Should You Save, Spend or Invest Your Stimulus Check?

Millions of Americans have now received their second stimulus check, which amounts to $600 per eligible individual, and an additional $600 per child. Many families that have been severely hit financially in the aftermath of the Covid-19 crisis are likely to use these payments simply to buy the bare necessities. But if you are not in deep financial distress, you could consider putting this second round stimulus payment to work for you. Regardless of your situation, you ultimately have three options to consider with your stimulus check:

Option 1: Save Your Stimulus Check
One of the critical lessons from 2020 is that savings are your best friend in a crisis. Most financial planners recommend that you should have an emergency fund equivalent to four to six months’ worth of household expenses. If you do not have an emergency fund to dip into in a crisis, your second stimulus payment could be a good starting point. And if you don't need to tap into those savings in a crisis, you could also just keep it for retirement.
One of the biggest drawbacks of putting money away into a savings or retirement account, however, is that your growth of money is going to be very limited. In fact, savings sometimes actually diminish in value over time because the interest you earn on them could be lower than the rate of inflation. If interest rates remain as low as they are now, and inflation rates rise as predicted, then a savings account may be worth less to you later than it does today.

Option 2: Spend Your Stimulus Check
Spending your second stimulus check might be a wise decision in certain circumstances. It depends on how dire your current financial situation is, and whether immediate spending of your funds can buy you time, save you money on finance fees or late fees, or provide temporary relief.
If you need the stimulus funds for necessities, such as a medical emergency, car repair, fixing a leaking roof, or simply to buy essential groceries for the home, it may make sense to go ahead and spend it now. Prioritize your family’s safety, health, and basic survival over any other plans that you may have.
Spending on non-essential items or luxuries, however, is probably the most wasteful way to use your stimulus check. The value of these types of goods usually depreciates fast, and you cannot count them as meaningful assets. Moreover, spending inevitably sets you back on your income growth goals.

Option 3: Invest Your Stimulus Check
Investing your stimulus check can produce the most effective and sustainable long-term returns on your money. You may consider traditional investments, such as stocks, bonds, and mutual funds, but you have to be comfortable with the risk/reward associated with it. Remember: when you invest, you're essentially putting your money into other people's hands and trusting them to make smart business decisions to bring you back more than what you put in. Returns can be large, small, or volatile depending on the current economic climate and who you invest in.

But what about investing in yourself? Another option is to invest your stimulus check into starting your own business.
Is There Really a Business You Can Launch with $600?
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Setting up your own business directory website with Ideal Directories is fast and easy. Once you sign up, you can have your website up and running in less than 24 hours. There’s no tech experience required and Ideal Directories provides dedicated training and support. You’ll even gain access to professional sales and marketing materials, along with a full knowledge base of helpful articles and guides. You can easily run your online business directory full-time or part-time – it’s up to you.
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Everyone is in a different personal and financial situation during this unusual time, and it's important that you take the time to decide what's best for you and your family in terms of your stimulus check. But if the prospect of investing your stimulus check is appealing to you, and the idea of starting your own business excites you, and you don't need the funds for immediate expenses, then perhaps you already know what you have to do. Just make sure that you invest in an industry or concept that's in a growth stage, that is prevailing despite the pandemic and economic situation.

Thousands of small businesses in your local area are seeking new and cost-effective advertising solutions to reach out to their customers and increase their online visibility. They will love the opportunity to promote their business and advertise online on your local business directory and coupons website. If you'd like to get started with your own local website for your town or city, then contact us at Ideal Directories to learn more or click here to sign up today!

Originally published on January 13, 2021
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