The COVID-19, or Coronavirus, stimulus check started being sent out this week. So, you all might have already seen the money hit your account.
As long as you are an American taxpayer who filed taxes in either 2018 or 2019, a senior or a retiree you should see a stimulus payment. Not sure if you’re eligible? That’s okay, check out the IRS website to find out.
Okay, so you have your money, now what? We are going to look at SEVEN great options for your stimulus money that is going to put you ahead on your journey to financial freedom.
Option #1: Put this money right into your emergency savings.
What is an emergency savings? This is a place where your money is safe and easily accessible, which means don’t invest it on the stock-market in an account you can’t easily pull from without any fees. A savings at your bank or credit union like a money market account will work just fine.
How to know if this option is for you:
Am I an essential worker with a stable income?
Is my spouse or significant other an essential worker with a stable income?
Do I already have at least a $1,000 emergency fund?
Is there a low chance either I or my spouse/significant other could contract the virus?
If either of us contract the virus, do we have enough money set aside to pay for the 2+ weeks we could be out of work?
If you answer no to any of the following questions, this may be the best option for your stimulus money. You want to make sure your income is stable and you can support your family and the four-walls (food, utilities, shelter and transportation) should something happen with health or job.
Option #2: Apply this payment directly to your debt to pay down the balances you owe.
Debt is considered anything that you owe anyone with the exception of your mortgage. You want to make sure to snowball your debt by paying it off from smallest to largest, not by interest rates! We will explain why that is in a later post.
How to know if this option is for you:
Are you and your spouse/significant other’s income stable?
Do you have at least a $1,000 emergency fund?
Will you and your family be okay financially if you were to contract the virus?
Do you still have debt to pay off? (this could be a car, credit cards, student loans, etc.)
If you answered yes to all of these questions, then this might be the best option for your stimulus money. It’s a great time to continue your debt snowball, and what better way than with an unexpected bonus! Also, if all you have left are student loans, or they are next on your snowball, take advantage of the reduced/eliminated interest and pay down the balance. (**be sure to check with your provider to see if they are participating in the interest reduction and that there are no penalties for paying on the loans at this time).
Option 3: Build up your emergency savings!
It is recommended by the Dave Ramsey Financial Group to have at least a 3-6 month emergency savings. This is money that is safely put somewhere that you can get to easily if an emergency arises. And NO that new television doesn’t qualify as an emergency! (but there’s an option for that later!) How do I know what that amount is? Well it’s a simple calculation, what are your monthly expenses? Once you know that then you multiply it by either 3 or 6. For example, if your monthly expenses are $1,000 and you want a 3 month emergency savings, you would want to have $3,000 in it.
How to know this is for you:
Do you have at least $1,000 in emergency savings already?
Have you paid off all of your debts except the house?
If you answered yes, then this is a great place for your stimulus check to go!
Option 4: Retirement, College Fund or Mortgage!
You have three options for option 4, because these are all done at the same time! Let me explain, if you have no debt except your house, you have a 3-6 month emergency savings, the next step is to max out your retirement to 15% of your household income, create a college fund for your kids and pay off your mortgage early!
So which should I do? Retirement takes priority, but if you are already putting in 15% of your household income, then you can put the extra money on your home or in your child’s college fund, it’s your choice! No kids or mortgage? Great then this last option is for you!
Option 5: Build wealth and give!
If you made it to this point and have already checked off the other steps, then I want to first say congratulations! You have done what a majority of our country has not and you are well on your way to financial freedom! If this step applies to you then you can do whatever you want with your stimulus money, although it’s recommended that you invest your money or give! Giving is so freeing, and by far the best form of happiness and satisfaction. When you can help others, change someone’s life, or just make a positive impression it is the best feeling in the world. There are a lot of people suffering right now, hurting, lost and confused, and you have the power to help.
Whatever you decide to do with your stimulus money, I encourage you to pray about it, talk with a trusted financial coach or advisor. Really step back and evaluate where you are and where that money is best suited to go.
And if you really aren’t sure, I suggest starting with a budget. Don’t have one? That’s okay! Check back with us next week where we will not only review what a budget is and what it can do for you, but how to make one. Don’t want to wait that long? Or got questions? Perfect! Email me today and I would be happy to walk through this with you. And remember, you are not alone!!