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Were you lucky enough to get a stimulus check? If so, find out the best way you should spend your stimulus check for your financial situation.
What To Do With Your Stimulus Check If You Have NO Income Right Now
Here is what you should do with your stimulus check if you have absolutely NO INCOME coming in right now.
1. Cover Your Basic Necessities
If you have no income right now, the first thing you should do with your stimulus check is cover your basic necessities (like food and shelter). Nothing else is more important than making sure you have food and a place to stay.
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If your stimulus check is not enough to cover your shelter, I would reach out to your landlord (or bank if you're a homeowner) now and let them know you were affected by COVID-19. Don’t wait until the bill is due to communicate to your landlord or your lender. If you’re really struggling financially, in my article "9 Things To Do When You Need Help Paying Bills" I give you some tips of things you can do right now to get help with your bills.
I also want to note that if you can afford to pay your rent right now, you should. Although a lot of states are freezing eviction proceedings, it does not stop you from getting evicted—it just delays it. You don’t want to risk ruining your credit or being ordered to pay back rent in the future if you can afford to pay your rent now. So if you’re in a position to pay, you should.
2. Save It
If you still have money left over after you’ve covered your basic necessities, you should save the rest of your stimulus check and put it towards your emergency fund. Being that you have no income coming in right now, it’s very important to establish an emergency fund to help you get through this tough time. I recommend you keep your emergency fund in a low-fee online bank account like the ones at Radius Bank or Chime Bank.
3. Only Make Minimum Debt Payments
Finally, if you have no income coming in right now, I would try to hold on to as much cash as possible and only make minimum payments on your debt for now. It’s more important to have as much cash as possible until you can get a new job or get unemployment benefits.
What To Do With Your Stimulus Check If You Have SOME Income Right Now
If you have income coming in right now, you should have different financial priorities than someone who doesn’t have income. Here is what you should do with your stimulus check if you have SOME INCOME coming in right now.
1. Fully Fund Your Emergency Fund
If you have some income coming in right now—whether if it’s from earned income, unemployment benefits, or investment income—the first thing you should do with your stimulus check is save it and build your emergency fund. As you can see, times like this make it clear why we all need an emergency fund.
Even if you have a pretty secure job or money coming in from investments right now, your situation can change. Your company can decide they don’t need as many workers, your tenants can stop paying rent, a company you invested in could decide to freeze dividends, or you can get sick. So for all those reasons, it’s still very important to still have a fully-funded emergency fund.
If you want to learn more about emergency funds and calculate exactly how much you should have in your emergency fund, read my detailed article “How To Build An Emergency Fund.”
2. Pay Down Your High-Interest Debt
If you already have a fully-funded emergency fund, you should use your stimulus check to pay down your high-interest debt. I consider any debt higher than 8% high interest. The logic behind this is the stock market has historically given a return of 8% over the long haul. So if you pay off any debt with an interest rate higher than 8%, you’re getting a guaranteed return higher than 8%. Therefore, it makes more financial sense to pay off any high-interest debt before you decide to invest that money.
Use an app like Tally to help you make a debt repayment plan. Also, with interest rates so low, you might want to consider using a service like Credible that can help you find a low-interest loan (rates as low as 4.99%) and get rid of some of your high-interest debt.
If you need help making a debt repayment plan, I recommend you read my detailed article “Debt Snowball Vs. Debt Avalanche: Which Method is Best?" to decide which debt repayment method is best for you.
3. Invest It
If you already have a fully-funded emergency fund and no high-interest debt, the next thing I recommend you do with your stimulus check is invest it. Stocks are on sale, so now is a good time to buy. I personally like to use Robinhood to buy individual stocks and ETFs (which is like a basket that can contain a lot of different stocks, bonds, and commodities). Sign up today and you can get a FREE stock like Apple or Facebook.
Also, interest rates are at an all-time low, so it might be a good time to buy an investment property. Investing in real estate is a great way to build wealth and another stream of income. If you’re not investing in real estate, I think it’s something you should really consider. In this article, “10 Benefits Of Investing In Real Estate If You Want Financial Freedom” I break down some of the top 10 reasons you should invest in real estate.
Finally, don't forget about your retirement accounts. Make sure you're putting the maximum you're allowed to fully fund your retirement account. A great FREE tool is Personal Capital’s Retirement Planning Calculator. You should definitely use this tool to map out your financial future. Simply link all your retirement accounts to Personal Capital so you can see all your accounts in one place and track your progress.
If you sign up today and link at least one of your investment accounts (with a balance of more than $1,000), we’ll each get $50. That’s FREE money for keeping track and staying on top of your finances (something you should be doing anyway)!
4. Donate It
Lastly, if you’re in a good financial position and have reached all your financial goals, consider donating your stimulus check. There are a lot of people struggling right now that could use your help. You could also spend your stimulus check in your local community to help some of the businesses that are going through a tough time.