Updated: Feb 7
By Matthew Collings
At The Money Rant, we’re focused on saving, paying off debt, and building wealth. That's our mindset with money.
According to a study done by Transunion, 57% of American families say the pandemic has financially impacted them. For many Americans, the stimulus checks are much needed and provide a sense of relief due to job loss and other financial burdens that have resulted from the 2020 COVID-19 pandemic.
It’s easy to get excited with the idea of extra money and lose sight of your financial obligations and goals. That’s why it is so important to have a budget as a guide to keep you on track.
At this point, it appears that most Americans will receive the $600 stimulus checks. However, the possibility still exists for an increase to $2000. Regardless of the amount you will receive, it’s crucial to have a game plan for how the money will be spent. And this really applies to anytime we receive additional income.
Let’s look a four ways to spend your economic stimulus check wisely.
4 Ways To Wisely Spend Your Stimulus Check
Pay For Necessary Expenses
Because of the pandemic, many Americans will need to use this additional money to pay for necessary day to day expenses they may be struggling to pay each month or have fallen behind on.
To help stretch this money, review your expenses for the past few months and look for bills that can be cut out or reduced, like gym memberships, cable, or insurance premiums. Reduce your expenses as much as possible.
Next, create a new budget (see our blog post 5 Simple Steps to Creating An Empowering Budget to learn) for the upcoming months and determine how much cash you will need to sustain for a few months. Then divide up your stimulus check to cover those expenses. If it doesn’t cover every expense, it can at least offset how much you need to bring in each month.
Establish or Pad Your Emergency Fund
If you don’t have an emergency fund, there is no greater time to think about having one than NOW! With so much uncertainty in the world, saving for unforeseen circumstances such as job lay off, or medical expenses is essential.
Typically, an emergency fund would be enough to cover your monthly expenses for three to six months. This fund isn’t your trips to Starbucks, gym memberships, etc. It is to cover the four walls of your home, utilities, insurance, and food! Now is a GREAT time to start or pad your emergency fund and start saving for the unexpected.
Having an emergency fund adds a comfort level in uncertain times and will come in useful if you find yourself facing an unexpected emergency. As we wrap up 2020, it’s not likely this crisis will stop when the clock turns 12 on January 1st, 2021. Putting some or most of this stimulus check into your emergency fund could be one of the best things you could do - not to mention you could grow it with a high yield savings account.
Looking for a Emergency Fund calculator, click HERE.
Anytime you receive unexpected money, and your financial affairs are in order (meaning you aren’t behind on bills and have an emergency fund), you can never go wrong by throwing it at debt.
Debt is the number 1 roadblock to building wealth. As I said in my book, Negative Net Worth, debt robs you of your future self, so if you have a steady income during this pandemic, why not get rid of some of your high-interest debt with the extra money?
Stock Up On Basics
Nobody needs 500 packages of toilet paper. That's not what I am talking about when I suggest stocking up on the basics.
I am talking about ensuring you have enough items on hand in the event you have to self-quarantine. A two week supply of food, water, medicine, diapers, and other basic household needs your family may require.
Figure out how much you need of each of these items and purchase accordingly. Don’t overspend or overstock. Use wisdom in preparing.
At The Money Rant, we’re all about getting out of debt, saving money, and building wealth. Extra income is always nice, but using it wisely and to your advantage even better! And there is no better time to make wise financial moves than in the middle of a global pandemic.
Want to learn even MORE?
Visit www.negativenetworth.com and subscribe to our blog, so you receive future notifications! Also, check out the author's #1 book in personal finance on Amazon, Negative Net Worth: Hard-knock life lessons in finances and the path to changing your financial future. Available in paperback and on Kindle. Finally, don’t forget to visit our e-marketplace to check out some of our favorite wealth-building resources as well!