Ah, the long-awaited stimulus payment. On Friday, POTUS signed the bill which contains the third round of stimulus payments. For the past three weeks, you’ve searched ‘Stimulus Check’ or some variation of it in your search bar. You stand in wonder each morning thinking of how you’ll spend that $1,400, or $7,000 in some cases, while you sip your fresh coffee. Maybe it’s finally time you buy-in to that pyramid scheme you’ve been eying (JOKING – don’t do this, please), or maybe you don’t need the money at all so you’re going to buy Tesla stock! Either way, we’ve got you covered here at Wealthy Idiots.
What is a stimulus check
I wanted to give a little background on the intended purpose of a stimulus check, although there is debate as to the actual merits and effectiveness. A stimulus check is intended to be paid to the general population and then re-injected into circulation to stimulate the economy. On this go-around, it seems there has been more discussion of these being “relief payments” which is probably more semantical than anything else. But, long story short, stimulus payments work like this:
Bob receives a $5k stimulus check. He knows his rental property needs a roof, and coincidentally, it costs $5k. Bob calls a local roofing company and schedules the job. The roofing company, that was possibly out of work, now has a job resulting from the stimulus. The contractor then pulls a permit from the city or county office which subsequently brings in tax revenue (I don’t particularly like this part, as I don’t feel the government should charge you a tax in order for you to build on your own property). The contractor then orders shingles, nails, etc. from their local lumber yard. The lumber yard has now depleted one roof’s worth of materials so they reorder from their distributor as a result. The distributor, which keeps an inventory system, immediately places an order to the shingle manufacturer who continues to produce shingles. All the while, each of these companies continues to pay their employees due to sufficient revenue, thus, keeping the unemployment rate low.
Here, you’ve taken a single purchase of $5k and turned it into a long string of events that are all predicated off of the first. This is the intended purpose of stimulus, typically.
The first priority: bad debt
So this isn’t the traditional business definition of bad debt. In that sense, it refers to debt you carry as a business that would be deemed uncollectable. Usually meaning it’s over 180 days delinquent. In personal finance, at least in my realm, people refer to bad debt as debts that have high interest rates, or poor terms, etc. This is normally things like credit cards, student loans, and payday loans.
You now have a stimmy, so why not tackle some of these? If you have that pesky little piece of debt that has been taking 30 minutes to an hour of your sleep every night, why not eliminate it? Maybe you are only $10k away from clearing your last student loan. Well, your $5k stimulus payment would get you halfway home! Either way, paying off that dreaded piece of debt can be downright invigorating. Give it a shot!
If you’re a regular visitor here at the Wealthy Idiots, you probably know that having some financial means to pay for emergencies is preferable. But, we all fall short at times and have bad months from a financial standpoint. Maybe you are delaying your hot water heater repair until next month, or possibly need a new alternator in your 200,000 mile Toyota Corolla. Either way, why not deploy your stimulus money to assist with these uncovered emergencies? You now have a way to pay for them that will serve you well by preserving your existing EF. Not to mention, we talked about the benefits of spending that money in the beginning of this article. Regardless of how you cut it, using your stimulus money to pay an emergency expense is a win-win.
Retirement accounts and investing
If your debt is in order and you don’t have any emergencies at the moment, why not toss a few extra Benjamins toward the ole retirement account? This is a great plan if you have your financial house in order. The possible destinations for this injection of cash are endless. Roth IRA maybe? Taxable brokerage account? Real estate? Grow your side hustle? There are unlimited possibilities. Whatever you do, make sure you are giving this money the best chance to work for you!
Purchase that [insert consumer good here] that you have been longing for
We all have wants. Heck, I think we’ve all had a time or two where we bought something pretty dumb. I’m not condoning that, but if your financial house is in order and you’re already on your way to becoming a Wealthy Idiot, why not reward yourself! If one thing is certain it’s that we are not going to live forever. Let your hair down and live a little while you still have the chance.
While the list of items you could buy with anything from $1,400 to $7,000 is endless, you shouldn’t try to search the entire internet to find the one item you want. It’s likely you’ve already had some ideas and just need to revisit and act on them. Walk around your house and try to think of something you want that would also deliver value. By doing this, you’ll be less likely to regret the purchase later. Spending money without regrets, you say? I’m in! For me, this item is a Yoder YS640 Pellet Smoker. I have been researching smokers for nearly two years but have yet to pull the trigger. In the near future, I’ll have one of these sitting out back with a brisket simmering inside.
You do you
These are crazy times, admittedly. So first things first, don’t worry about what everyone else is doing or what everyone else thinks. Take some time to come up with a plan and execute it. Whatever you do with the money, make sure it’s what you want to do. Remember – with stimulus payments, the only thing you shouldn’t do with the money is keep it in cash. This runs contrary to the entire purpose of the payments. Good luck, Wealthy Idiot Nation!