesses to close unexpectedly, highlighting the importance of being prepared for an unforeseen financial calamity.
The first thing you can do is make sure you have enough money set aside for an economic shock. A goal of saving six months' worth of living expenses is a common target. In an ideal world, you wouldn't use this money very often, so you should keep it in a savings account with a higher interest rate so that you can earn as much interest as possible on your cash.
If you already have a cash buffer and have credit card debt, prioritize paying down any existing cards.
Credit cards charge some of the highest interest rates possible, which means that your balances can quickly spiral out of control if you don't pay them off quickly. An unexpected influx of cash is the perfect opportunity to pay off those cards sooner!
An extra benefit of paying off your cards is that your credit score will increase as your credit utilization drops.
A best practice for using credit cards responsibly is to pay them off in full every month so that you never have to pay any interest. A common credit card myth is that carrying a small balance from month to month helps you increase your credit score, but that's false. It's never a good idea to pay credit card interest if you can avoid it. Setting up automatic payments is an effective way to avoid a late payment or a missed payment altogether.
If you are debt-free and have a solid financial footing, consider purchasing a term life insurance policy to protect your spouse or other financial dependents if something happens to you. A term policy may be less expensive than you realize, so take advantage of your savings to protect the people you care about most.
Accelerate Your Path to a Larger Goal
Depending on how much you typically spend to travel to be with your loved ones, your holiday savings could be sizable. This unexpected boost in cash can help you reach a long term goal much more quickly!
Have you been saving up for a dream vacation to marvel at El Capitan in Yosemite National Park? Or perhaps you've always wanted to see the Eiffel Tower shimmer on a warm summer night in Paris. These savings could be your chance to make it a reality.
Research shows that using your money to buy experiences that allow you to create memories will bring you much more sustained happiness than using your money to accumulate physical goods or consumer products. If you are still on the fence about whether you should travel, maybe the thought of increased happiness will inspire you to take that trip you've been thinking of taking for ages.
If you'd rather do something more utilitarian, you could always use the savings for a down payment on a home or other investments for your future. It's no secret that the average American worker does not have enough money saved for retirement or that social security won't provide you enough money to maintain your current spending habits.
On top of that, the increasing cost of healthcare is making it more difficult to retire on time. For this reason, it could be incredibly prudent to invest your holiday savings in order to make life easier for your future self.
Invest in Your Physical and Mental Health
Mass quarantines and lockdowns were common sights in response to COVID-19. But while many businesses were shuttered, companies in the mental health and at-home exercise markets grew beyond their wildest dreams.
If you are struggling with your mental health or simply haven't given yourself the time and space to work on your emotional and mental wellbeing, few investments are more worthwhile. Many insurance providers are now reimbursing virtual visits to mental health providers, which means it's easier than ever to meet with a therapist regularly, and it might cost you less than you think.
The link between mental health and exercise is undeniable, so using your unspent holiday money to find ways to be more physically active is another fantastic idea. Companies like Peloton have reported record numbers of sales and new members because everyone is looking for ways to work out at home. The days of boring at-home workouts are over!
Being physically and mentally healthy is associated with more confidence and higher self-esteem, which won't surprise most of you. Many people don't realize that having higher self-esteem is also linked with much higher career earnings. In the end, spending your savings to improve your health might just be the best financial investment you can make with your saved money.