3 Smart Ways to Spend Your Stimulus
Find out how to get the most out of your stimulus payment.
If you’re one of the many Americans who are eligible for the most recent round of stimulus payments, you should be seeing the check hit your checking account or mailbox shortly—if you haven’t already.
You may already know exactly how you’re going to spend those funds. I know for some of my friends, that money has already been spent on rent, groceries, or utilities before it even arrives.
But if your necessities are covered and you have some stimulus to spare, here are a few ideas for how you can get the most out of your stimuli.
Beef up your emergency fund
If you don’t already have six months worth of expenses saved up, a stimulus check is a great opportunity to either start, or continue to build an emergency fund.
Since we still haven’t seen the full impact that the COVID crisis will have on the economy, it would be prudent to make sure you have a couple of bucks stashed away for a rainy day.
An emergency fund should be kept in an account where you can access it immediately, so you shouldn’t necessarily be investing these funds. Taking advantage of a high yield savings account or money market account is advisable.
You can use our emergency fund calculator here to determine how much you should have squirreled away.
Pay down debt
Credit card balances, car loans, and student loans are all things that are obviously costing you money to carry.
While your instinct might be to invest your stimulus money, you can see an immediate return on those funds by eliminating high-interest debt—especially if you’re accruing compound interest from a credit card or personal loan balance.
We recommend using Dave Ramsey’s snowball method for paying down debt. The snowball method works by arranging your debts (excluding your mortgage) from smallest to largest, regardless of what the interest rate might be.
Then you’ll pay as much as you can each month toward the smallest debt, while continuing to make minimum monthly payments on your other accounts. Once your smallest debt is paid off in full, you’ll begin to pay off the next largest debt. You’ll repeat this process until all debts are paid off.
This technique has proven to be effective mainly because of the positive psychological impact it has. If you are constantly paying money to multiple creditors and it doesn’t seem like you’re even putting a dent in any of your balances, it can become overwhelming very quickly. When the debts feel insurmountable, some people tend to abandon hope and just start dodging their bill collectors.
But once you knock one debt out, that momentum makes it seem a lot more possible to pay off the others.
If you have debt spread across multiple credit cards, a company like AmOne can help with a personal loan that you can then use to pay off your balances and consolidate your debt to what could potentially be a lower interest rate.
Invest in yourself
If you’ve already got a solid emergency fund and you’re debt-free, spending the money on personal development could end up increasing your earnings substantially.
The following are just a few ways that you can invest in yourself to build skills that are likely to pay dividends in the future.
Index fund investing course
If you’re looking to build wealth and retire early, investing in index funds is a time-tested method for helping you to achieve those goals.
Whether you’re a beginner or seasoned investor, Jeremy Schneider over at Personal Finance Club offers a terrific course where he breaks down the blueprint for building wealth.
Seeing as how Jeremy reveals actionable tips for how to become a millionaire over the course of several years, his course is well worth the $79 it’ll cost you.
Learn a new skill
With the recent emergence of new remote learning resources, it has literally never been easier to learn new skills that could potentially make you a lot of money.
You might consider learning new skills that relate to your current industry so that you can add to your resume and either earn a promotion, or become more attractive to prospective employers.
It could also be wise to learn some new skills that are unrelated to your current job so that you can start a side hustle and increase your income. Skills like graphic design, SEO, and web design are always in demand and sites like Skillshare have an abundance of knowledge on those topics at affordable rates.
A final word on stimulus
The best way to approach a stimulus check is from the mindset that you’re going to put the money to work for you.
By fortifying an emergency fund, paying off debt, or acquiring new skills, you’ll be making sure that you get a return on this payment, as opposed to simply acquiring more material goods.
The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations about any investment product or security. This information is provided strictly as a means of education regarding the financial industry.