How to Get the Most Out of Your Stimulus Check
Many individual Americans and families have received their third stimulus check. While any deposit in the bank account is welcome, you smart savers want to know how to make the most of your stimulus check. You want to make sure this money is working its hardest for you because this past year and the COVID-19 pandemic have taught many people that solid financial footing is crucial when navigating unforeseen events.
Depending on your previous year’s tax return, individuals received a $1,400 stimulus check or a family of four could have received as much as $5,600. These checks (or — in most instances — direct deposits) are already nontaxable income, which makes this money a unique opportunity. If you’re wondering, “How should I invest my stimulus check,” we’ve outlined our top suggestions.
How Should I Invest My Stimulus Check?
Urgent Bills and Needs First
These stimulus payments are designed to help Americans weather the storm of the pandemic. If you need to use your funds to buy groceries or pay your mortgage, rent, or utilities, this is an opportunity to feel more secure.
Nest Egg for Taxes
The due date to turn in your 2021 tax return has been extended to May 17, giving Americans an extra month to save for the payment. And this year also brings added exemptions that could drastically diminish the size of your final payment and help with your personal finances.
Families who bring in a combined income less than $150,000 each year and have children may benefit from a tax credit of up to $3,600 per child. If you experienced unemployment last year and received unemployment insurance, you may be exempt from paying up to $10,200 on your taxes. If you still owe taxes after these savings, you may want to consider using part of your stimulus to pay that sum. Talk to your tax advisor about your state’s unique exemptions and credits if this is how you will make the most of your stimulus check.
Your Personal Wellbeing
The COVID-19 pandemic has been difficult in many ways. You may have put off talking to a therapist about the stress and strain of the past year, but a stimulus check may provide the necessary funds to reach out to a professional and discuss the accompanying feelings the pandemic has produced or exacerbated.
Credit Card and Loan Debt
Paying down debts is a great step to creating a more secure financial future. If you have multiple sources of debt, you can start with the easiest debts to pay off. But to be more strategic, you could first pay down the debts that are charging the most interest. This personal finance tactic will save you the most money in the long run and allow you to more easily pay down any other debts.
Repairs for Everyday Items
If any of your crucial belongings, like your computer, phone, car, or appliances are severely damaged, your stimulus payment could help pay for the necessary repairs. Ask yourself whether repairing these items would ultimately improve your financial outlook, as well as your quality of life.
The pandemic has underlined the fact that the future is unpredictable. An emergency fund provides a cushion to help you handle any unforeseen troubles. You may have already begun this fund. In which case, you could use your stimulus check to add to it. If you haven’t started saving, investing your stimulus check is a great start. Ideally, an emergency fund would cover three to six months’ worth of expenses. Your stimulus could greatly help you on your way.
Invest in your child by starting or contributing to a 529 College Savings Plan for their benefit. These investments grow on a tax-deferred basis. And when you or your child use the funds to pay for qualifying education expenses, you pay no taxes on those withdrawals. Depending on your overall financial portfolio, starting a 529 plan could help you make the most of your savings as well as your child’s educational future. Talk to your bank or financial planner to start a 529 plan or to find out about your state’s unique tax benefits.
Another smart way to make the most of your stimulus check is to start or contribute to an IRA or another investment account. Any amount you put in now has the opportunity to grow considerably by the time you’re ready to retire. You may dream of a comfortable and secure retirement — starting your savings early is the best way to get there.
The Less Fortunate
If you’re lucky enough not to need to invest your stimulus check, or if you’d simply like to pay it forward, donate to charities that are making an important difference during the pandemic. Food banks and homeless shelters are providing life-saving services and can always use more support.
At First National Bank and Trust Company, we’re dedicated to helping you build a strong financial future, whether you’re wondering “How do I invest my stimulus check?” or “How do I save for college?” or “What type of retirement account is right for me?”. We’re here to help. Contact us to speak to one of our experts.
Securities and insurance products are offered through Cetera Investment Services LLC, member FINRA
. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered. Investments are:
• Not FDIC/NCUSIF insured
• May lose value
• Not financial institution guaranteed
• Not a deposit
• Not insured by any federal government agency