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How to Spend Your Stimulus Check

Why, yes, I am telling you what to do. Are you surprised?

About 80% of American citizens are getting a stimulus check of $1400 per person. You could use it for a bunch of things. 1400 tacos come to mind. Or maybe 140 cheese pizzas.

It's meant to stimulate the economy, so why not?

Let me cut to the chase: Tacos are not the answer. Do not spend your stimulus on tacos unless you are already financially free. Let's dive into a better way to spend your stimulus check.

First, let me state the obvious:

If you’re in a position where you haven’t been able to pay your mortgage, rent, utilities, or car payments, then now is the time to catch up as much as you can. That's truly what these stimulus checks are for. Call those you owe and find out how much is acceptable to pay right now with the stimulus you just received. There's also specific help available for those who are behind on rent or mortgage and are also unemployed.

If you’re in the fortunate position to be current on all of your bills, then let’s start from the first step to financial security.

Step 1: Save a Starter Emergency Fund of $2000

That starter emergency fund (separate from a cash flow fund or investments) will allow you to weather an emergency without going into further debt. The point of the steps is to get out of debt forever and start building a future that allows you to give generously. Let’s start by saving up the beginnings of an emergency fund. Once you have this step checked off, you can move to Step 2.

Step 2: Pay Off All Debt Except the Mortgage Using the Debt Snowball

If you have debt, then throw your stimulus at your debt after you have a starter emergency fund (Step 1) in place. If you can completely pay off one of your debts with this stimulus check, then do that. If you cannot pay off a whole debt right now, then start your debt snowball.

If you're using the debt snowball method, you're paying off your debts from smallest to largest. Put all extra money toward the smallest debt principle. Keep paying your bills. Keep paying minimums on all your debts. Lower expenses as much as you can, increase your income wherever and whenever you can, and then shove it all at your smallest debt. You’ll build steam that way.

The debt snowball method is the most successful way of getting out of debt. Can you imagine not having any payment anymore? I cried the day we paid off my car. That tiny, musty, malfunctioning blue car is all mine now!

Once you’re out of debt (except your mortgage), then you move on to Step 3.

Step 3: Build a 4-6 Month Emergency Fund

COVID taught me and many others something important: money runs out quickly when you don’t have work. Also, hindsight is 20/20. Too soon?

Don’t let another disaster sneak up on you. Have a full emergency fund in cash waiting in the wing just in case something goes wrong in your life. You’re not going to be the one person life goes well for all the time. Plan for a rainy day or two. Plan for a child of yours to break an arm or leg. Plan to find mold in the walls when you're redoing your bathroom. Plan to lose your job.

Your future self will thank you.

Figure out what your bare-bones expenses are (no eating out, cutting WAY back on discretionary spending) and multiply that by the number of months you want to have in your emergency fund. That's your full emergency fund amount.

For example, let's say our regular, comfortable monthly expenses are $6000 per month, including daycare, a mortgage, eating out, prepared foods, and some extra fun money. To calculate our emergency fund, we take out eating out, fun money, and lower the food budget (we're down to $5400 now), then add in health insurance expenses (back up to $5800), and multiply by 6 to get a 6-month emergency fund of $34,800.

We'll then keep that locked away in a high-yield savings or money market account, so it's accessible, but not too accessible. You should only use an emergency fund for emergencies.

If you're out of debt and you don't yet have a 4-6 month emergency fund, then sock your stimulus check away to build your emergency fund.

Once Step 3 is in the bank (literally), move right on to Step 4.

Step 4: Save 15-20% of Your Pre-Tax Income for Retirement

What's your plan for retirement? Are you currently saving enough to retire when you want to?

Have you run the numbers? What kind of lifestyle are you looking for? Are you taking into account inflation? What's your current retirement nest egg?

Look, it's no fun to face retirement without a big enough retirement fund. My saddest calls are with older clients who put off saving for retirement for far, far too long. Social Security should not be relied on to provide enough, as I've seen time and time again that it absolutely does not.

If you're currently not sure if you have enough saved for retirement, you likely do not have enough. Pop your stimulus check into a retirement account. Your future self will thank you later.

If you know you're saving enough for retirement, then move on to Step 5.

Step 5: Save for Your Kid's College Education

This step is controversial. Some would love to pay for their children's degree(s). Others want their children to earn it themselves.

I'm square in the "help my kids" camp, but I also want them to earn it. We'll play a portion, not all. We'll help them make the right choices, find and apply for scholarships and aid, and learn the value of a dollar. We'll also supplement college.

The best way to do that is to save in an ESA or 529 for your child. If you're out of debt, have a full emergency fund, and are saving enough for retirement, consider putting your stimulus check into a fund for your children's future.

If you don't have children or you're all set here, then move on to Step 6.

Step 6: Pay Off Your Mortgage

"I'll always have a mortgage." I hear this a lot. It's not true. You can pay off your mortgage while saving more than enough for retirement.

But you should only work to pay off your mortgage once you've paid off the rest of your debt and you have a solid emergency fund in place. There's no sense in paying off your mortgage if your plan is to take out a HELOC (also known as a second mortgage) for emergencies.

If you're out of debt, have a full emergency fund, are saving enough for retirement, and you're saving enough for your kids' college education, then throw your stimulus at your mortgage principal.

Can you imagine having no more payments? No more debt at all is possible. It's also super fun. You can make the choices you want for your life without much risk. You could do anything.

If you're already completely debt-free including your mortgage, you have a solid emergency fund, and your kids are all set, then move on to Step 7.

Step 7: Invest More, Enjoy More, and Give More

Aha! You've made it! You're taken care of. Your kids are taken care of. Your emergencies can be funded. You're there.

At this point, your options are completely open. You can invest more for your future or for fun. You can enjoy yourself more. You can also give more (which is much more fun than spending it on yourself).

If you're in Step 7, feel free to get 1400 tacos. You're there.


If you find that you need help budgeting or sticking with a budget, please check out our programs at Saver Street. We have courses and services that help many, many people earn more, save more, and give more (eventually).

Not sure how to get started? Follow these steps.

Step 1: Get The Knowledge You Need

Step 2: Get The Accountability You Need (and More Knowledge)

Step 3: Get Personalized Help For Your Situation


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