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Stimulus Check Yourself Before You Wreck Yourself

By Daniel B. Kline – Apr 20, 2020 at 9:22AM

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4 big mistakes to avoid if you don't need that government-provided assistance for necessities.

Many Americans have now received their Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus checks. Eligible adults get $1,200, with an extra $500 added per child in a household. Some won't qualify for the full amount, including individual tax filers with adjusted gross income over $75,000 and joint filers with AGIs over $150,000. The check amount drops by $5 for each $100 of adjusted gross earnings over the cutoff amounts.

For some recipients, these funds help provide needed cash to cover basic expenses like food, utilities, rent, and mortgage payments. For others, like those who count themselves lucky enough to not be economically affected by the coronavirus pandemic, the money may seem less crucial.

Whichever camp you fall into, there are still smart ways to use the funds you receive (and a few dumb ones). Here are four things to factor in as you decide what to do with your stimulus check.

A man in a suit throws money around.

Don't waste your stimulus money. Image source: Getty Images.

1. Don't forget your emergency fund

The current situation can look a lot less scary from a financial standpoint if you have a 6-12 month emergency fund set aside. That's cash or cash equivalents you can tap into if your economic situation changes. If you have to spend this hard-saved cash it's not likely to be on something fun, but you'll appreciate having it if you need it.

You may not be impacted adversely by the current situation. That does not mean you won't be, or that something else won't come along that hurts your finances. If you don't have an emergency fund -- or it's not big enough -- that may be a smart place to put your stimulus money.

2. Don't treat the stock market as a casino

If you choose to invest in stocks, buy good companies and plan on holding them for a long period of time. You could also buy index funds that track the market and give you broad exposure.

Don't fall for the trap of seeing that some big-name company has fallen to new lows, which in your mind makes it a buy. Nobody knows where the bottom is. Short-term trading is dangerous -- it's like playing roulette with your money.

Even experts don't know what a recovery will look like coming out of this global event. What we can say is that history shows that the stock market eventually recovers. Invest for the long haul and don't try to make a big score quickly.

3. Don't splurge if you have debt

We're all stuck inside, and that makes a big-screen television or a fancy new piece of exercise equipment pretty attractive. However, those are only reasonable purchases if you're not carrying debt beyond a mortgage payment and maybe a car loan. Credit card debt is very expensive, and using the stimulus funds to pay it down will literally give you the largest return on your money possible in most cases.

4. Don't forget to think beyond yourself

You may be doing OK, but many are not. Think about spending some of your stimulus money to do what you can for others in need. That may mean helping a relative by leaving groceries at their door. It could also be what I think of as selfish charity, like ordering a decadent takeout meal from a restaurant you like that is in dire need of customers right now.

You can also make donations to local groups on the front lines battling COVID-19 both directly and indirectly. It's also possible to be generous and do something selfish. Buying a new bicycle from a local shop (even though you may not be able to pick it up quite yet) helps that store owner.

Be creative. Tip more when you get groceries or other things delivered. Remember that you're part of a community, and we can all lift each other up a little bit.

Make smart choices

Getting money they never planned on having can tempt people to make short-term decisions. Avoid those temptations and try to make smart longer-term decisions. The immediate future has become uncertain for many Americans, and that calls for caution, which includes guarding your finances and, where possible, looking out for others.

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