Your Stimulus Check Is Coming: What to Expect & 3 Non-Obvious Things to Do With It
On Friday, March 27, a $2 trillion stimulus package was signed into law. I’m guessing you’ve already looked into the stimulus package and you know whether you’re eligible to receive any money.
I wouldn’t be surprised if you’ve already whipped out your trusty calculator and crunched the numbers to determine how much money you’re going to collect. But, have you also researched what you should do with the money after you receive it?
Just to be clear: I’m not talking about researching whether you should use the money to pay your mortgage, to pay your utility bills, or to keep your business afloat.
I hope it goes without saying that those are obvious things you should spend the money on. What I’m talking about is what you should do with the money when you don’t have any obvious/practical ways to spend it - when you view this money as a windfall.
If you’re doing well financially despite the current conditions, and if you view the money as somewhat of a windfall, you need to think about what you’re going to do with that money. And I’ve got some ideas for you! First off: I do NOT recommend that you go and spend it on designer handbags or clothes. In fact, I don’t recommend that you spend it at all!
If you’re viewing this money as a cool extra paycheck, I recommend that you use this money to (in this order): 1) build up your emergency fund; 2) pay off high interest debt; or 3) invest in the stock market, real estate or a business. Why this order? Why am I not recommending that you just invest all that money? Isn’t that the best way to grow it?
First, investing is long-term.
You never want to invest money that you might need in the near future. Markets are volatile. If you invest your money in the market and the market tanks, and then you need money for an emergency, you don’t want to have to pull out your invested money at a loss. This is why having an adequate emergency fund is necessary - it keeps you from having to pull from your investments at a loss when your investments aren’t doing well.
Second, when you invest, your returns are never guaranteed.
In fact, you could invest and actually lose money. On the other hand, your high interest debt is guaranteed to continue to compound and grow until you pay it off. Think of it this way: You’ll get a better guaranteed return by paying off high interest debt than you would by investing in the stock market, real estate or a business. So pay off high interest debt before you invest.
Finally, let’s circle back to the topic of emergency funds.
Not to be a Debbie Downer, but our economy is getting battered. More than nine million Americans have filed for unemployment in the last two weeks alone - that’s more unemployment claims in the past two weeks than was filed over the past ten months. People that never expected to lose their jobs are finding themselves unemployed; businesses are shutting down overnight; and people are being forced to self-isolate. We are all dealing with a period of uncertainty. To help protect against this uncertainty, make sure your emergency fund is padded.