- I should be getting a full $1,200 stimulus check from the federal government, and I’ve decided to spend it in two ways since my income hasn’t been affected by the coronavirus so far.
- First, I’ll put half in my Roth IRA — I have years before retirement to make up for any losses I might suffer in the short term.
- I’m going to save the other half in a high-yield savings account to replace my computer and phone when the need arises — this period of social distancing has shown me how much I rely on those devices for my business and life.
- Find out who has the best high-yield savings account right now »
Based on my 2018 return, I should be on track to receive the full $1,200. And since I’ve been lucky enough so far to continue getting work as a freelance writer throughout the economic shutdown, I wanted to dedicate some serious thought to deciding on how best to make use of that cash infusion.
The way I see it, I have four options for my check, once it arrives — spending it, investing it, saving it, or donating it, each with its own particular benefits to me, my community, and the economy.
The decision I ultimately came to is a combination of a couple different options that I think is the best fit for my unique situation: splitting the sum in half to invest in my future self.
Options trading Investing in the market
Since I’m a young investor, with decades ahead of me until retirement, I’m planning on investing half of my stimulus check directly into the market.
Because of my relatively modest income, I’m well under the income cap for a Roth IRA, so I spend all year setting aside cash to make sure I can make the full contribution to that retirement account come April.
This year, I’d just made my 2019 contribution of $6,000 when the market began its slide. Frustratingly, that meant I’d not only missed out on rock-bottom share prices by a few short weeks, but also had no additional cash on hand to flush into the market, as so many financial experts were recommending. (Particularly for young investors like myself, with decades of runway before our planned retirements.)
Given that situation, my stimulus check is coming at the perfect time. While I hurriedly try to build up my saving reserves again and look for any cash to scrape into a whole or partial 2020 contribution, I plan to deposit $600 into my Roth to take advantage of low prices in the suffering market.
It’s not much, and part of my brain is tempted to put the whole $1,200 into my retirement accounts. But in such an uncertain time, I convinced myself that it was safer to keep a good chunk of that change liquid, so it’s at my fingertips in case I should need it.
Options trading Investing in myself and my business
If there’s one thing that the quarantine has proven to me so far, it’s how much I rely on a few specific resources for the success of my career. As a freelancer who works entirely from home, I don’t need an office, a car, or a boss in order to run my business. What I do need — and what I’ve been leaning on more than ever — are my electronics.
As much of the world embraces social distancing, my phone and laptop have been the difference between disconnection and connection. Every single communication, from interactions to transactions, has been funneled through them, making it clear that both I and my income would be utterly lost without them.
That makes me pretty invested in making sure they continue to work, so I’ll be putting the second $600 of my stimulus check toward electronics improvements. That means finally upgrading my phone, a task I’ve been putting off for a few months now, and also setting aside an emergency fund for the replacement of my laptop.
My hope is that I won’t need that emergency laptop fund for a while (please join me in knocking on wood), so I’ll be placing that cash into a high-yield savings account to allow it to grow uninterrupted until it’s time to withdraw it.
Options trading Choosing liquidity over risky growth
Obviously, interest rates have been dropping like stones as the Fed works to cushion the economy from the pandemic, so HYSAs are significantly less compelling now than they were even two months ago. (The rate on the Simple Protected Goals account that I used to save up for Invisalign, for example, has fallen by nearly half a point since January.)
But even though the potential for growth in many HYSAs is significantly lower than you might find in, say, a certificate of deposit (CD) right now, I’m choosing to go the HYSA route because I want to make sure I have access to the funds when I need it.
It’s hard to turn down a guaranteed growth rate, sure, but the trade-off of keeping the funds liquid is more than worth it for me. The whole point of this savings account is to minimize my downtime in the event of an electronics failure, after all, and experts agree that an emergency fund that you don’t have immediate access to isn’t much use in an emergency. No matter how high the growth rate is.
Plus, with any luck, my laptop replacement will be years down the road (another knock on wood here, if you don’t mind), and rates will be much improved by then, so I’ll end up with a tidy chunk of change that’s larger than my original stimulus check.
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