Trips canceled? Look on the bright side, here are some good money-saving tips. Top 3 Financial Strategies
My 2020 travel plans have been canceled, and it’s likely that yours have been as well. As we navigate this uncharted territory, take advantage of it. Each decision is an opportunity to build your net worth or reduce it. There are financial tips and strategies that you can benefit from. And on top of that, I’ve got some great pro tips from Marcos Mendonca, a travel and events organizer, on how to navigate travel perks.
Get status: Extremely long hold times are exhausting. And the results are often pointless with vendors avoiding cash refunds. Getting status isn’t just about upgrades, it offers tremendous value with dedicated phone lines for elite customers and experienced customer service agents.
- Refunds vs Credits: The recent Senate bill requiring cash refunds doesn’t state a deadline of when that refund must be provided. It’s worth considering the credit incentives offered as an alternative. With a 30% bonus on credits, it may be easier for you to redeem these in the future rather than wait for the eventual cash credit. Also, it’s nerve-racking to see your trip date approaching without an official cancellation from the vendor, but be patient and wait for the cancellation. If the vendor cancels, you get a refund, even for a scheduling change.
- Travel Insurance: We often depend on travel insurance offered as a benefit of credit cards or purchased directly. Be aware that the Coronavirus is not a covered reason for most travel insurance programs. If you are looking to plan a new vacation and want the reassurance of trip cancellation protection, purchase insurance with “cancel for any reason” coverage.
- Mileage sales and Redeeming miles for travel: Airlines need money. You may see 50% off sales for buying miles, which could be a great deal for frequent travelers. Just don’t plan on using those miles right now because airlines have quietly inflated mileage requirements for plane tickets to incentivize cash purchases. Also, stick with a carrier such as United and Southwest that have a reputation for easy mileage redemption.
Financial Planning Strategies
- Waive 2020 RMDs: The CARES act has waived the required minimum distributions for retirement accounts. If you aren’t currently using your IRA distributions for necessary living expenses, consider canceling your distributions. This would defer any taxes owed on that money till you distribute it at a later date.
- Roth Conversions of Expected RMDs: Take it a step further and do a Roth conversion with the money that you had planned on distributing from your RMD. That money will now grow tax-free until it is distributed with no distribution requirements. Keep in mind that you will want to pay the taxes owed with money that you already have on hand. Also, you must keep the money converted to the Roth IRA in it for 5 tax years in order to receive the tax-free deferral benefit.
- High-Yield Savings Accounts: For the money already sitting in your savings account, consider moving it to a high-yield savings account. The online banking platforms are still offering FDIC insured cash yields of approx. 1%. With the recent decline in interest rates, you are earning practically nothing in normal savings or checking account and it may be this way for a while yet.
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