By now you’ve probably heard that the U.S government has passed a record stimulus bill (called the CARES Act) in hopes of providing financial relief to citizens and businesses.
Although the bill covers many areas, the one most will be interested in is the stimulus check that millions of Americans are supposed to receive in the coming weeks.
While this one-time payment isn’t a ton of money, the hope is that it will provide some financial support to Americans and stimulate the economy through spending.
The government would like you to spend your stimulus check, however, what you should really be doing with that money depends greatly on your individual circumstances. In fact, we feel the most effective way to use your stimulus check isn’t to spend it on consumerism at all.
So, what should you do with your stimulus check?
The answer will depend on you, but we’ve put together a list of things you could choose to do with your stimulus check depending on your circumstances. Each of these options are designed to give you the most bang for your buck, and to benefit you and others that need the most help during these times.
But first, who is getting these checks?
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Who is Eligible?
Before we get into what you should do with your stimulus check, you need to know if you’re even getting one.
Your eligibility depends on meeting certain criteria (which you can read about here), but the simple version is this:
- If you had $75,000 or less in taxable income as a single filer or $150,000 or less as married filing jointly, you’ll be eligible for the maximum of $1,200 per adult. You’ll also receive $500 per dependent child.
- Those from $75,000 up to $99,000 in taxable income as a single filer, and $150,000 to $198,000 as married filing jointly, will also receive a check but it will be less the more you make.
Furthermore, those receiving social security or disability will also be eligible to receive a stimulus check.
It would become very complicated for us to go through all the scenarios in this article, but if you want to know how much you can expect to receive you can calculate your stimulus check here.
Those who have direct deposit information on file with the IRS can expect to receive their stimulus check deposited into their account within the next three weeks.
For those without direct deposit on file, the Treasury plans to develop a web-based portal where you can provide your banking information in the coming weeks. This will allow you to receive money immediately rather than waiting for a check to come in the mail (go to the IRS website for more details on this).
Now that you have a good idea how much you’ll be receiving, let’s talk about what you should do with it.
The first thing you should consider doing with your stimulus check is paying bills.
In fact, if you’re one of the millions of Americans who’ve lost their job, especially if you have little or no savings, you should definitely use your stimulus check to pay necessary bills as best you can.
We understand that $1,200-2,400 isn’t a ton of money, but it will hopefully allow you to pay for at least your basic needs and may give you a few weeks cushion to figure out your next steps.
Another thing you should look into (if you haven’t already) is filing for unemployment. Another part of the CARES Act adds $600 per week for four months to unemployment benefits and expands eligibility.
Finally, if you’re still struggling to pay your bills make sure you reach out to your landlords/mortgage companies, utility companies, and any other lenders you work with. Most are offering assistance during this time and many areas have passed laws to protect people from being evicted or losing utilities if they can’t pay their bills.
Make sure you check out what’s being done in your area to protect people during this pandemic.
Start an Emergency Fund
Let’s say you’re one of the lucky individuals who still has money coming in and you can still pay all your bills, but you don’t have an emergency fund.
Now is the perfect time to start one using your stimulus check.
Many financial pundits recommend building a $1,000 emergency fund even before paying off debt, so $1,200 will get you there and some.
With most American’s not able to cover a $400 expense without using credit, using your stimulus check to start an emergency fund will help provide a cushion if your situation changes and you need to cover some unexpected expenses.
Beef Up Your Emergency Fund
Already have a $1,000 emergency fund, great! Now it’s time to use that stimulus check to beef it up.
Most recommend having anywhere from 3-6 months’ worth of expenses in savings/emergency fund in case something drastic happens and you lose your job or can no longer work (exactly like what’s happening now).
Don’t feel bad if you don’t have that much saved up right now, not many do. But if there’s anything this pandemic has taught us, it’s that even the most secure jobs can be lost, and trouble can come from where we least expect it.
Moving forward, you should make it a goal to build up several months’ worth of expenses in savings for the future and this stimulus check is a great way to begin working toward that goal.
You can pay your bills and you already have a robust emergency fund, what should you do with your stimulus check now?
If the above categories are covered but you have debt, the next thing we recommend doing is using your stimulus check to make a big dent in it.
The only thing that can begin to approach having a good amount of savings in times like these is having little to no debt.
If you’re going to use your stimulus check to pay down debt, we recommend starting with the highest interest debt first, such as credit cards. If you have something left over after paying off your high interest debt, then you can go onto other debts you may have.
Any debt you can eliminate means less money coming out of your pocket every month, which will further insulate you from times of hardship.
Add to Savings/Sinking Fund
If you can pay your bills, have a good emergency fund, and have little to no debt (or debt at a low interest rate), another thing you can consider doing with your stimulus check is adding to your general savings or a sinking fund.
While an emergency fund is designed specifically to help cope with emergencies (unexpected expenses, loss of job, etc.), a sinking fund if designed to help you save for a known or expected expense.
Examples of things you could choose to save for in a sinking fund are a car, appliances, or even a travel fund for when it’s safe again to travel.
If you don’t want to save for anything specifically, another thing you could do with your stimulus check is to add it to general savings as an extra cushion.
If all of the above is covered and you’re feeling secure in your finances, another thing you could consider doing with your stimulus check is investing it.
There are tons of options when it comes to investing, but if you’re going to invest your stimulus check we would recommend focusing on putting it into retirement accounts, especially if you have years to go until retiring.
While markets are currently down, history has shown that they have always eventually recovered and continued to grow. Thus, investing in a volatile market with many years left until retirement is a relatively safe and lucrative bet.
Employer-sponsored plans generally require contributions to come out of paychecks and it’s difficult to add a one-time chunk. However, you could choose to up your contributions for a few months and then return to your normal amount.
You could also choose to put the money toward an IRA (individual retirement account), just remember that you can only contribute $6,000 a year. If you’ve already maxed out your IRA for this year you could also consider saving a portion of your stimulus check for next year’s contributions.
Last but certainly not least, if you’re in a stable financial position we encourage you to consider using your stimulus check to give to those who’ve been hit hardest during this pandemic.
One option is to donate all or part of your stimulus check to a charity providing relief to those most impacted. You could also donate to hospitals and healthcare workers on the front line, or researchers trying to develop treatments.
If you prefer a more hands-on approach, you could use your stimulus check to purchase goods and services from small businesses. If you’re a landlord, you could use your check to help pay the bills on your properties so renters who’ve lost their jobs can skip a month of rent. You could use the money to buy supplies to make masks or other protective gear for healthcare workers.
There are endless ways you can help, and if you’re on firm financial footing your stimulus check could go a long way in helping others not so fortunate.
Moral of the Story
What should you do with your stimulus check?
That depends on you and your situation, but unless you’re supporting small businesses, we strongly recommend not spending it in a consumerist manner.
Instead, you can use your check to pay bills, start an emergency fund, grow an emergency fund, pay debt, add to a sinking fund or savings, or invest.
If you’re fortunate enough to be financially stable, consider using your stimulus money to donate to a cause helping individuals hit hard by this pandemic or to those trying to stop it. You could also make purchases at small businesses or allow tenants to skip a month of rent. If you’re particularly crafty, you could use the money to buy supplies to make personal protective gear for healthcare workers.
Millions of Americans will be receiving a stimulus check and the options for how to use it are endless.
However, you choose to use your stimulus check, make sure it’s something that benefits you, your family, or those hit hardest during these times, not for frivolous things that help big corporations.
Talk about Money Well-Spent.