The majority of Americans will be receiving a check for $1,400 in the coming weeks due to the signing of the coronavirus stimulus package last Thursday. $1,400 is nothing to dismiss and can do a lot of good for many Americans. Yet, if you read most of the press around the direct payments, you’ll mostly hear talk about it being a boost to “consumer spending”. Spending is definitely one way to help the American economy during the pandemic, but is it the best thing for you to do with your check?
Before you go spending your $1,400 on the items in your Amazon Wish List, consider getting the most value out of your new found cash by following the top five ways to use your stimulus check below.
1) Take Care of Immediate and Necessary Payments
Before anything else, you need to make sure you take care of the necessary and pressing payments. It may sound obvious but without taking care of things like food, shelter, and health, it won’t matter what else you do with your money. The pressure from not taking care of these things will continue to weigh you down and prevent you from making progress on your other personal financial goals. By taking care of the immediate and necessary payments in your life, you better set yourself up for spending future cash in the other ways below.
2) Pay Off Your Debts
If you’ve taken care of the essentials, the next best way to use your stimulus check is by paying off or down your existing debts. Debt can be crippling. The longer it takes you to pay it off, the more money you’ll end up having to pay off. In addition, debt makes it harder when times get tough because what you owe usually won’t be forgiven, even if it’s harder to get the money you need to pay it off, leading to a vicious cycle.
If you have multiple debts (say credit cards, car and student loans, and a mortgage), pay off or down the loan with the highest interest rate first. If you have credit card debt, this is usually the highest, then typically student loans, car loans, and a mortgage. But this can be specific to your situation, so check the details on each loan first.
3) Invest in Yourself
If you’ve taken care of the essentials and have no debts, first off, congrats because not many people can say that! But if you are in this situation, the next best way to spend your stimulus check is by investing in yourself. And while spa days and the like can be very beneficial, the type of investment I’m talking about here is the kind that pays for itself for a long time, like taking a course to develop new skills or using the money to start or enhance your business.
There are other smaller steps you can take to invest in yourself too. For example, you could start a new savings account dedicated to big life events like weddings, buying a car or house, or just having a rainy day fund. Any way you do it, investing in yourself will provide big dividends later on down the road.
4) Invest in American Businesses
Taken care of all of the above and still looking for the best ways to use your stimulus check? Good for you. How about helping the American economy and yourself at the same time? Sounds too good to be true? Well, it’s not.
One of the biggest differences between the wealthy and everyone else is in ownership. What I mean by this is take a look at the wealthiest people in the world, and the majority are business owners or investors (who are basically businesses owners of multiple companies). But ownership doesn’t have to be limited to the wealthy. Any of us can be owners in businesses, even if it’s just a small %. We all have to start somewhere.
There are many different strategies and philosophies for investing but 99% of them are crap. Stick with what’s simple and works, invest in index funds. Outside of doing the top three things in this list, you’d find it difficult to do anything better with your money than investing in something like Vanguard’s Total Stock Market Index Fund. It is cheap, and is basically the equivalent of investing in every single US public company. So you get diversification, ownership, and one of the best ways to build your personal wealth, not to mention also helping out the American economy in a small (but meaningful) way. How’s that for a great way to spend your money?
5) Invest in Your Community
You were hoping number 5 was going to be to blow it out at the casino, weren’t you? Sorry to disappoint but unfortunately that is never a very good option. Honestly, if you’re on this step and have taken care of all the above, my first question is, how did you qualify for this check again? Regardless, if you’re in this kind of position financially, there are still better ways to spend your money than just buying things off Amazon.
Since we’re all a part of some kind of community, a great way to spend your stimulus check is by helping support it. No one wants to see others around us struggle or the parks our children or dogs love go to waste. You can help have a direct impact on your community by using your money to donate to a local charity in your neighborhood to help families get hot meals, clothes, or shelter. You could even use the money to purchase bonds from your local city government to help support public projects, like fixing parks and other city infrastructure. Finally, help out the businesses in your local community that have struggled the most during the pandemic like restaurants, barber shops, hair salons, etc. Maybe even give a little bit bigger of a tip on your next takeout order?
Getting the new stimulus check is exciting (who doesn’t like some more money!) but before you go rushing off to spend it like the media, government, and advertisers want you to, take care of your own financial situation first. If you do that, you’ll put yourself in a great position to buy those guilty pleasures later on.
After all, the American dream isn’t buying fancy things, it’s being financially well off. So follow these five ways to get the most out of your stimulus check.