Since a third round of stimulus checks are going out as we speak, let's chat about some ways you can use the money to your advantage! If you're in a position right now where you don't need the money to cover basic expenses and necessities, it's easy to view it as extra spending money to go on a shopping spree with. Instead of blowing all of the money on unnecessary purchases, here are some alternatives on how to wisely spend your stimulus check to better your financial situation!
**These are my own personal opinions + is not intended to be expert financial advice. Be sure to do your own research + contact a financial advisor to discuss what works best for you.**
1. BUILD YOUR EMERGENCY FUND - I'm a big fan of the emergency fund + having a financial safety net. With all of the uncertainties of life and the world we're currently living in, it's essential to have some extra savings available for emergencies. Most financial experts recommend building your emergency fund to $1,000 first and then over time increasing it to cover three to six months of your expenses. I always veer on the side of caution so I'm passively working on building mine up to a year's worth of expenses. This is a great opportunity to help you financially that your future self will thank you for!
**Even if you can only save a small amount, start now! Every dollar counts. It might not seem significant but small steps in the right direction is better than no action at all.**
2. PAY OFF BAD DEBT - If you have any high-interest debt (credit cards, personal loans, etc.) it's a good idea to get rid of them as soon as possible! The rule of thumb on this one is usually anything with an interest rate of over 5%. Typically if your interest is higher than 5%, you are losing more money to interest than you could earn by investing. Use your stimulus check to help reduce or get rid of bad debt!
3. INVEST + GROW MORE $$$ - If you have "good" debt that is under 5% or no debt, chances are you can grow + earn more by investing the money. The average return on most investments is around 10% per year so with investing you can use the money to your advantage. A few ways to invest your money is through a retirement account such as ROTH IRA/Traditional IRA, with an individual brokerage account, etc.
**Do your research or consult a financial expert to find out what the best option for you is!**
4. TREAT YOURSELF (WITHIN REASON!) - If you know it's not realistic for you to save/invest/pay off debt using all of your stimulus money, it's okay to treat yourself A LITTLE. I'd recommend budging out a percentage of your check for spending money + then utilize the rest to your benefit via savings, investing, etc.
**I also like to spend locally where I can so if you're planning on shopping or eating out, it's also nice to help support small businesses and restaurants in your area!**
Are you a spender or a saver? Comment down below!
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