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The best ways to spend your stimulus check — what experts are saying

Best way to spend your stimulus check — what experts are saying
(Image credit: Getty Images)

The best way to spend your stimulus check depends entirely on your financial circumstances. The economic impact payment you received as result of the government’s $2 trillion relief package intends is yours to use.

For those who have immediate necessities to pay for or others to support, the best way to spend your stimulus check is to fulfill those needs until a stimulus check 2 is voted on. But if you’re fortunate enough to have steady income at the moment, even if it’s below the eligibility threshold or less than you usually make, you might be looking for the best way to use your $1,200 IRS payment.

Of course, you can do whatever you want with your check. Put it in savings? Never a bad idea. Donate it? That would be charitable of you. Go on a shopping spree? If you’d like, sure. 

But if you’re looking for guidance, financial experts have weighed in with suggestions for the best way to spend your stimulus check. Most recommend placing your payment in an emergency fund or using it to chop down debts.

Perhaps you can do both. Or maybe you don’t need to do either, but still want to use it in a way that gives back to you in the future or to others in the present day.

If you're still waiting on your stimulus check, you can use the IRS's Get My Payment app to track the progression of your money in the system. You may also want to check out the USPS's Informed Delivery service, which offers stimulus check notifications so you can know exactly when your payment has arrived in your mailbox.

Here’s how to spend your stimulus check wisely, according to financial advisors (via MarketWatch and Wirecutter.)

Best way to spend your stimulus check: Bulk up your savings

The best way to spend your stimulus check is to not spend it all — rather, consider placing your payment in an emergency savings account or “rainy day” fund. 

Even if your finances are in order today, some analysts predict more jobs will be lost.

In a recent statement, the U.S. Private Sector Job Quality Index said it anticipates up to 37 million positions are vulnerable. While the pace of job loss is slowing, 33 million people have filed for unemployment since the pandemic began, meaning you might still want to prepare for layoffs.

Wells Fargo suggests reserving at least 3 to 6 months worth of your average expenses in an emergency fund at all times. If you don’t have enough in savings to support you in the event of an unforeseen situation, it could be time for you to bulk up a contingency account. 

Whether your stimulus check kick-starts or contributes to your savings, keeping enough dough on standby to pay your rent, mortgage and utilities is a habit worth adopting.

Best way to spend your stimulus check: Pay back debts

If your savings account is padded enough to handle unexpected expenses, your stimulus check could be used to chip away at debts you’ve incurred. You’ll likely want to tackle high-interest debts first, which grow harder to pay back the longer you have the money on loan. 

The U.S. Securities and Exchange commission recognizes that credit card interest rates are particularly high, making the debt challenging to pay off. It says the “wisest thing” you can do is reimburse your balance in full.

But should you pay back debts instead of savings? It depends on your situation. If your debts are less than the value of your stimulus check, consider splitting your payment. Alleviating your debt now will benefit your credit score more than letting how much you owe accrue, especially if you’re facing high-interest rates.

If you’re dealing with low-interest debt, though, adding to your savings could be better for you in the short-term. With such immense uncertainty caused by the pandemic, you might find having emergency funds will help you sleep at night.

Best way to spend your stimulus check: Invest for the future

Investing your stimulus check only makes sense if your savings account is flourishing and you don’t owe anyone a dime. If there’s even a chance you’ll need the $1,200 in the near future, hold off on making an investment. While it could be possible to grow your stimulus check’s value over time with a diverse portfolio, it won’t happen in a year. 

According to Acorns, it can be a smart move to invest in the stock market now because share prices are low. The market may seem unpredictable today, but based on historical trends the prices are likely to rise again.

If you don’t have investing experience, try to do some research beforehand. The cardinal rule of creating an investment portfolio is spreading risk and diversifying shares. 

Certain apps can help you take your first investment steps, too. Stash offers an educational approach for beginners, while Wealthfront is a well-rounded and low-maintenance investing tool.

Best way to spend your stimulus check: Support the economy

So you’re comfortable with your savings, absolved of debt and don’t feel compelled to invest (or don’t trust the volatility of the stock market.) How can you spend your stimulus check in a smart way that still benefits you?

Well, if you don’t want to see your favorite local businesses close, you might want to look into ways in which you can support them. Perhaps you can purchase a gift card to use when it’s safe for non-essential stores to reopen. Consider buying merchandise or contributing to a business-specific Covid-19 relief fund as well. 

You can also split your stimulus check among people you would pay under normal circumstances, like a nanny or housekeeper. Though you might not be using their services because of social distancing protocols, your business contributes to their income.

Best way to spend your stimulus check: Donate

The coronavirus pandemic has impacted hundreds of millions of people across the country. Many are facing hardships, and some worse than others. If you’re able, you might want to think about donating your stimulus check to those who need it more.

Whether you want to help parents who cannot afford to buy their children meals while schools are closed, or support the families of front line healthcare workers, there’s a charity that can benefit from your stimulus payment. 

Be sure to do research before choosing which charity or charities you’d like to support. Charity Watch provides background information and trust ratings for popular beneficiaries. You can also use it to discover for lesser-known causes that might resonate with you. It is your stimulus check, after all.