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Build an emergency fund
Although setting up an emergency fund might not seem like the most fun way to spend your travel money, it’s definitely the most practical.
Many financial advisers recommend putting aside enough emergency savings to cover at least six months of your normal expenses, including housing costs, groceries and bills.
And even if you’ve already got an emergency fund stashed away, it never hurts to top it up — especially during times like these.
Just make sure you keep your emergency fund in a high-yield savings account so it has a chance to collect interest and grow over time.
The interest rates on savings accounts can vary a lot, so it’s important to compare rates from different banks if you want to find the best option.
Put it aside for next year’s trip
Even though 2020 is the year of the staycation, that doesn’t mean you can’t start planning for your next big adventure. It may not be wise to book anything just yet, but there’s no harm in making tentative plans.
And if you decide to hold onto the unused cash from this year’s vacation fund for a future jaunt, your next trip could be a real doozy.
A great way to catapult into the trip of a lifetime is to combine your interest-boosted savings with cash back rewards. (Cash back is preferred over travel rewards right now, because you're probably not likely to book a trip — and cash is obviously more flexible.)
There are several accounts that allow you to accumulate interest on your travel fund and earn up to 10% cash back on your purchases.
Even if you’re cutting back on spending in the short term, you could still earn a couple of gorgeous dinners on the French Riviera just off the cash back you earn shopping for your monthly necessities.
Invest it in the market
Another way to leverage your unused travel cash into a nice vacation down the road is to invest it. The pandemic has been hard on the stock market, but this is a great time to scoop up some high-profile stocks at super low prices.
Even if you don’t have much (or any) experience with investing, you can still take advantage of today’s cheap stocks by using a robo-advisor.
Robo-advisors are digital investment tools that make the investing process quick, easy and stress-free. They’ll help you invest at a risk level you feel comfortable with, then automatically adjust your portfolio based on changes in the market. That means you’ll never have to worry whether you’re making the right moves.
By the time you book your next vacation, you may have earned enough to upgrade to the penthouse suite — or at least to a room that’s not next to the ice machine.
Get rid of some debt
If you’re not going to be traveling this year, you might want to use some of your leftover vacation money to clear away a chunk of your debt.
It’s a good idea to start with your credit card bills to avoid getting punished by their sky-high interest rates.
You could also use your leftover travel cash to take a bite out of your student loans. Even though the government has paused collections and interest for federal student loans until the end of September, you’re probably still on the hook for private loans.
You might be able to save money on your student loans if you refinance to a lower interest rate, so make sure to compare rates online.
Pay your mortgage off faster
The one positive thing to come out of this whole pandemic is that mortgage rates have hit an all-time low, so you might want to consider putting some of your unused travel money toward your mortgage.
It's the perfect time to refinance, and maybe into a new loan with not only a lower rate but also a shorter term. You could potentially save thousands of dollars in interest over the course of your loan and fully pay off your mortgage years sooner than you had originally planned.
Refinancing into a shorter-term loan is likely to boost your monthly payment; you could cover the extra cost with your vacation money. But since rates are so low right now, you might be able to lock in a refi with a payment that's close to your current payment — or possibly even less.
If you already have a rate you’re happy with, adding just $100 or $200 per month to your mortgage payments helps you shave time off your term and cut your interest costs.
It’s easy to comparison-shop mortgage rates online, so use the widget below to do some digging and see whether refinancing could save you a ton of money.