During the month of January, the IRS planned to send automatic payments of up to $1,400 to 1 million people, equaling somewhere around $2.4 billion. This windfall is due to Recovery Rebate Credits that taxpayers who were eligible didn’t claim on their 2021 tax return.
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This could mean a decent amount of money came to families. For example, a family could have received more than $5,000 they weren’t initially expecting if there are two eligible taxpayers and two eligible dependents in their household. What’s the best way to use these checks — or any other unexpected windfall?
Pay Off Debt
Thomas Racca, manager of the personal finance management team at Navy Federal Credit Union, recommended using the stimulus check to tackle debt.
“Credit card or loan payments can strain your budget, so think about paying down or paying off any debt that you have to lighten your load,” he explained. “Once those bills are paid off, it creates even more money for you to build wealth and improve your financial well-being.”
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Build Up Emergency Funds
Ketti Rose, the CEO of Wealthy Femme, said getting a little extra cash is great to save for a rainy day.
“Apply the check to create or bolster your emergency fund. Aim for anywhere between three and six months of living expenses, ideally,” she said.
Put It Into the Stock Market
Not investment-savvy? Rose said getting a stimulus check that you weren’t counting on is a great time to learn how to invest.
“If you’re just starting to invest, put that money in a low-cost S&P 500 index fund, and let compound growth do its thing.” Rose recommended setting up automatic future contributions to keep growing the investment. “For example, I started investing with only $50 a week in an S&P 500 index fund, and today, my investment portfolio is in the multi-seven figures. Every little bit adds up when you show up consistently.”
Invest In Yourself
The unexpected check could go toward a course to help advance a career or skillset.
“Whether it’s a professional course, a certification or a skills-based workshop, you can take them to help you level up at work or learn a side hustle that you can pursue,” Rose said. “Investing in your personal growth is worth it in the long run, as it creates growth in your income.”
Holden Andrews, the founder of Helpful Home Group, agreed with Rose, saying investing in his education has done wonders for his career growth.
“The best investment I have always made is into learning skills so I can make more money,” Andrews explained. “I have spent tens of thousands of dollars on education products, whether it be a $16,000 course on sales or $20-$30 on books about investing. Investing in myself to learn how to earn more has always given me a better ROI than anything an S&P index fund or crypto could do.”
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This article originally appeared on GOBankingRates.com: 4 Best Ways To Use an Unexpected Stimulus Check
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