What To Do With Your Stimulus Check

Whether you received $600 or more, I think we can all agree that stimulus checks are pretty sweet. The danger with stimulus checks is that it’s easy to spend money that’s not yours. Because you didn’t “earn” the money you are not attached to it. This is actually an emotional bias known as the windfall bias. Seeing an extra $600 in your account is a great feeling, how will you spend it?


If you’re stimulus check is MIA. You can get a status update here.

Before you take your Tinder Date out to Ruth Chris courtesy of Uncle Sam consider this:

Use that free money to help improve your finances. This will allow you to hang onto the money and even let it grow. Who knows if we’ll ever see a handout like this again?

  Don’t worry, you can still take that Tinder date on a much more affordable date.

Not sure of the best way to get that money working? Here are three great places to start:

  1. Pay Down Debt
  2. Use it to increase your savings
  3. Invest it and let it grow

Pay Down Debt

$600 can go a long way to decreasing most debts. Your focus should be on the interest rate. If you have credit card debt then this is a no brainer. Put your stimulus check towards it. This will save you a lot in interest payments. Your typical credit card interest rate is around 24.99%. If you had a $600 debt that you paid off with the stimulus money you would save $150 in interest payments.

Your stimulus check could also pay off other high interest debt. At Money Gouge we define high interest as >5% interest. An extra $600 payment towards debt with these interest rates will save you a lot in payments.

We would only recommend putting it towards low interest debt if the $600 will make a meaningful difference in the balance. For example, a car loan with a 2% interest rate with $3,000 left would be much more impacted by a $600 payment then one with $20,000 left.

We are not advocating for keeping debt, but at this point you need to consider if your money could be earning better returns elsewhere. Although using your stimulus check for debt repayment may not be as exciting, it will directly contribute to your long term happiness and financial health. Building healthy savings will contribute to your sense of security as well.

Save That Money

You should have 3-6 months of expenses in savings. Unfortunately, this year taught a lot of us why this matters. If you have no high interest debt then the next focus should be building your savings.  Your $600 stimulus check brings you that much closer to whatever your target savings is and helps build your personal balance sheet. In general, this money needs to be in a bank account. Not invested in the market. If you put it in a high interest rate account then the money will at least earn some interest. Our favorite high interest bank accounts are:


Both of these banks change their interest rates based on the federal reserve. In 2018, I was using both Marcus and Ally and earning 2.5% interest. Interest rates are at historic lows right now so it is reasonable to expect rates to increase in the future. High yield savings account keep your savings safe (FDIC insured) and accessible while allowing it to earn more interest than an ordinary checking account.

Invest Your Money

If you are fortunate enough to have no high interest debt and a solid savings account then you can put that money to work for you. Open a Robinhood account and receive a free stock or use another commission free company such as Vanguard. Your best bet is to play it safe, you can never go wrong with Vanguard Total Market Index (VTI) or the S&P 500 (SPY). Both allow you to own a piece of the best companies in America. In the last 5 years the return for S&P 500 has been 13%. $600 invested five years ago would be worth $1100 today!

If you’re feeling more risky than go ahead and buy the stock of a company you are interested in or know. This doesn’t mean buying a penny stock you’ve never heard of. Buy a company you know and love or have always been interested in. Don’t worry if the share prices are more than $600, most brokerages like Robinhood allow you to buy fractional shares in increments as small as a single dollar. Maybe you’ll buy a popular tech stock or dividend stock.

ATT (T) is a popular dividend stock that currently pays a 7% yield. If you bought $600 of ATT stock at the current price (around $29.00) you would own just over 20 shares. The dividend on each share is currently $2.08. So you would make an annual income of about $41. Nothing to write home about, but also really cool because you still have the original $600 and you make income every year regardless of your input. Most brokerage accounts will reinvest that to buy more stocks that will also pay a dividend every year. You can benefit from this snowball effect without using a single dollar you saved.

Easily the most fun way to use your stimulus check is investing it. But if the first two situations apply to your financial picture those are more important. Either way, it’s pretty cool to use a handout from the government to improve your long term financial picture rather than to spend it. Any money you save or make from your stimulus check literally costs you nothing. This should make a pretty good conversation starter (and first impression) on that Tinder date.

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