With the passing of the American Rescue Plan Act of 2021, millions of Americans were eligible to receive another stimulus check. While some recipients have an immediate need for the funds, others aren’t quite sure what they should do with the money. See below for a few suggestions on how you can maximize the use of your stimulus money.
- Cover Your Immediate Needs
If you’re experiencing any sort of hardship during this time, use the funds to cover your immediate needs or bills. If you’re still struggling to make ends meet, reach out to companies to see if they can work with you to develop a payment schedule, reduce your fees, etc. Also, evaluate if there are any services that you can cancel such as magazine subscriptions, gym memberships and video-streaming services. Create/review your current budget to identify any of these sneaky “wants” that often seem like needs. - Build Up Your Emergency Fund
Sometimes it takes a pandemic or other hardship to realize you could be one job loss, large medical bill, or other emergency away from financial hardship. It is recommended to have at least three months’ worth (shoot for six months if possible) of expenses available in an easily accessible account, like a savings account. Not sure what this number looks like? It’s time to set up a budget! Ask about our WealthLink tool for easy budgeting access and information. - Pay Off Debts
Still have some lingering debts that need to be paid? Now is a good time to either pay off some debts or at least put a dent in what you owe. Debt can be a huge hindrance to building wealth. If you still owe a large amount, check in with those companies to see if they can offer any sort of relief. For those with federal student loans, keep in mind that emergency-relief measures were extended through September of this year. However, if you’re able to continue to make payments, your payments will be applied to principal (once other previous accrued interest has been paid). - Spend it!
A great way to stimulate the economy is to support local businesses. Many small businesses were hit hard during the pandemic, especially restaurants and other businesses who had to scale down their business because of COVID-19 restrictions. Treat yourself and feel good about supporting businesses in your area. Other ways to spend the funds may include a big-ticket purchase. Maybe you’ve had your eye on a new laptop, piece of furniture or even a future vacation. Also consider home improvement or landscape projects to add value to your home. - Consider Investing
If you have your basic needs met, consider investing in a retirement account (like a Roth IRA) or a non-retirement account. You could also start/add to your kids’ education funds (like a college savings plan). - Be Charitable
If you’re fortunate enough to not have an immediate need for your stimulus funds, consider helping those less fortunate. The pandemic hit many people extremely hard and they’re struggling to make ends meet. Check out local charities, food pantries, or other organizations that help vulnerable communities.
However you spend your stimulus money, we hope that you are doing well and have a great 2021. Feel free to give us a call if you have any questions or would like to discuss your options further.
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.
Roth IRA contributions are subject to income limitations.
(04/21)