What Should I do with my Stimulus Check?
Stimulus checks are currently on their way to Americans' bank accounts, and millions of people are expected to receive one.
Roughly half of Americans say they plan to spend the money on bills and other essential expenses, according to a recent Gallup poll. For those who are experiencing significant financial hardship due to the coronavirus pandemic, an extra $1,200 can go a long way toward making ends meet.
As exciting as it is to get free money from the government, it's important to spend this cash wisely. Depending on your financial situation, there are a few things you should do and should avoid doing when you get your stimulus check.
A smart way to use your stimulus cash
- If you've been let go from your job and are struggling to pay for basics, your stimulus check should go toward essentials like food, medications, and other things you need to buy immediately.
- If you're still earning a paycheck and therefore have a means of covering your near-term needs, assess your emergency fund. Generally speaking, you should have enough money in there to cover three to six months of essential living costs, and given the fact that we might be heading into a full-blown recession, hitting the high end of that range is a good idea right about now. If your emergency savings need work, stick that stimulus check directly into the bank -- and leave that money alone until you need it.
- If you're good on both near-term expenses and emergency savings, you might consider investing that money. Stock prices have dropped dramatically in the wake of COVID-19, so now's a good time to load up on quality investments while they're more affordable.
What you shouldn't do with your stimulus cash
- When you get a lump sum out of the blue, it's easy to be tempted to spend that money on something that will bring you joy -- say, a new TV to soften the blow of being cooped up at home or some new clothing to enjoy once social distancing becomes a thing of the past and you're ready to mingle in society again. But before you spend that money on something that offers instant gratification, remember that your economic picture today might not be the picture you see two or three months from now.
- It's too soon to tell how badly the U.S. economy will be damaged, but unless you're absolutely rolling in emergency cash, take that money and stick it in the bank rather than spend it. Your earnings might be steady today, but if things get worse, that may not be the case several months down the line.
- Do not invest your stimulus check if you're behind on emergency savings. Investing is a smart thing to do when you're looking at money you know you won't need for another 10 years. But if you only have, say, a month's worth of living expenses in the bank, assume you may need that stimulus money in the near future, and stash it in a savings account where it's nice and accessible.
Take time to assess your financial situation and decide how to put that cash to good use. Be Safe. Be well. Stay Healthy!