What to Do with Unexpected Income (COVID-19 Stimulus Bill)
What should you do if you find yourself with unexpected income? We look at what you should do when you get some extra cash.
Updated on Mar 26 2020
COVID-19 has had a major impact on our finances. There have been thousands of layoffs, record unemployment filings, and a tanked stock market. Because of this, the US government has been working to create a stimulus package for American citizens and businesses. While nothing has been set yet, it seems that many Americans will receive between $1000-1200. If you are near retirement or your job is secure, this money may not be necessary for your well-being. However, deciding how to use an extra $1000 can be difficult. We look at some ways to optimize this amount of money.
If you have high-interest debt, put it towards that
If you find yourself with an extra thousand dollars, be it through the stimulus package or other means, you should almost certainly put it towards any high-interest debt that you may have. If you have personal loans or credit card debt that is accruing interest, you’ll be better off in the long run if you put it towards your debt, than say in a savings account.
Consider adding extra income to your emergency fund
An emergency fund is savings that you will be able to easily access in case of an emergency. This could be job loss, a major car repair, doctor bills from an illness, etc. Now, more than ever, the importance of an emergency fund is clear. You may have your job right now, but no one knows what the economy will look like in two months. It’s important to save as much as possible and not recklessly spend so that if you do lose your main source of income, you will still be able to pay your bills.
In a normal economy, try investing
While the stock market has reached unprecedented lows in the last couple of weeks, now may not be the best time to invest. However, if you find yourself with some extra money outside of a financial crisis, investing is a potentially great option. While investments can be risky, you can speak with a financial advisor and see what your best options are. A fiduciary advisor will work in your best interest to find the right choices for you.
Be proactive, not reactive
If you have your debt paid down and a full emergency fund, take a look at some other aspects of your life that may need some improvement. Have you been putting off going to the dentist? Is your car driving fine, but making a weird noise? Or, maybe you’ve been meaning to start working out but haven’t wanted to pull the trigger on buying a new treadmill. These are all investments in your mental and physical health that can have numerous benefits in your life. When you find yourself with a little extra cash, then perhaps consider using that money to improve your physical wellbeing.
Improve your self-isolation situation
Finally, millions of us are isolating in our homes. Going out to eat, going to the gym, visiting friends, etc. is all out of the question for the time being. Because of this, it’s important to make sure that your living situation is optimized. Being stuck in your house for weeks is detrimental to your mental health. This could be investing in a streaming service like Netflix or Hulu, buying a new video game system, or starting a new workout plan. It’s important to optimize your living situation so that you can stay healthy during isolation due to COVID-19.
Unexpected small amounts of extra cash can be spent recklessly when you haven’t planned for it. Prioritize your high-interest debt and emergency fund.
Find an Advisor Near You
Advisors by City
Find advisors located in the cities nearest you.
Need a financial advisor?
100% free consumer service