In late December of 2020, millions of eligible Americans received a $600 stimulus check to alleviate some of the financial stress the COVID-19 pandemic’s brought about. Since then, a third stimulus payment has been long-awaited – and it’s finally on the way after President Biden signed the American Rescue Plan Act of 2021 into law on Thursday, March 11th. At long last, Coronavirus relief is on the way for millions of Americans in the form of $1, 400 stimulus checks.

Relief won’t be available for all Americans, however. If your income is at or above the following limits, you (and any dependents you have) won’t be eligible for a third stimulus check:

  • Single filers: $80,000
  • Married filing jointly: $160,000
  • Head of household: $120,000

Now only one question remains: If you’re eligible for a third stimulus check, what should you do with it?

When we look back to the first round of stimulus checks sent out in April 2020, the majority of people who received them socked it away or used the funds to pay off debt, with less than 1/3 of recipients using the cash to make essential and non-essential purchases. With that in mind, April was a much different time. It’s fair to assume many Americans’ financial outlooks have changed since then.

So, in this article, we’ll share a few ideas on how you can best use your third stimulus check. What you do with it greatly depends on how you’ve been impacted over the last year, so before you make any big moves, it’s a good idea to consult your budget first.

Begin by taking a close look at your finances

Start by reviewing your income and expense closely. It’s the only way to ensure you’re using your third stimulus payment wisely.

In its simplest form, a budget measures how much money is coming into your account vs. how much money is going out. If you’ve been maintaining one of your own, you already know how your finances have been impacted over the last year. That’ll make the decision on what to do with your stimulus check much easier.

Haven’t started your budget yet? Here are a few articles that’ll make you’re a pro-tier budgeter in no time:

Once you have a better understanding of your financial situation, you’ll be able to make an informed call on how to best use your stimulus. We’ve got a few suggestions of our own listed below.

Cover essential expenses

With millions of Americans still out of jobs or working reduced hours, many don’t have the luxury to choose what to spend their stimulus checks on. If you or someone in your family has lost their income, covering the essentials like food, utilities, household supplies, and rent/mortgage payments are of the utmost importance.

Bills fall into the “essential” category as well. If you can comfortably pay your bills, continue to do so. But, if you’re struggling financially, it’s worth giving your lenders a call.

At the moment, many lenders are offering payment programs that allow people impacted by the pandemic to make lower monthly payments or skip payments altogether. If you could use the assistance, take advantage of it. That’s what it’s there for!

You can find some additional tips for cutting expenses out of your budget here:

Add to your emergency fund

You can afford the basic necessities, your rent or mortgage is covered, and you can pay all of your bills on time. If this sounds like you, the best use for your stimulus payment could be adding it to your emergency fund. 

An ideal emergency fund has between three to six months of expenses, but if the last year has shown us anything, it’s that more security is better than less. Consider stashing the money away and forgetting about it until you really need it – you’ll thank yourself later.

Pay down high-interest debt

If you don’t need your third stimulus to get by, consider using it to get ahead. Credit card balances higher than you’d prefer? Pay them down! The longer interest accrues on your balance, the more you’ll pay – and most of the time, it’s a lot more. Tackling debt with your third stimulus check will put you in a much stronger financial position moving forward.

Learn how to use one of the most popular debt paydown methods here:

Donate to a local small business

If you’ve taken a walk through your town recently, you’ve likely witnessed it for yourself – small business owners are struggling at the moment. Depending on your circumstances, you could always share some of your stimulus payment with the small businesses in your area.

Any amount, no matter how small, could be the difference between someone in your community staying open another month or shutting their doors for good. If you can swing it, why not stop by some of your favorite shops and show your appreciation?

Invest it

If your essentials are covered, you have no high-interest debt to pay down, and your emergency fund is well-stocked, you could always invest your stimulus check. We aren’t financial advisors and can’t make any guarantees,  but if you have disposable income, it could be a smart idea to try to make your money grow.

Not experienced with investing? Consider learning more about how you can invest using a robo-advisor like Wealthfront. Robo-advisors take the guesswork out of the equation by collecting information about your finances and future goals, then use that data to automatically invest your money. If speaking to a human is more your style, you could always reach out to a financial advisor to help with investing.

For a middle-ground approach, check out investing apps like M1 Finance and Acorns. You’ll have to make some investment decisions for yourself, but both apps provide a great user experience, providing research and articles that show you the most profitable and fastest-growing stocks to invest in.

Wrapping up

Depending on your current financial situation, $1, 400 could seem like a drop in the bucket or an incredible windfall.

It may be tempting to spend the money on items you don’t truly need, but with the economic outlook still up in the air, it’s a wise decision to play it safe with your third stimulus check.

If you don’t need to spend it to cover essentials, we highly recommend adding it to your emergency fund, using it to pay down high-interest debt, or growing your money with safe, low-risk investments. For the givers out there, sharing a bit of your stimulus payment with local small businesses can be a great way to give back to your community as well.