What You Should Do With Your Stimulus Check to Build Wealth

With the third round of stimulus checks already being rolled out, you, my money savvy friend, may be wondering: What should I do with my stimulus check?

This is the question that many of us find ourselves faced with as we get this round of stimulus checks which is the biggest one yet.  

And with so much money on the line, it is definitely wise to way your options carefully and make sure you are making the best decision for you.

Now, of course, if you've found yourself out of a job and left with a mound of past due bills due to Covid, what you should do with your stimulus check is pay those bills girl!

But if that is not the case for you, then there are other options you should consider before deciding how to put your stimulus money to good use.

Here's a quick rundown of what you should do with your stimulus check:

We'll dive into each of these below.  Feel free to use the Table of Contents to skip to the areas you're most interested in.

7 Things You Should Do With Your Stimulus Check

God bless America and the free money that they have given us (not that it doesn't come at a price).  Because now, we can use this money to make some smart money moves that will set us up for success.

Check out these 7 money moves in more detail below.

Pay Off High Interest Debt

One of the first things you should do with your stimulus check is to pay off those high interest credit card debts.  

Why?  Because those debts are draining your money and preventing you from truly being able to build wealth.

Just like compound interest is a godsend when you are investing in the stock market, the interest rates on your debt is the devil draining your money 3x faster.

That's why, you should always pay off your high interest debt as soon as possible.  Because it could be the hole that sinks your boat to financial freedom.

Start or Rebuild Your Abundance Fund

Yes, I have now fully converted to calling it an abundance fund.  Now for those of you who are new to the game by 'abundance' fund I mean your emergency fund.  I have my reasons for calling in that which I explained in an earlier article.  Check that out here if you're interested.

Now back to what you should be doing with your stimulus check...

Having an abundance fund is vital to your financial stability.  Without one, you are more vulnerable to any and every little emergency putting you back into the debt you fought so hard to dig your way out of.

So take it from me.  If you don't have one already, start an abundance.  And even if it's just $1000, at least it's a start.

Save For Retirement

If you've already paid off that high interest debt and have at least a starter abundance fund, the next best thing to do with your stimulus money is to put it into a Roth IRA.

This is one of my most favorite investment vehicles because money put into a Roth IRA is allowed to grow tax free and is tax free upon withdrawal once you reach retirement age!  Sweet deal right?!

There is a limit to contributing to a Roth which is $6,000 for an individual under 50 but the good news is you can contribute to last year's Roth up until April 15th of this year.  So max it out if you haven't already.

And if you've already maxed out your 2020 Roth, get a head start on that 2021 Roth.

Invest in Yourself

One of the BEST things you should do with your stimulus check right now, would be to invest in yourself.  Because not only would you be investing in yourself, but you would also be investing in your future.

So take that extra cash and pay for a mentor or a coach.  Go out and buy a course to start learning about marketing, AI, or even bitcoin.

Now is the time to invest in learning new skills.  Because, if the pandemic has taught us anything, it's that those with the skills that are vital to society will always have a job.

So get out there, upgrade your skillset, and increase your value in the market place.  Because by doing so, you will also increase your future income.

Plan for Your Children's Future

Haven't started planning for your children's future just yet?  No worries! Because thanks to this round of stimulus checks you can start planning for their future today!

Use your money to open up a 529 account for your child.  A 529 savings plan is a tax-advantaged savings plan that allows you to invest money for your child's future educational expenses.

The money invested in this account is allowed to grow tax free and when used for educational expenses, the withdrawals are tax free as well.

Plus, bonus point good news, some states will even give you deductions or credits for investing in a 529 plan.

There is one downside though to using a 529 plan.  And that is, schools will see the money in that plan as income.  So that could affect whether your child gets financial aid or not.

BUT.  I say, it is better to plan on not being poor than to hold yourself back form investing in your child's future.

Just saying.

Add to Your Mortgage Escrow

Get a jump on your property taxes by taking your stimulus check and putting it into your escrow account.  That way when your property tax bill comes due, you'll be ready and willing to pay it.

Thanks IRS.

At best, the stimulus check will cover your property taxes completely.  At worst, it will lessen the load on your wallet.  Thereby saving you a lot of stress.

So if you are a home owner, perhaps you should use that stimulus check to pay off those property taxes.

Pre-pay Premiums

Another thing you could do with your stimulus check is to pay your insurance premiums in advance.

We all have insurance: Car insurance, home insurance, life insurance, etc.  And these bills are due every month.  But did you know you also have the option of paying it in full upfront?

Maybe you did know that but just never had the money to do so before.  Well, my friend, now you can.  Now you can.

So take that check you just got from the government and pay your insurance premiums in advance.  Not only will you have the peace of mind in knowing that your insurance is already taken care of but you'd also save a ton of money!

That's because when you pay your premiums upfront, you get a discount for doing so!  

So lock in a couple hundred dollars in savings by pre-paying those bills!

Invest Through Your Brokerage

Another route you could take is to use your stimulus check and invest in your own brokerage account.  Investing through a brokerage gives you much more options than investing in a retirement account.  And sometimes this flexibility is priceless.

The downside of investing in a brokerage account is that your gains and dividends are taxable.  But it is always good to have different wealth building vehicles.

Furthermore, this could be your fun money that you use to invest in individual stocks of companies that you like (and hopefully, have researched).  

So go on.  If you're up for it, take that chance.  You never know.  Maybe you will pick the next Amazon.

Related:  Tax Efficient Investing: Tax Strategies to Save You Money

Donate to Charity

Maybe you are pretty financially stable or you just happen to like where you are financially.  If that's the case, one of the things you could do with your money is donate it.

By donating money to charity you are helping people who need the support more than you.  It's a great cause and will leave you feeling much better about yourself and the world you live in.

And not only that but by donating, you are able to claim up to $300 in tax deductions.  Above the line tax deductions.  Which means you are able to reduce your taxable income.  Woop woop!

See that.  Doing good is rewarded.

What if I Haven't Received My Stimulus Check Yet?

If you haven't gotten you stimulus check yet, don't worry you can claim it on your tax return.  You can do so by claiming the Recovery Rebate Credit on your 2020 Form 1040.  There should be instructions on the 1040 form for you to follow as well.

All in All

Although I have given you a list of great things you should do with your stimulus check.  Ultimately, the final decision is up to you.  

Whether you choose to invest it wisely or blow it on a new TV is totally up to you.  But I do encourage you when you get that check to think about your future.  What kind of life do you want to be living in the next few years?