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5 Ways To Spend Your Next Stimulus Check Based On Your Finances

A third stimulus check could be on its way to you in the next few days. Here’s how you can plan to use it based on your financial situation.

Articles by Nick Holeman, CFP®
By Nick Holeman, CFP® Head of Financial Planning, Betterment Published Mar. 12, 2021
Published Mar. 12, 2021
3 min read

With a newly inaugurated President, the American government is moving quickly on social and economic policies.

Most recently, President Biden signed a $1.9 trillion COVID relief bill that includes $1,400 stimulus checks for eligible recipients.

While the $1,400 stimulus payments could hit your bank account within a few days, other benefits, such as the extension of federal unemployment benefits and the enhanced child tax credit, may take a few weeks to arrive.

No matter what financial stage you’re in, below is a simple action plan on how you can make your stimulus check work for you.

How The Plan Works

We’ve analyzed five potential ways to use your stimulus check wisely, and organized them according to which stage your finances are currently in.

Start from the beginning and work your way up. For example, if you already have stage one covered, congratulate yourself and move onto stage two. Let’s get to it.

1. Spend on necessities.

We recognize that for many, receiving their stimulus check can mean the difference between putting food on the table vs. going hungry. If you’re one of the millions of Americans who are unemployed, or are simply struggling to make ends meet, then consider using your stimulus check to help cover your basic necessities (i.e. food, water, heat, shelter).

These basic needs should be your first and foremost priority. If you’ll need the money soon for these necessities, you should keep the money in an account that’s immediately accessible.

2. Pay down debt.

Once your basic needs are covered, you can consider using your stimulus check to pay down debt. You are not alone if you had to borrow money to get through the difficulties of COVID-19. Americans collectively have over $4 trillion in non-housing debt, $800 billion of which is credit card debt.

Paying down any debt will increase your net worth, but you should especially prioritize any debt with high interest rates.

Two common culprits of this are credit cards, which currently average a 15% interest rate, and personal loans, which average 10% interest.

Really, any debt with an interest over 5% should probably be paid off before investing.

3. Save for emergencies.

Next on the list is building an emergency fund. 2020 was a perfect reminder that unexpected events can happen at any time, many of which are outside of our control. When an emergency happens, like an injury, broken appliance, or job loss, knowing you have a safety net to fall back on is priceless.

Emergencies, by definition, are difficult to plan for. You don’t know when they will occur or how much they will cost. As a starting point, we recommend your emergency fund be at least three months of your living expenses. 

4. Invest for the future.

With your emergency fund full, you can calmly focus on investing for your future. Investing your stimulus check in stocks can help your money work harder for you than cash. Unfortunately, only about ½ of American families own stocks, which means many have not reaped the benefits of the double-digit returns we’ve seen over the past decade. Your stimulus check could give you the jump start you need to invest.

Betterment makes it easy to invest for common goals such as retirement, saving for college, or buying a home. In just a few minutes, you can have a personalized investment portfolio, built by humans and managed by algorithms.

A bonus way to invest for your future is by investing in yourself. Consider instead using your stimulus check to take an online course or train for a new career in our rapidly-changing world.

5. Give to others.

Lastly, you can consider using your stimulus check to help others. If your finances are in good shape, giving some or all of your stimulus check to those who need it can be a great way to lend a hand during these trying times. There are plenty of ways you can help out.

  • Donate money to charities. An added benefit of doing this is potentially getting a Federal income tax deduction. Congress passed a special rule that allows you to deduct up to $300 per person ($600 if married filing jointly) of cash donations to charity, even if you don’t itemize!
  • Use your stimulus check to help out a local business that may be suffering due to the pandemic. Even buying a gift card to use in the future can help significantly.
  • Use your stimulus check to help family or friends who need it.

Wrapping Things Up

The best way to use your stimulus check will depend on your situation, and we recommend working your way down the prioritized list depending on where you fall financially.


Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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Original content by Betterment

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