17 Jan how to use your stimulus check
You may have received a stimulus check recently – and more may be on the way. While relying on the government to help bail us out is never a good long-term strategy, the money is literally a lifesaver for many right now, and it’s important to put it to good use.
If your job is tenuous or you are out of work, the best thing you can do with the check is put it towards what Dave Ramsey calls “the four walls” – food, utilities, shelter, and transportation. Those are necessities to keep you sheltered and fed, and get you to work.
If your job appears to be stable and you do not have a starter emergency fund of $1,000, move the stimulus check right into that starter emergency fund. If that is done, start attacking your debt, putting the check towards your smallest debt (regardless of interest rate). If you are debt-free (with the exception of your mortgage), put the money towards a fully-funded, three-to-six month emergency fund. These are the first three of the 7 baby steps to financial freedom.
But, aren’t we supposed to spend the stimulus check so we can stimulate the economy? By paying down our debt and increasing our savings, Americans will stimulate the economy in the long run. However, if you have been really careful with your spending – and depending on your situation – you could consider spending a small amount (such as $30) on something that will lift your spirits: a take-out meal, a new shirt, or the like.
Regardless of whether you are employed or under/unemployed, you should analyze how you can reduce the cost of your “four walls:”
- Food: the average American spends $232 monthly on meals outside the home (thesimpledollar.com). If your job situation is tenuous or you are trying to get out of debt and you are eating/ordering out, this is a key area to cut.
- Utilities: can you turn the heat down a bit? Use less water? Change your home phone service? Several years ago I reduced my home phone service by 74%, saving hundreds of dollars since then.
- Shelter: your mortgage/rent payment should be no more than 25% of your take-home pay. If you are un- or underemployed right now, this is likely not the case. Take a serious look at your situation, what you see happening in the future, and determine if your current home/apartment is feasible.
- Transportation: the average car loan is $554 monthly and lasts more than five years. That is serious money and you should consider whether it’s worth carrying that debt.
In future posts, I’ll touch more on each of these areas of spending, and on the seven baby steps.
Feel free to reach out if you have any questions or would like a free consultation!