Whether you’re homeschooling, taking some version of a break from work or working from home, we hope you’re taking it in stride! For us, we just finished up our own private label (featured above) for mental health reasons, right?

Many of you recently received, or will soon receive, a stimulus check from the IRS. These checks are intended to help individuals and families survive this economically difficult time and keep the economy moving forward. You can track the status or even update deposit information of your IRS stimulus check here. If you’re like most, you may have a question on your mind:

What should I do?

With $3 Billion in stimulus money on the way or already delivered, you may be asking the question: how can I best use this unexpected windfall? For most, it’s a payment that nobody expected to receive at the start of 2020. With checks ranging from $1,200 to more than $3,000, let’s explore a few of your options moving forward!

Here are a few ideas:

· If you have recently lost your income and will be spending more than you're bringing in, save it!

o Your top priorities are to know what your household’s necessities are and set aside money for them while reducing any expenses that are non-essential.

o The rule of thumb for an emergency fund is to have between 3 and 6 months worth of necessary expenses set aside in a savings or checking account.

o Even if you have a fully-funded emergency fund, strongly consider saving the money before using it on non-essentials. Many employer are reducing staff, closing doors or in a hiring freeze. In this uncertain and ever-changing employment landscape, it may be more difficult than usual to get a job after your emergency fund runs dry.

· If your income is secure and you have money left after your bills are paid and your essentials are covered:

o Make certain that you have 3-6 months of your necessary expenses saved.

o Pay down high interest credit cards. 18% in annual interest saved feels a lot like making 18% in the market EVERY year.

o Consider paying down other debt, especially any with high interest rates.

o You may also consider using the money to refinance your home. With interest rates at historic lows, using some of the funds to pay refinancing fees can help reduce the amount that you pay in interest over the life of the loan. You could also give yourself more wiggle room with lower payments, depending on the loan terms.

· If your income is secure, your emergency fund has 6 months of expenses, and your finances are looking good, now you're into some of the fun opportunities:

o Use your stimulus check or other sources of cash to make contributions to your 401(k) and IRA.

o You can still contribute to your IRA or HSA for the tax year 2019 due to the extended IRS contribution deadline of July 15th.

o Most individuals are not maxing out the $19,500 annual available 401(k) contributions (or even higher catch-up contributions if you have attained age 50). Consider increasing your payroll contribution temporarily while you make use of your stimulus money to pay for day-to-day expenses.

o If you expect to have a relatively low tax rate in 2020, you may want to make use of a Roth IRA or Roth 401(k). Your money is taxed when you put it into a Roth account but it and any growth can be withdrawn tax-free in retirement.

o Now is a good time to invest in companies due to equity values being lower now than they have been for the past year. Temporary disruptions in the market or to a specific company do not necessarily mean that the long-term quality of the company has been impacted as much as the price has dropped. The key is to be broadly diversified in many companies, and not have all your eggs in one basket.

o If you have money in a Traditional IRA, it can make sense to convert it into a Roth IRA and use your stimulus money to pay the increase in taxes. You basically pay taxes on money in a traditional (pre-tax) IRA to move it into a Roth (post-tax) IRA. With lower market prices, you can pay less in taxes.

o Giving during this time can be very impactful for the community and psychologically beneficial. Research ways you can give back to your community and to those who are struggling during this time.

It’s easy to say that you’ll put all the money to savings, but far harder to actually do! As a compromise, if you’ll splurge with your stimulus, try to put a few guardrails in place before you start!

Some sample guardrails are:

o Choose a fixed amount or percentage of your stimulus to spend (15%, $250, etc.). before choosing your purchase.

o Put the amount of “splurge money” in an account separate from your daily checking. This separation helps you make a mental “bucket” for your money and not be as tempted to spend more than you want to.

No matter what you decide to do with your money, we hope that you are staying safe during this time. If you would like any clarification on any of the topics covered, please message me or schedule a meeting.

Stay safe!