Options for that federal stimulus check
Most of you reading this have either received or are about to receive a stimulus check from the government in the amount of $1,400. For many of you, the pandemic has had limited impact on your overall financial condition (outside of probably a few more Amazon purchases).
For those people not needing this check to cover lost wages, the question becomes what to do with this unplanned windfall. Many I know already have their eyes on a new big screen TV, a much-needed tropical vacation, or a multitude of other things. I however, I have a different suggestion for these funds.
As a big believer in tried-and-true personal finance principles I recommend to people that they use these funds to strengthen their overall financial condition. My recommendation would be do the following in this specific order:
First, before doing anything else, make sure you have an emergency fund of $1,000. The pandemic has shown how unpredictable life is and without anything in savings life can be very scary. If you already have these savings in place, I recommend you apply these funds to your non-home debt. Choose the debts with the highest rates first and work down the list until the debts are all gone.
If you are debt free, or the stimulus check is larger than your total non-home debt, my next priority would be adding to your emergency fund. A fully funded emergency fund should consist of between three and six months of expenses. However recently studies show that far too many Americans do not have these reserves in place. Hence the need for stimulus checks being sent to individuals to help them in this time of need.
If you are one of the very few who already had all of these ducks in a row, this stimulus check provides you a lot of options. You can spend the money on something you want but don’t need like that new TV or vacation I mentioned earlier, you should consider giving some or all of it to a favorite charity. You might also consider a contribution to a child’s or grandchild’s college account.
The bottom line is don’t let this money just slip through your fingers. Be intentional, have a plan, and make the most of it. By doing so, perhaps it can serve its original purpose of improving the lives of those receiving it, or the people around them.
Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations.
Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.