Menu

Stimulus Checks Are Coming

Stimulus Checks are Coming

It was recently reported by the Washington Post that stimulus checks could be coming soon. The current amount per person could be as much as $1,200 depending on your Adjusted Gross Income in previous years.   With a future amount of money coming soon it’s important to talk about what you should do with your stimulus check.  Let’s talk about a plan for your money.

What is a stimulus check?

A stimulus check is a check sent to a taxpayer by the U.S. government. The influx of money is intended to help stimulate the economy by providing consumers with money during a time of need.

What should I do with my stimulus check?

There are going to be a lot of factors that will be part of your decision.  If you have already experienced a job loss or slow down with your current business or employment this stimulus check could simply be a way of paying for the necessities.

In our situation we have an emergency fund that allows us to sleep at night, extra cash for upcoming expenses, and no personal debt payments.  Everyone’s situation will vary.

For most of Americans that live paycheck to paycheck here are my suggested stimulus check priorities.

My Suggested Stimulus Check Priorities

I mention these three items if I were living paycheck to paycheck, didn’t have an adequate emergency fund, or was concerned about a potential job loss coming.  In this case (s) this is how I would prioritize my stimulus check:

When you look at my three suggestions they look incredibly boring.  No corvettes, swimming pools, or even a vacation to Disneyland. What’s most important in the unknown is taking care of you and your immediate needs, not your wants.

Disney Stimulus Check

Disney, Not where I suggest to spend your stimulus check

Remember each situation is going to be unique.  If you want to discuss what you plan to do with an unbiased third party, check out my financial coaching page and schedule an appointment.  It’s free of charge and just two people talking about money.

Even Steven Money Stimulus Check Priorities

  • Family
  • Small business (local, friends who own them, businesses I support)
  • Investing

If our household were to receive a stimulus check these would be my top priorities. 

Family

I’ve thought about how much my parents or in-laws could use extra money for missed work or health related expenses.  My family is important and any extra help financially I’m sure would be appreciated.

Small Business

I’ve talked about it before but my local CrossFit gym means a lot to me.  I prioritize my health and fitness as one of my main values. 

I’ll be keeping a close eye in the coming months to see how the financial health of the gym is doing. This is just one example of helping a small business, but there are many.

Investing

I have lost thousands of dollars in the stock market.  Yes I believe it will recover in due time.  One way to speed up the process is to invest when the stock market is going lower. 

At the time of writing stocks are down 30% from their all time highs, just a short time ago.  While it’s certainly too early for me to say “stocks are on sale” what I will say is people are not currently greedy, I would categorize them as fearful.

This could make an excellent opportunity to invest.

I wanted to provide the quick and easy answer to what my immediate thoughts and actions would be for my current situation and in the most common financial situation today.  Let me explain more on how I came to these priorities.

Evaluate the Situation Stimulus Check

Evaluate the Situation 

Before you receive any stimulus check in the mail or direct deposit it’s important to evaluate your current financial situation.  Dive into the money you have in your accounts and explore what your monthly expenses are per month.

The process is going to be similar to a financial snapshot or net worth of your assets and liabilities.  I call it your Evaluate the Situation Snapshot.  The big difference in your net worth calculation and your Evaluate the Situation Snapshot is instead of including your debt as a liability, instead it’s seen as another asset.

The bottom line for the Evaluate the Situation Snapshot is to calculate your total monthly expenses as compared to your overall money available.

I have categorized the key areas into 4 different categories:  Cash, Available Debt, Assets, and Investments.

Cash

This amount is going to include all of your checking and savings accounts.  The money in your checking and savings is meant for the everyday bills, emergency fund, and every savings account available.  

Our Situation

Right now my wife and I have what would amount to 6 months worth of expenses in an emergency fund held in cash (Vanguard Money Market and Ally Online Savings).  I know this because I track my expenses with Personal Capital.  

We also have cash that we have set aside in a separate account (s) for monthly car maintenance, flood insurance, real estate taxes, home insurance, and our travel fund for 2020.  

Setting aside money for specific items like our travel fund is a saving strategy commonly used to save up for a long term expense or purchase.   

I’m evaluating the situation as if s*** really hit the fan, we have some reserves.

Available Debt

When looking at your overall financial picture and evaluating the situation to see what you should do with your stimulus check it’s important to know what debt is available to you today, not tomorrow.

Available debt is most commonly the remaining credit line from your credit card, a home equity line of credit (HELOC), or any personal lines of credit that may be available to you.  

The important part of this is not the debt OWED, but rather the debt AVAILABLE to use. 

For example if you owe $2,000 on your credit card bill this is not part of this evaluation.  Instead this money is only considered as part of your monthly expenses.  What is important is the amount that is still available for purchases.

It’s important to note that while you may have equity built up in your home today, that does not mean the bank will borrow you money tomorrow.  Especially if a job loss occurs.  Debt available today, not tomorrow.

Our Situation

We own our primary residence and recently decided we would obtain a Home Equity Line of Credit (HELOC) to be prepared for a potential future investment.  The application is currently in the process of being closed. 

While debt certainly isn’t my favorite option, the main purpose for this decision was to be proactive.  This could be for a future investment or to help us through a job loss if it came to that.

We also have three (3) different credit cards that we could use with available credit lines.  It’s critical to note that our credit cards are paid off in full every month.

Although years ago I was scared to death of credit cards, I have since added them back into my life for cash and travel hacking purposes.

Assets

Assets can include a variety of things and while some may have more sentimental value than actual worth it’s important to take stock of what you own.

My rule of thumb is to only include items that I would be able to sell for $1,000 or more and are physical assets like a house, car, or boat for example.  

Don’t forget to think about what the item would sell for, not what you would want to get for the item as these are different numbers.  

For example while the amount of time and money I spent collecting baseball cards for me is probably worth many thousands of dollars I would be lucky to get a couple hundred dollars if I sold my collection.  

Our Situation

As mentioned we currently own our home free and clear of a mortgage.  

The possibility of selling our home would bring a lump sum of money.  This would also decrease certain expenses. 

However we would need to rent or live with family for our housing needs.  Living with family or renting would most likely increase our overall expenses.  Unless our family would let us live with them for free.

Of course we could move into our paid for 2007 Toyota Sequoia.  It’s however more likely we would sell the vehicle for cash. 

There is not a ton of value in the vehicle but if times get tough selling a vehicle has certainly been done before.

Investments

Investments are going to include assets that you can sell on the stock market.  For each share of stock in the company or fund a certain dollar amount would be received.

The money received from investments and the sale of shares is going to be included in their 401K at their employer, for most Americans.  Other examples could include money in an IRA or non-retirement account like a brokerage account.

It’s significant to know what investments are available.  The investments could become another option in the grand scheme of your overall financial picture.

Our Situation

We also own stocks, bonds, and REITs that pay dividends throughout the year in both are retirement and non-retirement accounts.  The dividends in our taxable account could be transferred to our checking account and be included as part of our Cash category. The dividends in our retirement account have more tax implications, but the same transfer could occur.

The obvious part of our investments is to sell them and receive a lump sum of cash.  Although vastly lower because of the current market conditions.  Each investment whether in a non-retirement or retirement account has it’s own tax implications and potential penalties to go along with it.

While I don’t want to sell any of my investments it’s another weapon in defense of not having income.

Evaluate the Situation Recap

After you calculate our monthly expenses and come up with totals available in cash, debt, assets, and investments it’s time evaluate.

The main point of the Evaluate the Situation Snapshot is to understand how long you can survive without any income.  While using debt, selling your assets, or investments is not ideal it’s during a difficult times.

While receiving a $1,200 stimulus check is appealing for wants, it’s more important to make sure you have enough money saved and you can survive should tough times be ahead.

Leave a Comment:

Leave a Comment: