Did you wake up on St. Patrick’s Day to a higher bank account balance courtesy of the $1,400 stimulus check? If so, Dave Ramsey has a message for you: You really don’t need that check.
Ramsey faced assessment for his comments on Fox News in February. Here’s what the personal finance radio host said: “I don’t believe in a stimulus check because if $ 600 or $1,400 modifies your life you were pretty much fastened once, ” Ramsey said. “You get other issues going on.”
Of course, it’s easy for a multimillionaire like Ramsey to ignore just how big a distribute added cash is when you’ve lost your job or you’re living paycheck to paycheck. Now are five courses you can use your $1,400 stimulus check to change your life.
5 Life-Changing Ways to Spend Your Stimulus Check
The following five policies won’t change your life overnight. They won’t give you the instant gratification you’d get from making a big purchase. But they can make a meaningful change, particularly if they inspire you to start a new dres, like investing or saving a percentage of your monthly income.
1. Pay Down Credit Card Debt
The average credit card costs you more than 16% every year in interest. By pay the monthly minimum, usually anywhere from 1% to 4% of what you owe, you’ll barely make a dent in your balance.
If you made a one-time $ 1,400 remittance toward your credit card debt, you’d lower your monthly minimum. But here’s where your stimulus check becomes a game-changer: You impede making at least the same monthly payments that you did before you paid the additional $1,400.
Let’s suppose you have a $ 5,000 symmetry on a card with a 16% APR. Your monthly minimum fee is 3% of your counterbalance, or $150.
You reduce your match to $3,600, so your 3% minimum fee fells to $108. You restrain $150. That means an extra $42 going toward the principal , not the interest.
You’d be debt-free 15 months sooner and save nearly $900 on interest. You then have an extra $ 150 liberate up to put toward your other fiscal goals.
Once you’ve paid off your match, keep the account open. Having open credit accounts is contributing to remain a good credit orchestrate — which raises us to another case of Dave Ramsey suggestion to ignore.
2. Establish an Emergency Fund
You never realize just how life-changing an emergency fund is until you actually have an emergency. But a three- to six-month emergency fund can take times to build, especially if you’re living paycheck to paycheck.
A sudden cash infusion of $1,400( or more if you have relatives) could be a great jumpstart for your disaster money. Even if you can only afford to add a few dollars a week moving forward, you’ll have a buffer against the unexpected. That $1,400 could maintain you from going behind on rent if you lose your job or help you bypassed blaming a surprise medical bill to a credit card.
3. Invest It in an S& P 500 Index Fund
With S& P 500 index funds, you automatically invest across 500 of the largest business in the U.S ., including Apple, Amazon, Facebook, Johnson& Johnson and Disney. If you’d vested $1,400 in an S& P 500 indicator money 30 years ago, you’d have over $22,000 today.
Will $ 22,000 change your life? Probably not, though it could certainly make for a nice retirement savings boost. But the real magic happens if it kickstarts a lifelong investing habit. If “youve added” really $100 a month for 30 times, you could have over $ 226,000 if you made normal annual returns only reticent of 10 %.
Note that investing your stimulus check is only a good move if you’re on top of your invoices and you don’t have a credit card balance or other high-interest obligation, like payday lends. You should also have an emergency fund before you expend. The stock market can be volatile in the short term. Without savings, you risk losing money if you have to cash out your investments when stocks are down because you can’t afford a surprise expense.
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4. Put It Toward Your Down Payment Fund
No, an additional $ 1,400 isn’t going to score you your dream home. But in most real estate markets across the U.S ., it’s a highly competitive seller’s market. If you’re trying to buy a home, every additional dollar you can put toward a down payment or earnest money( a deposit you put down when you enter into a contract) will determine your furnish more competitive.
5. Boost Your HSA Contributions
If you have a health savings account, you likewise have a high-deductible health plan. In 2021, the minimum deductible under these plans is $1,400 for individuals or $ 2,800 for class. That means you’ll commonly have to pay at least $ 1,400 or $2,800 for pedigrees before your health insurance kicks in, though some preventative caution, like an annual scrutiny, is covered at 100% before your deductible.
Conveniently, you’ll probably get at least $ 1,400 if you’re single or $2,800 if you’re married from the third largest stimulus check. Using that money to increase your HSA contributions is a smart bet so you can cover your deductible if you have a major medical expense.
Robin Hartill is a guaranteed financial planner and a major writer at The Penny Hoarder. She writes the Dear Penny personal finance opinion article. Send your dicey money questions to AskPenny @thepennyhoarder. com.
This was originally published on The Penny Hoarder, which improves millions of books worldwide make and save money by sharing unique job opportunities, personal floors, freebies and more. The Inc. 5000 graded The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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