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15 Financially Savvy Ways to Use Your Stimulus Check

By Selena Maranjian - Feb 17, 2021 at 10:00AM
Stimulus check with hundred dollar bills

15 Financially Savvy Ways to Use Your Stimulus Check

Help is on the way

Millions of Americans are hurting due to the ravages of the pandemic. Gobs of jobs have been lost, and the economy isn't firing on all cylinders. Enter stimulus checks, which can keep many people afloat for at least a while, and which can give the economy a jolt, too, via more spending.

If you're about to be evicted, or you're hungry, it's clear how you should spend your stimulus money. But for those who are financially comfortable enough to have many options regarding how to spend that stimulus money, here's a look at 15 productive possibilities.

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The word Debt being erased.

1. Pay down debt

This is a non-exciting way to spend any extra money that comes your way, but it's one of the best things you can do if you're carrying high-interest-rate debt: Pay off that debt. Failing to do so can mean forfeiting hundreds or thousands of dollars each year to credit card companies -- with nothing to show for it. Once paid off, those sums could go toward important financial goals, such as college savings accounts or retirement. As an example, if you're carrying $30,000 in debt and being charged the not-so-uncommon interest rate of 20%, you're looking at $6,000 in interest payments alone.

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Jar of coins with a Post-it labeled Emergency.

2. Fund an emergency fund

Next, unless you're financially independent or very well off, you'll need an emergency fund, stocked with enough to cover all nonoptional living expenses for at least a few months. These include not just food and housing, but also transportation, taxes, insurance, and internet access, among others. This can keep you safe in the event of a job loss or costly health or automotive setback.

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An egg with IRA written on it is sitting in a nest.

3. Open a traditional IRA account

If you don't have an IRA retirement account, using stimulus money to set one up is a grand idea. An IRA is a tax-advantaged retirement account, which comes in the traditional or Roth variety. A traditional IRA gives you an up-front tax break: Whatever you contribute to it (up to $6,000 in 2020 and 2021, plus an additional $1,000 for those 50 and older) can be deducted from your taxable income, shrinking your tax bill. Saving just $6,000 per year for 20 years and earning an annual average of 8% on it will get you a nest egg worth nearly $300,000 (pre-tax). Traditional 401(k) accounts work similarly but have far greater contribution limits -- $19,500 in 2020 and 2021, plus an additional $6,500 for those 50 and older.

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A Roth IRA road sign.

4. Open a Roth IRA account

A Roth IRA, or a Roth 401(k), features the same contribution limits as its traditional counterpart, but offers no up-front tax break. Instead, you get to withdraw money from the account tax-free if you follow the rules. That can be a big deal. If you'd saved that $300,000 over 20 years, for example, you'd get to spend it all in retirement, instead of sending a chunk of it -- say, $72,000 if you were in the 24% tax bracket -- to Uncle Sam.

ALSO READ: 3 Reasons to Open a Roth IRA in 2021

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Exercise equipment, a stethoscope and a board of fruit and grains.

5. Invest in your health

Another savvy financial move with stimulus money is investing in your health. After all, if you want to be able to really enjoy your life and to have a better chance of living a long life, you'll want to eat nutritious meals and exercise. So consider spending some or all of that stimulus check on a gym membership, a membership to your local farm's community-supported agriculture program, or perhaps some exercise equipment.

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Graduation cap and diploma rolled and tied with ribbon

6. Invest in yourself

Another way to invest in yourself is to feed your brain. Take a course or two. Pursue an additional degree or professional certification that can help you advance in your career -- and help you earn more in the process. That will mean you can save and invest more for retirement, and a higher earnings record can result in fatter Social Security checks as well.

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An open book on a library desk with shelves full of books in background.

7. Invest in your investing skills

You can also improve your financial health by investing at least some of your stimulus money in improving your investing skills. You could use it to buy several classic investment books -- such as Common Stocks and Uncommon Profits by Philip Fisher -- or a whole lot of books about great investors or great companies. Subscriptions to business-oriented magazines such as Fortune, Bloomberg Businessweek, and Forbes will also help you keep up with what many companies are up to. Solid personal finance books can help you manage your money better, too.

ALSO READ: How to Double a $1,400 Stimulus Check With Absolutely No Effort

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Tax forms and calculator with Post-it note reading Tax Time!

8. Save it for tax time

Many of us receive tax refunds in most years -- but plenty of other folks end up owing money to Uncle Sam. (Self-employed people typically send quarterly estimated tax payments to the IRS.) If you're expecting to owe tax dollars in the coming year, you might save your stimulus dollars and put them toward that tax expense.

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A tiny graduation cap, glasses, and pen next to a paper that reads 529 College Savings Plan.

9. Contribute to a 529 account

If you have kids with college expenses ahead of them, you should be saving up for that via a 529 plan -- or at least considering doing so. A key feature of these plans is that you can contribute a lot to them -- in many cases, hundreds of thousands of dollars. The rules and plans vary by state, and you don't have to use the 529 plan offered by your state -- you can opt for another state's plan, if you like its terms and features more. Money in a 529 plan account can grow on a tax-free basis, before it's spent on qualified education expenses. Some states offer their own tax breaks for contributions by residents to their state plan, and some states even offer breaks for those saving in another state's plan.

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Financial advisor sitting at desk and reviewing documents with client

10. Get a professional checkup

The idea of spending up to several hundred dollars or more on a financial advisor or financial planner may not be appealing, but a good one may be able to help you save or earn far more than that. And if you suddenly have stimulus money in hand, this could be a great time to get some professional guidance. An advisor can assess how well you've been doing financially and can redirect you into some more effective practices, perhaps coming up with a great long-term plan to help you reach your financial goals as well. Consider using a fee-only advisor, who won't be collecting commissions for selling you on various investments.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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One person placing cash into the outstretched hand of another.

11. Make an extra mortgage payment or two

Putting your stimulus check toward paying off your mortgage can be a good thing to do. Better still, make extra mortgage payments regularly, and you can shorten the life of your loan considerably. Check out this example, from the folks at Interest.com:

"Since there are 12 months in a year, increasing your monthly payments by one-twelfth amounts adds a full extra payment towards your principal balance by the end of the year. If, for example, you had a 25-year loan for $250,000 at 3.75% interest, your monthly payments would be about $1,285.33. Increasing this by one-twelfth would add $107.11 to each payment for a total of $1392.44 per month. If you started the higher payments from the beginning of the loan term, your loan would be repaid 3 years earlier and you would save $18,131.48 in interest over the life of the loan."

ALSO READ: 4 Mortgage Myths You Can't Afford to Believe

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Person holding beets in a garden.

12. Plant a garden

Consider planting a garden with your stimulus money. Lots of flowers can boost your spirits regularly, and fruits and vegetables from your own yard can save you a lot in food spending, too. Not everyone has a sunny yard in a temperate zone, but you may be able to grow more than you thought you could indoors or in a greenhouse.

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Smiling person wearing apron and standing outside coffee shop has arms folded.

13. Support local businesses

Think for a few minutes about the local small businesses you love the most -- your favorite restaurants, gift stores, craft beer brewers, salons, and more. Many of them are struggling to stay afloat and may be on the verge of closing their doors without the support of you and others. Consider spending some (or much) of your stimulus money on your favorite small local businesses to help them survive until the pandemic is behind us. Many of them will deliver to your doorstep.

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A smiling family spanning three generations standing on a beach.

14. Share with loved ones

If you're in desperate need of your stimulus dollars just to survive, then you should absolutely spend it on surviving. (There's a good case to be made that they should be referred to as "survival checks" instead of "stimulus checks.") But if you're doing OK, think about your loved ones -- relatives and friends. Some of them may be in great need of some relief. They may not be mentioning it, so it's not a bad idea to just come out and offer help. Your stimulus (or survival) check may well help someone else survive -- by putting food on their table or paying their mortgage bill.

ALSO READ: 3 Simple Steps to Accelerate Wealth Building

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Coins in a glass jar labeled Charity.

15. Give to charity

Finally, if you're doing OK financially and your loved ones are as well, consider looking beyond your immediate circle and helping strangers. Donate to local food banks and homeless shelters. Look into which local organizations are helping those in need near you and which national charities you might want to support as well. Remember that you may even get a financial benefit from your generosity, if you're able to deduct your contribution.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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A woman pointing to a stack of cash in her left hand, with a steadily rising chart next to her.

Make that money count

However you spend any stimulus dollars that come your way, aim to make them count. These 15 suggestions can help you make or save money with your stimulus cash, or they can enrich your life or the lives of others. Consider making some of these moves with other sums of extra cash you receive, such as tax refunds or raises.

The Motley Fool has a disclosure policy.

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