Stimulus Checks: Tips on spending your extra income wisely
After a long, somewhat tortuous process, the third – and so far largest – wave of stimulus checks is finally reaching the hands of Americans. This injection of cash is supposed to help kickstart the economy, so the current push in part of the media is for the people to spend it ASAP, even buying things they don’t need because “it helps struggling retailers.”
While certainly many retailers and restaurants have suffered greatly for a whole year now thanks to the pandemic, so have many American families that have seen themselves subject to large cuts on their income while many other expenses remained the same.
The question then arises, what should I do with my stimulus money? Considering the money for some families can amount to several thousand dollars, it’s a relatively large chunk of income – and with it comes the urge to spend it having fun.
Now, I’m not here to tell you not to have fun. I’m also not here to tell you to not follow the general thought that stimulus money is for you to spend right now, since it helps others. But I should remind you that your first responsibility isn’t with retailers, restaurants, cinemas, amusement parks, night clubs, or pyramid scheme peddlers. Your main responsibility is with yourself and your household, and thus that’s where you should look at first.
First line of priority: Essentials
Many American families have seen themselves highly affected by the pandemic. It’s not too uncommon to hear from people struggling to cover the bare basics – that being food, medicine, and services. Thus, your main priority should be this: Cover any holes among your essential needs, and then some.
In this case, “then some” means something very specific: Don’t be just content with having your needs filled right now. Look at your budget for the future – will the situation remains as is? Could it get worse? Then, plan ahead. Keep some money saved, so you can pay for food and services even if things get harder. As for medication, consider buying ahead – they don’t expire quickly and you know you’re going to need them anyway. Might as well get it now.
Second line of priority: Outstanding bills
While several of your outstanding bills are definitely essentials (power, heating, water,) others might not be. Perhaps you’ve covered the basics, but you’ve also accrued a rather large credit card bill. Or you’re behind on the rent. Perhaps it’s your mortgage that has suffered, or maybe you’ve had to borrow money from a friend or family member.
Cover these expenses, starting with those that might be the most threatening. High-interest ones, for example, should go first since delays on paying those means losing money – and this includes credit card debt that might not require immediate payment.
Anything that will make you lose money in the long run or that might affect your life negatively, such as getting evicted, is part of this second line.
Third line of priority: Emergency fund
An emergency fund was already mentioned above, but it bears mentioning again. Even if you’ve made it this far while still having your stimulus money relatively intact, this is where you should consider keeping a good chunk of it saved. You might be doing fine right now, but the economy is fickle and things could go sideways at any time.
Be prepared. Make sure you have an emergency fund.
Fourth line of priority: The future
Congratulations, again, on making it this far while still having a decent amount of stimulus money left. At this point, your main impulse is probably running out and spending all that’s left on candy, and I can’t blame you for that. Candy, after all, is delicious.
Not having any other priorities right now doesn’t mean you don’t have long-term ones. If you have children, adding some of this money to their college funds will help them in the future (and let’s remember, a part of the money you got is specifically meant for them). If you’re saving for a home or a car, the same might apply. Your retirement account will also likely benefit from a deposit.
Alternately, if you’ve been thinking of starting an investments account or funding a personal project, try it here – particularly if said personal project could well report dividends down the line.
While you might be doing great now, you might also have expenses in the mid-to-long term that you haven’t taken care of. Help yourself by adding some money to these.
Fifth line of priority: Everything else
That’s it, you’ve made it. You’ve covered all basics, paid all debts, made sure you’ll be fine even if your house burns down followed by a flash flood followed by an earthquake, and even have so much money saved keeping your stimulus check “for the future” is silly.
Setting aside speculation on whether a person in such a situation even needed a check to begin with, this means you can now actually dedicate some of that money for your enjoyment and that of your family. Even then, start small: Get new clothes when needed, for example. Replace aging electronics. Pay for some house repairs.
At this point, you don’t need a priority list – because it’s your own, personal priorities you should deal with. Just remember, whatever you spend your money on, do it wisely.