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As I see it, there have been a few bright lights during the COVID pandemic. One of those being the government stimulus checks. These stimulus checks are, by design, for the people of our country to stimulate the economy by giving us disposable cash to boost consumption.
The reality is, for many people, this money is going directly towards covering the bare necessities like rent, bills, and food. If this is the position you find yourself in, you’re not alone.
These stimulus checks really serve the purpose of helping people who suddenly find themselves out of work or falling on hard times due to the pandemic.
But if, like me, you’ve been lucky enough to keep your job and be meeting your monthly financial obligations, then you are the intended target for boosting consumption.
I feel incredibly fortunate to be in a position where I can use this money for something other than putting a roof over my head.
Spending Stimulus Money the Responsible Way
Of course, when I got my first check, my first inclination was to blow it on something ridiculous like a new wardrobe for that office job I no longer go to. Or to set it aside in my vacation fund for all those trips I can’t exactly plan this year.
But then the logical side of my brain stepped in and told me I could find some really responsible ways to spend my stimulus check.
Remember that if you have a rent payment or other bill that’s due, that should be at the top of your priority list. The items I outline below are for those who have all of the necessities covered, and the money is truly an excess of funds.
And in an effort not to be the only adult in the room, I challenge you to consider these somewhat more financially responsible options when you’re mulling over what to do with your latest mini-windfall.
Erase Lingering Debt
Paying off debt is undoubtedly the most responsible and un-fun choice for your stimulus money. But if you have a lingering debt that’s hovering around $1000 or less, why not use your stimulus check to pay it off and get it done?
It makes it easier to think about it in terms of the money you’ll free up instead.
Last month my husband paid off his truck, which had a remaining balance of $1200. By doing so, he freed up $200 each month. So as he saw it, the lump sum payment now enabled him to re-allocate that $200 towards a new monthly expense instead.
Maybe paying down those student loans today means you have a new recurring sum to use for something more fun like investing next month.
Invest in the Market
The beautiful thing about investing these days is that you don’t need much money at all to start. Robinhood and other apps let you easily invest in a fractional share. That means you don’t need to drop around $800 on that single share of Tesla if you don’t want to.
Instead, you could break down your stimulus check to purchase fractional shares of a few great companies.
Each year, one of my primary investment goals is to make sure I max out my Roth IRA contributions (a limit of $6,000 in 2021).
So my recent stimulus checks have been helping me hit that investment goal. If you have an investing goal, consider turning stimulus money into a money-making vehicle by allocating it towards stocks, bonds, ETFs, or otherwise.
Start Your Emergency Nest Egg
There’s no single decision that’s made me feel more secure in my financial position than choosing to have an emergency fund. It is one of the surest ways to provide a buffer between you and life (which this pandemic has shown us can be incredibly volatile).
I’m a product of Dave Ramsey’s Financial Peace University. That means I followed his well-known baby steps to financial freedom. The very first step is to save $1000 in an emergency fund. So with a hefty stimulus check, you’re there!
Think about your emergency fund as combating unnecessary future stressors. Even setting aside a few hundred dollars can make a big difference if a tire blows or you finally get that forgotten dentist bill from last year’s visit.
Save It for Taxes
Remember when I said paying off debt was un-fun? This might be less fun, but paying taxes is one of those adulting responsibilities we all have to come to terms with.
If you think you might be owing some money to Uncle Sam this year, you may want to hold onto your stimulus check to see if you’ll need to hand it right back come April. The best-case scenario is you do your taxes, get money back instead, and have even more to put towards another venture!
Treat Yourself and Support Local Businesses
There is absolutely nothing wrong with taking a sliver of your stimulus check to treat yourself. Heck, if you’re going to be working out at home, you might as well get that set of dumbbells you’ve been wanting instead of continuing to use soup cans.
And if you need to work on your laptop, a monitor to use as a second screen might not be a bad move.
To make an impact on your local community, try to find small businesses near you to support. We all know that Amazon has fared pretty darn well during the pandemic. But Bob and Jo’s Sports Emporium might be struggling.
It is probably better to shop local and pay a few dollars more for your dumbbells if it means keeping people in your community employed.
The Bottom Line
With more stimulus checks on the horizon, it’s a great time to plan for how you’ll spend those funds. Once the check hits your bank account and you see there’s money to blow, it might be too late.
Before you run out to spend your check, remember to take a step back and assess all of the options before you. It’s far better to have something to show for it in terms of becoming debt-free or owning assets instead of splurging on a few gourmet meals that have gone down the hatch and are long forgotten.
Contributor’s opinions are their own. Always do your own due diligence before investing.