4 Ways to Use Your Stimulus Payment to Grow Your WealthSubmitted by Axberg Wealth Management | Phoenix, AZ Financial Advisor on January 13th, 2021
As we begin 2021, with fingers crossed and guarded hopes, there’s one widespread question:
“What do I do with my ‘economic impact payment (more commonly referred to as a stimulus check)?”
While you could, of course, spend the money on something fleeting, like a new couch or a few grocery bills; we recommend applying these newfound funds to a more effective purpose. Why not use your stimulus money to actually grow your wealth and inch you closer to your long-term financial goals?
Here are 4 constructive ways to utilize your stimulus payment for your financial empowerment:
1. Deposit the funds into your Health Savings Account (HSA).
If you haven’t already hit your maximum contribution for the year, directing your stimulus payment into your HSA can have massive long-term benefits for your financial (and physical) health. While funds in these accounts can only be used for qualifying healthcare purposes, such as appointment co-pays, certain medications, and medical supplies; these deposits are automatically considered tax deductions for the current year.
Besides mitigating your tax burden, HSA funds are eligible to gain interest over time - potentially resulting in thousands of available dollars in healthcare costs. With dedicated funds for recurring care and long-term medical expenses, HSA funds could save you and your family years of stress and tension.
2. Reduce debt.
Being in debt is hard on your psychological wellbeing and mental health. Whether it’s credit card debt, student loans, or otherwise; this responsibility can drain your quality of life and increase your stress levels.
Consider putting your stimulus check towards any outstanding fiscal responsibilities. If you have multiple debts, try applying this payment to the smallest one. By primarily attacking your tiniest hurdle, you can eradicate it as quickly as possible; providing additional resources to conquer the more complicated burdens. This practice will keep you mentally motivated to pay off your debts and achieve financial freedom!
3. Pay down your mortgage principal.
If you’ve already settled your credit card debt, contemplate using your stimulus check as an extra payment towards your mortgage principal. By chipping away at that overwhelming principal amount, you can literally save THOUSANDS of interest dollars over the life of your loan. Putting your stimulus check towards this goal is a great start towards reducing your mortgage timeline!
If you’d like to continue this strategy beyond your initial stimulus check deposit, here are two proposed methods:
- Make payments every four weeks. By proactively paying your mortgage bill every four weeks in lieu of the traditional monthly schedule, you create a voluntary 13th annual payment. This additional payment will be completely applied to your principal as your annual interest responsibilities have already been satisfied. This method can significantly speed up your payment rate and decrease your interest responsibilities.
- Add extra dollars to each mortgage payment. If you don’t want to worry about an extra payment, you can simply add dollars to each of your traditional mortgage checks. With this method, you have the flexibility to adjust extra monies directed towards your mortgage according to your available finances. Obviously, large amounts, like $100 every month, will have a faster and more significant impact than smaller amounts, such as $25 a month. However, every dollar put towards your principal gets you closer to this worthwhile goal and mortgage independence!
4. Invest it.
You don’t need thousands of dollars to begin your investment journey. If you’ve never invested before, we are here to help you identify the right strategies and tactics to reach your long-term wealth objectives. Call us today for a recommendation personalized to your unique financial situation.
While it would be easy (and fun!) to squander away your stimulus check, this federal payment provides a unique opportunity to grow your wealth and increase your future stability and success. Don’t miss the chance to reduce your debt, grow your investments, and achieve your ultimate dreams.