Spending Your Stimulus Check? Pay Yourself First
Stimulus checks are hitting bank accounts, and many people already have plans for their money. But before you start spending, first take a closer look at your savings.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
The $2.2 trillion CARES Act is the largest emergency relief package in American history. It includes a one-time direct payment to an estimated 93% of taxpayers. Even those receiving Social Security benefits are eligible for a check, even if they haven’t filed taxes in the past few years. The money started hitting bank accounts in mid-April, with paper checks close behind.
Individual filers with adjusted gross incomes less than $75,000 a year will receive $1,200, plus an additional $500 per dependent child under age 17. That amount phases out for those making between $75,000 and $99,000. For married couples filing jointly, they would get $2,400 for adjusted gross incomes up to $150,000, with the check amount phasing out between $150,000 and $198,000. (To find out how much money you'll get, use our Stimulus Check Calculator.)
While the hope is that people spend this money and stimulate the economy, there are a few things you can do to benefit your financial situation now and in the future.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Open a Roth IRA (or add funds to an existing Roth)
Consider using your money to open a Roth IRA to help diversify your tax liability in retirement. Because you won’t have to pay income taxes on your stimulus check, it’s essentially free money to put in a Roth IRA. Other contributions you make to your Roth will be taxed, but your account grows tax-free and you can withdraw it tax-free in retirement.
A Roth IRA can make a big impact on your overall tax situation in the future. Your taxes in retirement are based on your overall income, and your Roth IRA withdrawals don’t count as income. This means your Social Security check and other income in retirement could be taxed at a lower rate. You can save up to $6,000 in your Roth IRA in 2020, and up to $7,000 if you are 50 or older.
If you don’t have a long-term financial plan, now is the time to meet with a financial adviser who can help you set savings goals for retirement and create a plan to reach them.
Eliminate Debt
Household debt is at an all-time high with Americans owing more than $14 trillion. Use this money from the government to tackle your debt. There are two popular methods:
- The avalanche method encourages you to tackle the debt with the highest interest rate first.
- The snowball method encourages you to pay off the debt with the smallest balance first.
With each method, continue making at least the minimum payments on your other debts as you work to pay it all off. The money you’re receiving now can help you chip away at what you owe.
I recommend eliminating debt before you enter retirement. Any debt payments need to be worked into your retirement spending plan, and eliminating those payments now will help your money last longer in retirement.
Boost Your Emergency Fund
Half of people expect to live paycheck to paycheck this year, and more than half don’t have enough saved to cover three months of expenses. If you’re concerned about being laid off in the near future, take the stimulus money you receive and start an emergency fund. Your emergency fund should have enough money to cover three to six months of expenses if you were to lose your job, miss a paycheck or face an unexpected medical bill.
An emergency fund is a key piece of financial security no matter your age — but it’s especially important in retirement when you’re living on a fixed income.
As unemployment reaches record highs, many people will need this money from the government to make ends meet in the coming weeks. However, for those who are financially secure right now, investing in your future is a move you won’t regret.
-
I want to sell our beach house to retire now, but my wife wants to keep it.I want to sell the $610K vacation home and retire now, but my wife envisions a beach retirement in 8 years. We asked financial advisers to weigh in.
-
How to Add a Pet Trust to Your Estate PlanAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Avoid Leaving Chaos in Your Wake: Keep an Updated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to Chance
Adding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate Plan
An outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
I'm a Financial Adviser: This Is Why I Became an Advocate for Fee-Only Financial AdviceCan financial advisers who earn commissions on product sales give clients the best advice? For one professional, changing track was the clear choice.
-
This Is How You Can Land a Job You'll Love"Work How You Are Wired" leads job seekers on a journey of self-discovery that could help them snag the job of their dreams.
-
65 or Older? Cut Your Tax Bill Before the Clock Runs OutThanks to the OBBBA, you may be able to trim your tax bill by as much as $14,000. But you'll need to act soon, as not all of the provisions are permanent.
-
I'm a Financial Adviser: This Is the $300,000 Social Security Decision Many People Get WrongDeciding when to claim Social Security is a complex, high-stakes decision that shouldn't be based on fear or simple break-even math.
-
4 Ways Washington Could Put Your Retirement at Risk (and How to Prepare)Legislative changes, such as shifting tax brackets or altering retirement account rules, could affect your nest egg, so it'd be prudent to prepare. Here's how.
-
Is Your Retirement Plan Built for 2026 — or Stuck in 2006?It's time to move away from the 4% rule and the 60/40 portfolio to an adaptable, tax-diversified strategy focused on reliable income and longevity.
