The majority of Americans will be receiving a stimulus check soon–if they haven’t already. If you are expecting a stimulus check and haven’t received one yet, you can check on the payment status via the Economic Impact Payments page on the IRS website.
The big question now is - what is the smartest thing to do with this money? With unemployment at a record high, many families will depend on this check just to get by. But, if you are in a fortunate situation where the need for the funds its not immediate, there are a number of other uses for your check.
Pay your bills.
In the event savings is depleted, you are facing unemployment, or an uncertain employment outlook, then pay for immediate necessities. This is a prime opportunity to look at your monthly expenses and see where anything could be cut. Even a few dollars here and there can add up. There are also a number of resources available to help with overdue bills. Reach out to your lender before you get behind and they will be able to help with payment or deferral options, and keep you from compounding debt.
Start an emergency fund.
Generally, experts suggest having 3-6 months of expenses in savings. While $1,200 is probably not going to go very far, it is a good start. Take a little time to research savings accounts at different banks to get the best interest rate. The higher the interest, the faster that nest egg grows. Just be sure that your funds are still liquid, and available to spend if you decide you need it a few months down the road. You can open an FSB savings account or money market completely online, and get your savings started within minutes. We also suggest setting up an auto transfer from your main checking account to a savings account. Even $20 every payday will begin to add up over time.
Pay down debt.
If you are comfortable with the size of your rainy-day fund, consider paying down debt. If you have high-interest debt, like credit cards or car loans, the stimulus check could be a great way to fast-track your payoff. Generally, experts recommend paying off high-interest debt first, because it will save you money on interest payments in the long run. Depending on your situation, it could make more sense to put the money into savings so it is available if needed. Once the check is used to pay down debt, it is gone. If you are able to keep chipping away at debt, but feel uncertain about being able to make payments in the coming months, putting the funds into savings may be the smarter decision.
Save for retirement.
Right now, you may not want to look at your 401k, but if you are in a situation where your debt is relatively low, and you have a good emergency savings set up, then it could be time to talk to a financial advisor about starting an IRA for retirement.
Donate to a cause or support local businesses.
If you are fortunate enough to have more than you need and you feel like giving back, consider donating to a local charity or supporting local small businesses who are taking a hit. Always research a charity and ensure it is a certified 501 (c)(3) before giving. If you are looking for an excuse to spoil yourself, there is no better excuse to splurge on takeout, shop local boutiques online, or buy gift cards to use later. Every little bit can help your local economy.
Remember, you don't have to use the lump sum for one purpose either. Use a little to splurge on local takeout, pay down your credit card debt, and put the rest in savings. There can be a lot of pressure to use your check the "right" way, but the best way is going to be completely unique to you.