With the third round of stimulus checks, many Americans are receiving a small financial windfall. If you received a stimulus check or an unexpected sum of money, it can be very tempting to immediately spend it on a new phone, car, or electronic device that you have been wanting. You should, however, take a moment to reflect on how best to spend and/or invest your windfall. Here are some ideas:
- Pay bills.
- Make a substantial payment or pay off high interest debts such as credit cards, personal loans, etc.
- Start or add to your rainy-day fund (this account should have enough funds to cover 3 to 6 months of expenses).
- Invest in your retirement through a 401K, IRA, etc.
- If you have children, consider opening a college savings account (i.e., 529 plan, custodial account, savings account, etc.)
- Invest in certificates of deposit, stocks, bonds, mutual funds, or savings accounts.
- Spend your money in your community and help out local businesses.
- Donate to causes and charities that you care about.
No matter how you choose to spend your financial windfall, just be sure to consider all your options carefully and not make an impulsive decision.