Spring break may not be happening this year thanks to shelter-in-place measures, but there’s a silver lining to having your vacation plans grounded for the time being. Now you have at least another full year to focus on your finances, making sure they’re ready for the best trip possible once it’s safe to take to the skies again.
Here are some tried-and-tested money management tips to help you save up more for your next trip.
1. Focus on Paying Down Your Debt
You don’t have to be drowning in debt for it to have an effect on your savings. Any regular bill siphons money away from what you can squirrel away in a travel fund, including outstanding credit card bills, auto loans, and online installment loans.
Try seeing what you can do to pay down these debts faster, even if you can comfortably handle each bill. Check-in with your budget to find unnecessary spending you can put on hold to free up more cash to put towards your personal loans.
The online installment loan experts at MoneyKey recommend making any additional or early payments whenever possible, provided there are no pre-payment penalties. Some lenders apply these fees to deter you from paying off what you owe before the pre-determined term.
As long as there no penalties for making early payments, this habit helps you pay down what you owe quicker, and it may help you reduce what you pay in interest.
2. Don’t Forget to Save for a Rainy Day
A sunny vacation is a hotly anticipated trip that you prepare for by saving a little every month. But not everything is as expected as a planned holiday. Sometimes you have to budget for unanticipated repairs or medical bills.
Having some savings set aside for these emergencies can help you cover these bills without putting them on your line of credit or credit card. It may also help you avoid adding another online installment loan to your bills.
The standard rule of thumb suggests you should save between three to six months of living expenses in an emergency fund. However, you may want to bump up your goal to reflect the current economic climate. If you work in a volatile industry or have lost hours due to the lockdown, consider increasing your target.
3. Use Your Tax Return Wisely
Last year, the average tax return was $3,143. While this signified a 0.6% drop from the previous year, it’s not exactly nothing. Nearly three grand can help you pay down debt or start an emergency fund.
If nothing changed your work or living situation, you might expect the same sized return as you did in the past. While it’s never a good idea to bet on this money to pay regular bills, your return can give a boost to existing goals.
If you receive a sizeable return every year, some tax experts recommend revisiting your tax forms to adjust how much tax gets taken off each paycheck. A return indicates you’re withholding too much for your tax bracket. You could see a quick injection of cash every payday by lowering it.
Globetrotting may be off the docket for the foreseeable future, but that doesn’t mean you can’t prepare for when it’s safe to travel again. Follow these tips to get your finances in order by the time that day comes.