On April 15th, the first Economic Impact Payment checks were direct deposited into bank accounts. Since then, more direct deposits have been made and paper checks should start being mailed out in May 2020. These checks are part of the government’s relief efforts to help the economy as a result of COVID-19.
I am noticing online that lots of individuals are talking about how people should use their stimulus checks to support the economy by spending the money or giving it away. While there is nothing wrong with this advice, I think it removes some of the “personal” nature of personal finance. Not everyone’s situation is the same, and not everyone has the same needs. The best way to use this money is however you NEED to use it. With this in mind, I created a list of some things that you could use your stimulus check to do. This list is not written in any particular order, mix and match to find solutions that best apply to your situation.
- Pay Your Rent: With job changes and reduced hours in March and April, some people struggled to make rent payments. Your stimulus check could help you catch back up on your rent or at least help reduce the amount that you owe. If your other needs are taken care of, you might want to use your check to pay your rent.
- Pay Down Credit Card Debt: With less money in your monthly budget you might be relying more heavily on credit cards, and that is ok. But carrying a balance on your credit card comes at a high interest rate, which costs money. If you have been using your credit card more, you might want to use the influx of funds from your check to pay off the balance.
- Pay Down Other Debts: If your immediate needs are met, but you have other debts (medical debt, debt in collections etc.), you may want to use your stimulus check to pay down these debts. This will help free up money in your budget for other goals going forward. And knowing you have less debt can help ease anxiety in these uncertain times.
- Contribute To Or Start Your Emergency Fund: Times like these highlight the necessity of having money saved “just in case”. But sometimes, saving money can seem out of reach. You could use your check to build up or start an emergency fund. I usually recommend that clients try to build up a fund that is equal to three to six months of take-home pay for emergencies. Others recommend three to six months of necessary spending. Either way you choose to go, having cash on hand for emergencies can take some of the stress out of life and leave you feeling a bit more prepared.
- Save Towards Another Goal: If your emergency fund is funded, you can save your stimulus check towards another of your savings goals. Use it to help you reach your new car, vacation, down payment or other goals even quicker.
- Contribute It Towards Your Retirement: You could use your check as a contribution towards your IRA, Roth IRA, or other personal retirement account. This could help you make strides towards your annual contribution limit and help you reach your retirement goals.
- Invest It: You could decide to add this to an existing investment account or start a new one. This is a good way to make the money you weren’t planning on having continue to work for you if all of your other needs are taken care of.
- Buy Something You’ve Had Your Eye On: I get it, the last six weeks have been rough. You may have been close to buying something only to have your situation change. If there is something you’ve been wanting for a while now, you could definitely use your stimulus check to buy it!
- Donate It To Charity Or Support Local Businesses: If you choose, you could spend your check in a way that directly benefits your community. You could give some to your church or favorite local non-profit. Or you could order take-out or shop online at your favorite local stores. This will help put some money back in your community.
These are just a few ideas that stood out to me as possible ways to use your stimulus check. You can combine them in whatever way you need to best fit your individual position. Remember, this isn’t a one size fits all situation, so what may be right for one person to do with this money might not apply to you.
Please note, if you haven’t received a check aren’t sure if you qualify, visit the IRS webpage with complete information about the program https://www.irs.gov/coronavirus/economic-impact-payments