Q: Craig from Ludlow: Any suggestions for what to do with this stimulus check (once they go out)? I don’t need the money to live on. Should I invest it? Pay down credit card debt?
A: First on the priority list should be to look at your emergency fund. Is it sufficiently funded? We always recommend this account has enough money to cover three to six months’ worth of critical expenses (with emphasis on the six months). ‘Critical expenses’ include bills like rent/mortgage, utilities, car loan, and groceries. If this fund could use a boost, this money should be siphoned to that account.
As you suggest, you could also use the money to pay down high interest credit card debt – however, this suggestion comes with a caveat: If you’re going to go this route, you also need to change your credit card behavior. Because what good is paying off this debt if you’re just going to be right back in the same hole a few months from now? (An alternative could be to call your card issuer and ask them to lower your interest rate.)
Investing is another good option (assuming you have all your other financial ducks in a row) since stocks are basically ‘on sale’ right now. But you need to be in this for the long haul.