Stimulus check
Now that your stimulus check has arrived there are some dos and some don’ts regarding what you should do with yours. We all know $1,200 wont change the world but that doesn’t mean you shouldn’t be smart with it. At the vital deposit we constantly push to be smart with your money and have your money work for you, not the other way around.
That being said there are a couple smart moves you can make with your check and start working towards your goals of financial freedom.
In this article we will be going over three smart moves you can make with your check once you receive it. Before we get into it I would just like to say that I am not a financial advisor and the content is for informational purposes only.
Three smart moves
Pay off bad debt
When I say bad debt i’m talking about high interest debt. This usually is in the form of credit cards and personal loans. Lets face it no one is sure where this economy is going so it is important to protect yourself as much as possible. By using your stimulus check and paying off high interest debt you are putting a necessary safeguard in place. If the economy does take a down turn the last thing you want is a boat load of payments coming in, especially if your job is on the line. High interest debt is more critical due to the fact it is high interest. You pay on it month after month yet it barely seems to go down. In times of uncertainty this is definitely a smart move.
High yield savings account
Another smart move is adding to your emergency fund in the form of a high yield savings account. With the feds cutting the rates to virtually zero this does have an impact on savings accounts. So some savings that once offered high yields are now not much better than the standard savings account at your local bank. The good news is there are still a few companies out there that offer decent savings yields. Taking rate cuts into consideration expect to find yields of 1.50-1.75%. These rates are nothing to go crazy over but they are better than the average 0.09%
Ally bank
Ally bank is one of the few still offering a decent yield of 1.50%. Being that they do not have a minimum balance requirement to qualify for the 1.50% yield. As well as no monthly service fees, this makes Ally a good option. By not using a high yield savings account you simply are leaving money on the table.
Invest in IRA
This move is if you already have all the essentials covered (food, medicine, bills paid, etc.) and a solid emergency fund of at least 3-6 months living expenses saved.
When I say IRA I am referring to a Roth IRA. Your $1,200 stimulus check would be a nice contribution to your Roth. The reason I say Roth IRA is because there are multiple benefits in putting money in your IRA vs. your non retirement account, especially right now and especially with a Roth. First reason being, the contribution date has been extended. Every year you are only allowed to contribute up to a set dollar amount. This applies to both Traditional and Roth IRA’s.
Current 2019 and 2020 Contribution limits
– Under age 50: $6,000
– Age 50 and older: $7,000
* Income stipulation chart posted below
In the midst of everything the contribution deadline for 2019 has been push all the way back to July 15th 2020. This means if you were not able to max out your contributions last year you still have time. Take the Roth for example, it is important to max out contribution since this will be tax free growth. Although there is no minimum deposit to receive the tax free benefit. Maxing out contributions will allow you to utilize the full power of a Roth. Mix that with the market still well below their highs and it is savings on top of savings.
2019
| Filing Status | Modified adjusted gross income (MAGI) | Contribution Limit |
| Single individuals | < $122,000 | $6,000 |
| ≥ $122,000 but < $137,000 | Partial contribution (calculate) | |
| ≥ $137,000 | Not eligible | |
| Married (filing joint returns) | < $193,000 | $6,000 |
| ≥ $193,000 but < $203,000 | Partial contribution (calculate) | |
| ≥ $203,000 | Not eligible | |
| Married (filing separately)* | Not eligible | $6,000 |
| < $10,000 | Partial contribution (calculate) | |
| ≥ $10,000 | Not eligible |
2020
| Filing Status | Modified adjusted gross income (MAGI) | Contribution Limit |
| Single individuals | < $124,000 | $6,000 |
| ≥ $124,000 but < $139,000 | Partial contribution (calculate) | |
| ≥ $139,000 | Not eligible | |
| Married (filing joint returns) | < $196,000 | $6,000 |
| ≥ $196,000 but < $206,000 | Partial contribution (calculate) | |
| ≥ $206,000 | Not eligible | |
| Married (filing separately)* | Not eligible | $6,000 |
| < $10,000 | Partial contribution (calculate) | |
| ≥ $10,000 | Not eligible |
Bonus
This also is recommended only if all the essentials are covered, emergency fund in place and low to no bad debt. If you are serious about mastering your craft, dominating your business or just want to be financially independent this is a very smart move that often gets over looked. And that is invest in your knowledge or learn a new skill! Buy a course on a business you have been wanting to start. Or a book that you have been thinking about for awhile. If all the bases are covered and financially you are ok, use the stimulus check as an excuse to start that next venture. Set goals, be focused, stay diligent and you will achieve success!
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