Should You Spend Your Stimulus on a Vacation?

Need a getaway? Your stimulus may buy you one, but is that the right way to spend that money?

A lot of us have spent the past 12 months cooped up indoors or otherwise staying close to home. And if you're the type of person who likes to travel, that's a tough spot to be in.

You may have canceled your travel plans this past year for various reasons, from coronavirus concerns to a lack of funds. But if you're now sitting on a $1,400 stimulus check, you may be tempted to use that money to buy yourself the vacation you've been longing to take. The question is whether that's the right move, or should you use your direct payment for something else?

It's all about priorities

Tempting as it may be to spend your stimulus funds on a vacation, you'll first need to ask yourself two questions:

• Do I have a fully loaded emergency fund?
• Am I carrying 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 put your vacation plans on pause.

At a time like this, it's especially important to have enough money in savings to cover unplanned bills or a period of unemployment. That's why you should aim to have an emergency fund with enough money to pay for three to six months of living expenses. If you only have, say, a month's worth of living costs in the bank (or, worse yet, if you have no savings whatsoever), then you probably can't afford to spend your stimulus on a vacation. Rather, that money should go straight into the bank.

Now, let's talk debt. If you're carrying a mortgage or auto loan, there's no need to rush to pay it off. That type of debt is meant to be repaid over a longer period of time. But if you're carrying a credit card balance, you should absolutely use your stimulus funds to eliminate it -- or whittle it down as much as possible. The longer you hang on to that balance, the more interest you'll rack up, and the more damage your credit score might take, depending on how much debt you have.

Similarly, if you owe money on a personal loan, it pays to use your stimulus to chip away at it. Even though it isn't quite as bad as credit card debt, it's still better not to owe money toward a personal loan debt.

Now, if you don't have unhealthy debt and are doing well on emergency savings, there's nothing wrong with using your stimulus check to book a getaway. That said, be mindful of potential pandemic travel restrictions and risks. If you haven't yet been vaccinated and are looking to travel very soon, you may want to stick to a destination you can drive to rather than fly. And you may want to rent someone's private home rather than book a room at a resort or hotel.

It's been a tough year for a lot of people. Even if you didn't get sick or lose your job, you may be struggling mentally with the impact of the pandemic. And if a vacation is what it takes to help your outlook improve, so be it. But before you book one using your stimulus cash, make sure you don't have a more pressing use for that money. Nice as it is to get away, you're better off using your extra funds for financial security if you're low on savings or grappling with debt. You can save your travel plans for later once your finances improve.