What To Do With the Third Stimulus Check

$1400 dollars will soon come your way

Now that the 1.9 trillion dollar stimulus bill has been modified in the Senate and is headed back to the House, Americans may see some relief soon. Unemployed Americans will receive an extension ($300/week until probably September). In addition there is “a tax break on $10,000 in unemployment benefits.” Families with children will see a higher tax credit, small businesses and schools will get more funding, and most people should be vaccinated soon. I will finally get my first of two vaccine doses on Thursday.

In addition, most Americans will get another stimulus check/deposit of $1400, but eligibility will phase out sooner.

“In the Senate version, individuals earning $75,000 per year and couples earning $150,000 would still receive the full $1,400-per-person benefit. However, the benefit would disappear for individuals earning more than $80,000 annually and couples earning more than $160,000” (Rachel Siegel, The Washington Post).

Since the median household income in the United States is below 70k, most Americans would still qualify, definitely those Americans who need the money most. The best and most comprehensive information on any pending stimulus bill is ClearValue Tax on YouTube. Find the newest video here.

What should we do with the third stimulus check?

Some politicians have objected to giving people money who may not even need it. I think whatever your financial circumstances, you can put that money to good use.

For my suggestions, I will refer to Dave Ramsey’s baby steps — not because I think everyone has to follow them, but because each step illustrates a person’s/family’s economic situation more precisely and concisely than I could explain it in other ways.

For example, if people tell me they are on Baby Step 2, I know they have only $1000 worth of savings and are clawing their way out of debt, sometimes even a substantial amount of debt.

However, someone on Baby Step 6 has no debt, ample savings, is investing 15% for retirement and also saves for kids’ college. In addition, he or she is making extra payments on the mortgage.

Each individual step is giving me a lot of information about a person’s financial situation.

My suggestions:

If you are on…

Baby Step 1: If you have not saved your $1000 starter emergency fund, add your stimulus money there. Open a savings account or add enough money to have $1000 in savings. Living paycheck to paycheck is stressful, and having at least a little cushion will relieve that stress.

Baby Step 2: Use your stimulus check to pay down debt — except if

• you are unemployed and have no immediate job prospects.
• have a baby on the way.
• have to move, which is expensive.
• need the money to avoid more debt. For example, if you need to fix the car, and that will cost more than 1k (see Baby Step 1).

If any of the above apply, just save any cash you can, including the stimulus check.

Baby Step 3: Use the stimulus check to help complete your 3–6 month emergency fund.

Baby Steps 4–6 are concurrent: At this point, you are already investing 15% of your household income for retirement. You are saving for your children’s college, and you are making extra payments on your mortgage.

Therefore, you have options. You can add more to your mortgage or to your children’s college funds. You can also add the children’s stimulus money to their college funds, or at least some of it. However, if you haven’t been on vacation for months because of Covid-19 and you really need one, you can treat yourself to a nice vacation now.

Baby Step 7: This is the gold standard in the Dave Ramsey World. At this point you have no debt, emergency savings, and abundant retirement investments. You also have a brokerage account, and your children have completed college and can support themselves financially. Your house is paid off, and you have ample cash flow every month. Another $1400 does not change your life.

If you are in this position, you could donate the stimulus money, or at least some of it. I plan to donate again to a friend’s gofundme account. Her three-year old daughter has been in the hospital for months, waiting for a heart transplant. They have two other children and one income. They need the money more than I do.

In conclusion, I hope you will find a good use for your third stimulus check and that it will help you and your family in some way. — And if you don’t need the money, donate it and help others.