1. Going on shopping sprees

Young woman excited about shopping online
antoniodiaz / Shutterstock

Although it may be tempting to burn this “free money” on something you’ve always wanted, you should think twice before you splurge on online sales.

It’s true that a fancy new TV and a stack of Blu-ray box sets might ease your quarantine boredom, but keep in mind that this stimulus check is a one-time payment. There’s no guarantee of a second round of stimulus checks.

Even if you don’t need the money to cover your monthly expenses at the moment, you’ll wish you set it aside if your financial situation changes.

Most financial advisers recommend keeping enough emergency cash saved up to cover at least six months of your essential costs. If you don’t currently have an emergency fund, the stimulus check is a great excuse to start one.

The smartest place to stash your emergency savings is a high-yield savings account, so your money will earn top interest and grow while you’re not spending or investing it.

2. Putting it directly toward debt

Graduation mortar board cap on one hundred dollar bills
Brian A Jackson / Shutterstock

If you’re carrying a lot of debt, you might see the stimulus check as an opportunity to pay off a big chunk. Ordinarily that would be a wise move, but if you don’t have an emergency fund right now it could be a mistake.

A number of financial institutions are allowing customers to defer debt payments during the pandemic, so it’s worth looking into whether your creditors will give you a break for the time being.

In addition, the government announced that people with federal student loans can freely skip payments between March 13 and September 30, 2020 and that interest rates will drop to 0% during that time.

Unfortunately, if you got your student loan through a commercial lender, you’ll likely still be required to make payments. But you may be able to reduce the amount you owe and shave a few years off your loan if you refinance.

There are companies that will let you compare refinancing options for free, making it easy to find a better interest rate. With a lower rate, your relief money will go further toward clearing your debt — and you may save thousands of dollars in interest.

3. Using it as an excuse to kick back

Mother, father and daughter having fun in the living room. Feeling happy and complete.
bbernard / Shutterstock

Extra money in the bank can lull you into a false sense of security. The hard truth is that during a global health crisis like this one, anything can happen — and even a hundred stimulus checks wouldn’t provide for a family that loses a breadwinner.

The easiest way to protect your loved ones is to buy a life insurance policy. A lot of people think getting insurance is a complicated process, but it can be as easy as booking a hotel online.

In just 90 seconds, you can find multiple life insurance rates tailored to fit your family’s needs. Depending on how old you are and where you live, you could get $1 million in coverage for as little as a dollar a day.

That’s a small price to pay for peace of mind.

4. Thinking only about the here and now

Man in medical face mask looking through window.
Renata Apanaviciene / Shutterstock

It’s true that we’re living in a particularly frightening time, but the concerns of the future wait for no one.

A few years ago, the Government Accountability Office reported that half of American households 55 and older have no retirement savings whatsoever. Plenty of others don’t have nearly enough.

If you’re still of working age, putting even 10% of your relief payment into a retirement fund like a 401(k) or an IRA will pay huge dividends down the road.

Not sure where to start? Find a company that can connect you with a certified financial planner online or over the phone. You’ll be able to prepare for your golden years even while social distancing.

Your CFP will craft a personalized plan based on your financial goals and tell you exactly what you need to do if you want to retire comfortably.

More: Get a free 401(k) analysis today.

5. Trying to 'time the market'

Businessman grabs his head with business chart
Witthaya lOvE / Shutterstock

The stock market has taken a beating since the start of the pandemic. While using your stimulus check to snap up discounted stocks isn’t a bad idea, trying to “time the market” for quick wins could wind up costing you.

There’s no guarantee that a particular stock will rebound to its former price anytime soon. In fact, during this time of instability, any number of government moves, business decisions or a surge in coronavirus cases might cause the market to drop once again.

If you’re eager to invest some of your relief payment, set up a diversified portfolio with an eye to stable, long-term growth. To get started, consider using a robo-advisor, an algorithm-driven service that will make investing quick and stress-free.

It’s all done online, and you can choose how much risk you’re willing to take on. Once you decide on a portfolio, your robo-advisor will monitor it and automatically make adjustments based on changes in the market — all for a fraction of the cost of a human adviser.

6. Spending it all at chain stores

Cheerful waitress wearing apron serving customer at counter in restaurant - Small business and service concept with young business owner woman giving bag with takeaway food to client
Dan Rentea / Shutterstock

Even though big-box stores might be the easiest place to do your shopping during the pandemic, your stimulus check will make more of a difference if you buy from local businesses instead.

You may save a few bucks at a chain — and some of them are having financial problems of their own — but failing to support your local economy at this critical time could have long-term consequences.

If you want shops and restaurants in your area to survive the lockdown, you need to make an effort to support them as much as possible.

Buy your groceries at independent markets. Order takeout from different places in your neighborhood. And, if possible, donate part of your relief payment to organizations that help people and businesses around your community.

7. Stocking up on pointless supplies

Buyer wearing a protective mask. Shopping during the pandemic.
eldar nurkovic / Shutterstock

Panic buying is a natural response, but using your stimulus check to hoard things you don’t need is expensive and wasteful.

Take all the people buying bottled water, for example. The water in your tap is treated and completely safe to drink.

Instead, just make sure you have a reasonable supply of essentials in case you’re exposed to the coronavirus and need to isolate yourself for two weeks. Be sure to grab:

  • Nonperishable food, for yourself and your pet.
  • Medications, both prescription and over the counter.
  • Household cleaning supplies to disinfect your living space.

You can make the most of your supply runs (and your stimulus check) by using a cash-back card. One of the best nets you up to 10% cash back on your purchases and allows you to choose whether you want your fees to help with causes including anti-poverty efforts, clean water, health, education, the environment or human rights.

About the Author

Shane Murphy

Shane Murphy


Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

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