Putting Your Stimulus Check To Work: Don't Blow It
The IRS started sending stimulus payments shortly after the American Rescue Plan Act was signed into law. In the week following, approximately 90 million Americans received about $242 billion in stimulus payments. More stimulus checks are still on the way and many payments will be received by direct deposit in the coming weeks.
If you are wondering what's included in the latest round of stimulus, we encourage you to read our recent communication - Highlights Of The New Stimulus Package.
Getting a stimulus payment isn't an event that happens every day. Some may be tempted to blow that "stimmy money" on something fun like a new tv, gaming system or over-priced accessory to help themselves get through the pandemic. Before you are quick to swipe or blow your stimulus cash on things that may deliver near-term gratification, think about the ways it could improve your total financial picture. We've included several ideas below:
Pay-Off High-Interest Debt and Build Your Savings
The decision to spend or save your stimulus check hinges on a four-letter word: debt. Paying off any high-interest debt should be a top priority. Credit card debt is a common high-interest debt that can also affect your credit score.
Once high-interest debt is paid off, a good rule of thumb is to have three to six months of household expenses saved in a bank account.
Contribute to Your Roth IRA
A Roth IRA contribution is made with after-tax dollars. The benefit of contributing to a Roth IRA is that your money grows tax-free and can be taken out in retirement tax-free.
Contribute to a Child's or Grandchild's 529 Plan
A 529 plan is a valuable tool that may be used to save money for education, including college tuition and certain related expenses as well as up to $10,000/year of K-12 tuition. Earnings in a 529 plan grow tax-free and will not be taxed when the money is taken out from the plan to pay for qualifying educational expenses.
On a related topic, we encourage you to watch this short video - Rule of 72, which is intended to help explain and measure the effect of compound interest on your investment and the choices you make early.
It has been stated, "The best way to predict the future is to create it." Our team is committed to serving your needs and working together to create “strategies for your success.”
If you have specific questions or would like to discuss your financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.
Disclaimers:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
Sources:
https://www.kiplinger.com/taxes/602396/when-will-a-third-stimulus-check-arrive