10 Smart Ways to Use Your IRS Stimulus Check

Ferrone & Associates CPAsBlog

Many Americans will soon be receiving additional stimulus checks from the federal government sometime in 2021. Here are some suggestions to use your stimulus check in the most efficient way. 

1. Use the money to pay essential expenses. This is why the government is making these payments. Rent and mortgage payments top the list. Car payments too. Feeding your family. You need to survive.

2. Reduce high-interest-rate credit card debt. If you can cover your basic expenses. Pay down your credit card debt to reduces your monthly expenses.

3. Pay your estimated tax bill. If you are a freelancer and pay estimated taxes to the federal and state government, these payments need to be made or you face penalties. This is a very wise use of our stimulus check. 

4. Prepay your property taxes. School taxes also fit into this category. When you receive your bill you might notice a 2 percent discount if you pay in full on an earlier date. Two percent is higher than you would earn if you put the money in your bank. This bill will need to get paid sooner or later.

5. Add the money to your emergency fund. The pandemic has taught us there are no guarantees in life. If your income stopped, you would face a shortfall until you found your next job. Add the money to your emergency fund. This fund should cover your basic expenses for three to six months.

6. Make retirement plan contributions. If you are in good financial shape. Make contributions to your retirement savings now.

7. Invest the money. You could also send the money to your financial advisor and ask them to spread it across your different asset classes or use it to bring an underweighted asset class into balance.

8. Job hunting. You feel your previous job isn’t coming back. Your employer closed permanently. Finding another job requires a good resume and an effective strategy. You are investing in yourself.

9. Spend it locally. Recirculate the money when possible. If you shop online, the money goes to a business far away. If you shop at the local grocery, butcher, and hardware store, the money is recycled back into your community. You are stimulating the economy.

10. Charitable contributions.  If you don’t really need the money and your finances are in fine shape, you may know other families are visiting the local food pantry. Find a local charity that will put money directly into the hands of those needing it the most.

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