What to do with stimulus check = IF(financial situation, value if true, value if false)
Updated: Apr 3, 2020
This is by far the nerdiest format I’ve ever used for a guide! If you are a nerd like me and love using Excel, this will totally make sense to you! The U.S. has officially passed the $2 trillion stimulus package which will put dollars into most of our bank accounts soon. This COVID-19 pandemic has really shed light on everyone’s current financial situation. Since my target audience is young professionals, it is likely that most of you reading this did not personally experience the financial crisis in 2007-08 because you were still in school. It was a scary time back then for me, especially since I had a ton of debt and no savings. I learned a lot through that experience so fortunately I am doing much better today with this crisis. I hope you can use this difficult situation as a learning experience to make positive financial choices.
In the past, whenever I made extra money or received a random large check it never lasted very long. Most of the time I would even spend more than I received which is terrible! I have found the best way to handle a large, unexpected income is to make a plan before you get it. Since everyone is in a different financial situation, I thought I’d write out some if-then statements for actions you could take depending on where you are.
=IF(“you have no money for food or rent”, use this money for your everyday needs,)
If this is you, tighten up your budget, eat beans and rice, and cancel subscriptions. You will need to cut as many expenses as possible to make this money last.
=IF(“you have less than $2-3k in savings, put this money into savings,)
Rainy days are going to happen. If you haven’t realized it already, it is “raining” right now! You might be working and earning an income, but nobody knows how long this is going to last. It is in your best interest to save at least $2-3k in case this rainy day turns into an outright torrential downpour.
=IF(“you have debts”, use this money to pay off debt,)
In case you don’t know my story, a few years ago my wife and I paid off $149,000 in credit cards, car loans, and student loans in 40 months. During our debt free journey, we put almost every extra dollar to pay off the debt. It was tough but becoming debt free has been the absolute best thing we could have done. If you have debts, I cannot stress enough how important it is to pay it off. If you need extra help, reach out to me. As a financial coach, I’ve helped a LOT of families create a plan for their money and get out of debt. If you can use the stimulus money to pay off an entire balance, I would do that. If you cannot pay off an entire balance, I would throw the money into savings until after things settle down and then put it towards a debt.
=IF(AND(“you have zero consumer debt”, “you do not have 3-6 months savings”), use money to beef up emergency fund,)
After paying off all our non-mortgage debt, we built up our emergency fund. We are a single income household, so we chose to save 6 months of expenses, but you do whatever makes you comfortable. I recommend that you get this savings in place before you do any major investing.
=IF(AND(“you have zero consumer debt”, “you do have 3-6 months savings”), consider investing some of the money,)
It is difficult to see the market drop so much when you know people who are in or near retirement. This is impacting their ability to retire, and I truly feel so badly for them. For those of us who are younger, it is a great time to continue with our retirement investing. I’m not a financial adviser so I strongly recommend you reach out to a professional before you do anything. I am personally continuing to invest and plan to throw a portion of the stimulus money it into my Roth IRA.
=IF(“you are investing 10-15% of your income”, then give save or spend however the heck you want,)
If you fall in this IF-THEN statement, you are doing VERY well! You have plenty in savings, you have no non-mortgage debt, and you are investing diligently. There is nothing to do now except do anything you want! You could spend the money on a house project, buy yourself a nice toy, or save it for your next vacation. For our own personal plan, we will most likely set some money aside to help those around us. When it comes to money, giving it away is some of the most fun you can have. You might know someone who lost their job or a single parent who is struggling and could use some help. You could buy them some groceries, toilet paper (if you can find some), or send them a pizza for dinner.
No matter where you fall in the personal finance spectrum, use this situation as a time to pause and think about your money. Are you spending money in a way that aligns with your goals? Are you budgeting? If not, now is a great time to start. Are you investing enough to retire when you want to? I’m not saying anyone should obsess over money, but I do recommend that you take some time occasionally to do a financial check up and make necessary changes. If you have any questions, do not hesitate to reach out!
In case you were wondering what the full equation would look like, here it is for your viewing pleasure.
=IF(“you have no money for food or rent”, use this money for your everyday needs,IF(“you have less than $2-3k in savings, put this money into savings,IF(“you have debts”, use this money to pay off debt,IF(AND(“you have zero consumer debt”, “you do not have 3-6 months savings”), use money to beef up emergency fund,IF(AND(“you have zero consumer debt”, “you do have 3-6 months savings”), consider investing some of the money,IF(“you are investing 10-15% of your income”, then give save or spend however the heck you want,))))))