Now that President Biden has taken office, many Americans are asking, “where are our stimulus checks?” The good news is that there is a deadline in place, meaning that relief could be on the way to you within just a few weeks’ time. Considering that as many as 70% of small businesses are in debt, while many individuals are barely making ends meet a year into the pandemic, that may be welcome news for millions.
But what exactly should you be doing with your stimulus check? For many, focusing on anything other than the essentials still won’t be feasible. But if you’re in a position to use that money in more frivolous ways — or you simply want to make a smart choice for the future — you might be curious as to the actions you should take. Here’s what financial experts advise.
1. Start an Emergency or Retirement Fund
A startling number of Americans don’t have anything saved for emergencies or for their future retirement. While $1,400 probably won’t cover an unexpected medical event (nor will it come close to providing all you’ll need after you retire), everyone has to start somewhere.
As Bloomberg points out: “If you put $1,000 away now, forget about it, and earn 5% per year on it, you will have over $1,200 on the next inauguration day in 2025… In contrast, if you go on a stimulus-check spending spree and add debt to a credit card with a 17% interest rate, you will be over $7,700 in the red.”
Starting a savings account now can provide you with a bit of a financial cushion if you suffer job loss or other financial hardships in the future. You also have until April 15, 2021 to invest in an IRA for 2020 — so if you don’t need the money for other expenditures right now, you might want to consider making a contribution toward your retirement. If you keep your stimulus in your checking account, you might be too tempted to spend it. Think about transferring at least a portion into some kind of savings or investment account to prepare for the unknown.
2. Pay Down Your Debt
You might be able to afford the basics, but what about mortgage debts or your car loan? It might make sense to use your stimulus check, at least in part, toward paying down your debts. Student loan debts will still be paused for quite some time, but they aren’t going to completely disappear. If your educational debts may be tough to handle later, consider setting your stimulus check aside (or even depositing it into an account that will accrue interest!) for when you have to start making payments again. If you have credit card debt, your stimulus check can provide you with an opportunity to make your financial situation less stressful, as well. Start with your highest interest debts first to make the most of what you have. And if you can pay off any balance in full, go for it.
3. Support Local Businesses and Charities
If you’re passionate about supporting your community, it’s a great idea to use your check for its intended purpose: to stimulate the local economy! Many businesses in your area, especially restaurants, are likely struggling right now. Anything you can do to provide them with financial support will be much-appreciated. You could make a pledge to get takeout from a new eatery every week or purchase gift cards for your favorite eateries. Alternatively, you could donate to causes you care about (and potentially write off those donations on your taxes next year). If there’s a mutual aid group operating in your city, you might also consider getting involved there to support neighbors in need.
4. Improve Your Home
More than 50% of global employees now work outside of the office at least a few times a week. Since COVID-19 hit, remote work has become the norm. If you’re working from home, this is a great time to invest in an office setup. If you need a new desk, an ergonomic chair, or some better technology, your stimulus check can help you be a bit more productive. Alternatively, you might consider making some simple-yet-effective home improvements to boost the value of your property. Even if you plan to stay put for the time being, a little stimulus check could potentially go a long way in terms of ROI. Discuss the best kinds of home improvement for your family’s needs and your property’s value and get to work.
5. Consider Investing
Despite the fact that index futures can be used as strong leading indicators of market sentiment, investing in the stock market is inherently risky. That said, anyone who followed the GameStop controversy knows that a small risk can sometimes bring huge rewards. Experts say it’s smart to invest in companies that have benefitted from the pandemic in some way. But it’s good to start out small and slow, particularly if you don’t know a lot about investing. In general, you should do your research and attend to more pressing financial matters if you have them. But if you haven’t experienced much hardship during this time and you’re looking for a way to diversify your portfolio, your stimulus money might provide you with a new opportunity.
For many Americans, the next stimulus check won’t provide nearly enough financial relief after a catastrophic year. But if you’re fortunate enough to have the basics covered, these ideas can help you spend your money from the government wisely.
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