5 Ways to Spend your Coronavirus Stimulus Check
If you live in the USA and make less than $99K per year, chances are you will receive a stimulus check from the federal government.
Some people with a consumerist mindset will use this money to go on a shopping spree. Don’t do this.
Our objective on this blog is to build up wealth in order to one day become financially independent.
With this in mind, here are 5 ways to spend your stimulus check.
1 – Pay off your debts

If you have any debts, use that check to pay them off.
The first step to setting yourself up for future wealth-creation is to become debt-free. Many people get caught up in the credit card lifestyle thinking they will easily pay it off later. The truth is that credit card debt comes with extreme interest rates that will lock you in a negative cycle of never having any money.
Being in debt will bring you immediate pleasure, but long term it means you are working for someone else, not yourself. You work to earn money in order to pay somebody back. If you don’t pay them back, they will eventually take action against you. This is not what you want.
To turn your financial life around, you must adopt a business mindset.
Start thinking in terms of assets and liabilities: Is my next purchase adding to my net worth? Is it necessary for my immediate survival? If the answer to either one or both of these questions is NO, then don’t buy whatever it is you were craving. You’ll survive without it.
You must reprogram your brain to get a dopamine high from NOT buying things. This is a very difficult process but it is possible. It simply takes time and effort.
2 – Save it

If you don’t have any debt, first of all congratulations!
Believe it or not, you are now part of an exclusive club. Did you know that the many Americans are living paycheck to paycheck and have an average debt burden of 40-60% of their income?
Wrap your head around this fact: Being debt free makes you wealthier than most of the population.
Since our objective is reaching financial independence, the second best thing you can do after paying off your debts is building up an emergency fund.
Personal finance experts suggests building an emergency saving fund that can cover 3-6 months of living expenses. Some argue you need 12 full months to really sleep well at night but this target is very high for most people starting out. Setting the bar too high at first can discourage you so we’ll keep it simple.
If your living expenses are $2000 per month, then you’ll need $6000-$12000 in emergency savings. This sounds like a lot and it is. The secret is to start small and stay consistent.
First, save $1000. Once you do, save $2000 (and so on, and so forth). In the space of a few months, you’ll have reached the low end of the emergency fund range. Don’t stop! Keep going until you reach the 6 month target.
Once you reach $12K in emergency savings, you’ll be very tempted to spend some of it. Do not touch it! This would undo all of your hard work. Remember that this money is reserved for extreme emergencies, such as job loss and potentially life-threatening situations.
If you have zero savings, stash that cash in a saving account. You’ll thank me later. Read my article on how to save (when you’re broke) to help you get started.
3 – Buy stocks

If you’re debt free and have an emergency fund, the third best way to spend your stimulus check is to buy stocks.
Due to the coronavirus crisis, the stock market has fallen considerably from its recent highs. Some incredible companies are basically “on sale”, meaning that their current stock prices are relatively cheap compared to their intrinsic value.
Yes, the stock market may crash further but remember that time in the market beats timing the market: Studies have proven that long term investors outperform those who try to time market tops and bottoms.
If you adopt a long term investment horizon, you can’t go wrong investing in an S&P 500 Index Fund or in blue chip stocks like Microsoft, Visa or Apple.
In order to minimize your risk, you can spread out your purchases over the next few weeks or even months to dollar-cost average your position. This way, you can take advantage of any future dips and lower the cost of your purchase. By doing so, you’ll profit much quicker when the market starts rising again.
4 – Buy gold

Are you concerned about a possibly prolonged stock market crash?
If so, here’s a fourth way to spend that stimulus check: Buy gold.
Gold is a popular choice among investors who wish to hedge against market volatility. Historically, gold is a proven store of value and its price tends to increase when markets move downwards.
This time is no different: Gold is currently priced at over $1700 an ounce and could continue its climb towards $1800 in coming weeks. We are still some ways off the all time high of $1917 reached in 2011 but you given the current market conditions, you never know what could happen .
In sum, there are plenty of reasons why owning gold is a good idea.
5 – Buy cryptocurrencies

If you are debt free, have an emergency fund, a well diversified stock portfolio and own some gold, why not dip your toes in the cryptocurrency markets? At writing, Bitcoin, Ethereum and Litecoin are currently trading at reasonable prices.

Cryptocurrencies are a new asset class that is difficult to fathom: What is their intrinsic value? Will they be around in 10 years? Are they scams?
While each of these questions require their own essay, the short answer is the following: Cryptocurrencies are novel assets that are gradually becoming mainstream. Thus, growth-orientated investors should include some in their portfolios.
How much cryptocurrency you should include in your portfolio depends on your appetite for risk. Risk-adverse investors should allocate no more than 1% their portfolio to crypto while investors with a greater appetite for risk can obviously allocate more than that.
The cool thing about cryptocurrencies is that you can buy fractional shares. This means that you don’t have to splash $7K in one go to buy Bitcoin. Due to Bitcoin being divisible by eight decimal points, you can buy as little as 0.00000001 Bitcoin. This same principle applies to almost all cryptocurrencies.
I recommend investing in the top 10 largest cryptocurrencies by market capitalization, more specifically Bitcoin, Ethereum and Litecoin. Smaller, less known coins, known as “altcoins'”, are risky investments and should only be purchased by those with deep knowledge of crypto markets.
Although most cryptocurrencies follow Bitcoin’s momentum, I recommend you diversify your crypto holdings by buying 50% Bitcoin, 25% Ethereum and 25% Litecoin.
So there you have it! 4 ways to spend your stimulus check that will improve your financial situation and contribute to your objective of one day reaching financial independence.