The IRS has already sent out over 90 million third-round stimulus checks, and they’re poised to send out more tomorrow.
Have you gotten yours yet?
This is the biggest stimulus yet at $1,400 per person and another $1,400 per dependent.
The income limits of this round are similar to “stimulus round two” but phase out much quicker this time.
You are eligible for the full $1,400 if you are:
- An individual with an adjusted gross income of $75,000 per year or less,
- A head of household with an adjusted gross income of $112,500 per year or less
- Married filing jointly with a total adjusted gross income of $150,000 per year or less
Eligibility for dependents has been expanded greatly this round. A dependent is a child under 19 or under 24 if they are a student.
You can go to the IRS “Get My Payment” site to see when you will be getting your payment if you haven’t already.
What to Do With Your Stimulus Payment
With this stimulus payment being the largest one yet, there is more opportunity to make some big moves.
But should you?
The truth is, any stimulus is designed to stimulate the economy. It’s designed to either keep us from going into a recession or lift us out of a recession—with spending.
You’re supposed to spend your money. But that doesn’t mean you should.
Like almost all things in personal finance, you need to do what is best for you. Period.
It’s been reported that millions of Americans have already used their stimulus to pay for basic needs and catch up on bills.
That’s a GREAT use for your stimulus check, but depending on where you are, you have some other options as well.
Here are some ways to prioritize your stimulus in the order I would recommend.
1. Meet Your Needs
The first thing you should prioritize is meeting your basic needs.
Buy food for you and your family. Get gas so you can reliably get to any job you may still have.
Catch up on your mortgage or rent. Or use your stimulus to pay it for a month to give you some breathing room.
You can also think long-term. If there is a bill that’s been a little bit of a struggle to pay, set aside some stimulus money to pay that bill specifically for the next six months.
This could even look like saving it for a vacation when the pandemic is over.
It’s been quite the year. No one is going to blame you if taking a trip is a legitimate need for you.
The point is to make sure your needs are prioritized so you aren’t having trouble making ends meet.
2. Build Your Emergency Fund
If you’re doing ok with meeting your need, the next area I recommend prioritizing is your emergency fund.
No, I’m not going to tell you to build to three months or six months or longer in your emergency fund because your emergency fund should be unique to you.
However, receiving a large amount of money for free ($1,400 or more!) is a great opportunity to build up your emergency fund.
In fact, for some people, your stimulus may cover your entire emergency fund!
Consider this one if your needs are already met.
3. Pay Off Debt
Paying off debt is another great way to prioritize your stimulus check.
Even the base amount of $1,400 is a big chunk of change to use toward debt.
You may be able to pay off an entire credit card or put a big lump sum toward your debt payoff plan.
A quick tip for you on this.
If you can, try and prioritize a debt that will make a big impact on your monthly expenses.
For example, if you and your partner receive $2,800 total, using that to pay toward your mortgage principal will not reduce your monthly mortgage payment.
Using that $2,800 to pay off a credit card may save you around $50 in payments every month.
Depending on your specific goals, it would be a better use of your money to pay off the credit card so you lower your monthly expenses.
Paying off debt is another great way to prioritize your stimulus money.
4. Save or Invest
Let’s be clear. Sticking your stimulus check in a bank earning a very small amount of interest is not going to be a great way to use your money.
Even an online bank giving you a much higher than average interest rate of 0.5% isn’t going to do much for you.
But using your stimulus money to helps you max out your 401K or Roth IRA this year is worth way more than the $1,400 you may be getting.
If you were to deposit your $1,400 stimulus into your 401K or Roth IRA and then invest that money into an index fund with an 8% average yearly return on investment, you’d have yourself $10,276.25 in 25 years.
Not bad for a free $1,400!
If you are in a position where your needs are met, you’re doing well with debt and your emergency fund, and the pandemic didn’t completely derail your investments, consider using your third stimulus check to help those in need.
There are plenty of people around all of us right now that need our help if we can give it.
Use your relationships. Reach out to your neighbors, your coworkers, your fellow churchgoers.
See how you can assist them financially—even if it simply means buying this week’s groceries.
Using your stimulus to give also has another side effect.
It’ll make you feel AMAZING.
6. Spend It
Here we go! I am recommending this last, but if you’re in a position where you can, absolutely spend your stimulus money.
Take a vacation. Buy that new TV. Purchase whatever you’ve been eying for a while.
If you’re all set with everything else, give yourself permission to spend your money.
Simple as that.
This is What I Would Recommend
This is the order I would recommend prioritizing your stimulus check. But it doesn’t have to be this way.
Remember, through all of this, do what is best for you.
You can even combine some of these. Maybe you want to give it to someone else so they can spend or take someone on a vacation with you.
Trust yourself to make the call on what you need.