IRS stimulus check: The 4 best ways to spend your $1,400

Recently, the IRS realized that it owes $2.4 billion total in COVID stimulus payments to about one million taxpayers, with a maximum payment of $1,400. If you’re eligible for a stimulus check, you don’t have to do anything to receive it: The IRS is sending out honest-to-goodness windfalls to a million Americans.

Unlike your tax refund—which is a portion of your salary being returned to you—no one is likely to wag a finger at you for getting a stimulus check. But that doesn’t necessarily make it easy to figure out what to spend your stimulus money on.

If you’re looking for good uses for your stimulus money, here are several strategies that can help you make the most of your money.

Put it someplace safe while you decide

Getting an unexpected $1,400 is the kind of financial boon that is both smaller and larger than it seems. It’s a small enough windfall that you can easily spend it all without even noticing until it’s gone. But it’s a large enough amount of money that you will kick yourself when you accidentally spend it without thinking.

That’s why your first order of business—if you don’t already know exactly what you plan to do with that IRS stimulus check money—is to put it somewhere you can’t fritter it away by accident. The taxpayers receiving a paper check may want to deposit that bad boy directly into a savings account, while anyone getting their stimulus via direct deposit may want to transfer the money to a savings account as soon as it clears their checking account.

The longer it stays in your checking account, the more likely it is that it will be spent accidentally. And the whole point of an unexpected windfall is to enjoy it—or at least let it make your life better.

Be kind to your future self

This is the point in the article where every financial writer is duty bound to advise you to pay down high-interest debt with your IRS stimulus check. And that is excellent, if boring, advice. If you are struggling with high-interest credit cards, student loans, or any other debt that makes you feel like you’re drowning, using stimulus money to help dig yourself out of that debt hole is a fantastic idea.

This kind of debt paydown advice is about improving things for your future self. Sending a big payment to your credit card will make it easier and less stressful for future you to get that thing paid off. That’s a great reason to use your stimulus money for debt payoff.

But that is not the only way this money can show kindness to your future self: you can also set the money aside for retirement. (This, by the way, is another suggestion every financial writer feels obligated to include in articles of this kind.)

These suggestions are common because so many Americans are overwhelmed by debt and have underfunded retirement plans. If that describes your situation, please do consider using at least part of your stimulus money to ease your future financial stress.

A simple thought exercise

But one of the best ways to figure out how to treat your future self kindly is to just ask. Consider this thought exercise: Imagine your future self enjoying an easy, low-stress day. Think through what you would need to make such a relaxing future a reality.

For instance, someone with chronic back pain might schedule several massage sessions for their busiest work season, making it easier to handle work stress. Another individual might upgrade the elderly laptop they use every day, which would improve their daily stress levels.

Remember, you’re checking in with your future self, rather than telling yourself that future you happens to want exactly the same unnecessary gadget that current you is craving. You want to figure out what your future self will be glad you did today.

You may still decide to send the money to your credit card or 401(k), since that’s what will most relieve your future self’s anxiety, but going through the thought exercise can give future you a chance to weigh in.

Treat yourself

There is nothing wrong with using your stimulus money to buy yourself something flashy—with the caveat that paying down debt or investing for retirement might be the “smarter” choice. This is, in some ways, an easy decision, since everyone can easily come up with ways to treat themselves with unexpected money.

But you might want to consider some of the less common ways you might treat yourself with this money, including:

Buy yourself some budgeting slack

Many monthly services offer discounts to customers who pay annually instead of monthly. You might be able to use your stimulus to make an annual payment for auto insurance, streaming services, gym memberships, or tuition.

If you use your IRS check to make an annual payment to one of your service providers, you will free up the monthly amount you’ve been paying. While you’re at it, set up an automatic transfer of a portion of your monthly savings into a savings account—and build up the reserves to prepay again next year. You’ll get the benefit of a roomier budget—that doesn’t constrict again once the year comes to an end.

Be a kid again

One of the quotidian tragedies of adulthood is losing touch with the things we loved as a child. Not only does no one ask grownups what their favorite dinosaur is, but we often put aside the activities that we used to spend hours on.

Since you’ve already had a conversation with your future self, sit down with 8-year-old you and ask them what they want to do. Consider spending some of your stimulus money on whatever activities the child version of you misses most.

Donate

Making charitable donations and treating yourself may seem mutually exclusive. But some of the headiest emotional highs come from being generous to others.

Giving some of your stimulus money to a cause you care deeply about will be something that sticks with you, which is the best kind of treat.

Spending with intention

It’s not often that we get to enjoy a gift of money with no strings attached. With some strategic thinking, the 1 million Americans receiving a stimulus check from the IRS this month have an opportunity to really enjoy the money.

To start, taxpayers should put the money somewhere where they can’t easily spend it while they decide what to do with the dough. These stimulus payments are a decent windfall, but not so big that you can’t accidentally spend it all without thinking.

To figure out what to spend the money on, be kind to your future self. In many cases, that might mean paying down debt or investing for retirement. But thinking through what your future self would want can help you identify the best way to spend the money to relieve your future stress.

Of course, treating yourself is always an option with unexpected money. But instead of buying the thingamabob you’ve had your eye on, consider some less common treats, like prepaying for a service—and gaining some slack in your monthly budget, indulging in your inner child’s favorite, neglected activities, or donating money to a cause close to your heart.

Spending your stimulus intentionally is the best way to get the most out of the money.