Five Things to do With Your Stimulus Check (& Three Things to NOT do With it)
So the government is handing out checks, huh? It’s a good idea to have a plan for that money before you get it to ensure it goes to good use for you.
Here are 5 ways to put that stimulus money to good use:
- Get caught up with bills and debt payments. Unfortunately, this is where a lot of Americans find themselves, especially in this post-holiday shopping season. Have you or someone in your household been out of work for a while? Has work has forced you to take a pay cut? Or have you have been relying on unemployment (which has unreliably ranged from inconsistent to non-existent)? You could definitely use that stimulus money!
- Put it towards savings. If you are in the camp of Americans whose income is still providing enough to pay all of your bills, then putting this money towards your safety net could alleviate some stress for your household. Having an emergency fund is a beneficial cushion for when the car desperately needs tires for the first rain of the year, you get into a car accident with only liability insurance and have to pay for your repairs, or find your downstairs ceiling develops a massive leak from your upstairs bathroom (all of which in fact did happen to us during this pandemic year).
- Contribute towards your after-tax retirement accounts. If you find yourself in the fortunate position of still being able to support your household, and have 3-6 months of expenses in savings, then you can start thinking about contributing to your after-tax investment accounts: Roth IRA, brokerage accounts, kids’ investment accounts, etc.
- Start a business. That business that you’ve been thinking about for years? Now is a good time to start it. According to a 2009 study by the Ewing Marion Kauffman Foundation, 57% of Fortune 500 companies and two-thirds of the fastest growing companies began during a recession or bear market. If you have an idea of a product or service that would be beneficial to the world, now could be a good time to get serious about it.
- Donate to a cause. There are tons of people hurting right now. If you are in the position where you have excess, that could be used to help those in need. Whether it be to your cousin who lost their job, a GoFundMe that speaks to your heart, or a national / international organization that you feel compelled to support, your funds can do some good.
What about ways to NOT use that stimmy money? Here are 3 ways:
- Do NOT get into (more) consumer debt! This is not your down payment on that fancy new car that’s going to cause additional monthly expenses in the form of a car payment and increased auto insurance. Instead, if you need (not just want) a car, save up to buy a used car for cash. If you must finance, then adopt the Money Guy’s 20/3/8 rule in deciding how much to spend on a car: put 20% down, pay your car off in 3 years, and make sure your total household auto payments are no more than 8% of your household gross income.
- Do NOT let it burn a hole in your pocket. This is not your opportunity to buy something just because you have the money. You probably don’t need that new wardrobe, handbag, living room set, iPhone, PS5 for your kids (or yourself or your boyfriend), or other new costly expense. Think long and hard before spending that money to make sure it’s something that you actually need, not just something you want.
- Do NOT let it sit in your checking account. If you do not need to use this to get caught up on bills or pay down (or off) debt, then move this money into a savings or investing account. Letting it sit with your regular spending paying money will only tempt you into frivolously and regrettably squandering this money.
Got any other do’s & don’ts for this list? Add them in the comments!