Written by: Corey Janoff
With a fresh new wave of stimulus money hitting people’s bank accounts this week, many residents & fellows (and med students, for that matter) will be receiving their $1,400 stimulus checks. Today we thought it would be a good idea to lay out some things to do with your stimulus check while in residency.
1. Spend it
Stimulate the economy – that’s the whole reason they are issuing the checks. The government wants us to spend the money to help keep businesses afloat.
We could all think of endless ways you could spend the money. You could buy a boatload of pens to keep in the resident lounge so you and your co-residents will always have something to write with. For $1,400, you could buy 3,255 pens and customize the color and text along the side. That should be enough to last your residency program at least a few months.
Get takeout from your favorite local restaurants and leave a nice tip. Shop at local retailers. The mom & pop businesses are the ones that need you the most during this pandemic. Places like McDonald’s, Starbucks, and Amazon will be just fine. Help out your local business by buying from them.
Spending the money may not be the most fiscally responsible financial strategy for you personally, but we’re all in this boat together, so don’t feel bad about supporting your local businesses.
Now that we got the spending option out of the way let’s look at some ideas that may be a little more in line with helping you achieve your financial goals.
2. Build Up Your Emergency Fund
Everyone is aware that they should have some money set aside in savings for emergencies. Most financial advisors for doctors will recommend 3-6 months of fixed expenses sitting in a savings account for rainy days.
Many residents don’t have an adequate amount in savings, so one wise option for your stimulus money would be to build up that emergency fund. You never know when you’ll need to replace a flat tire, fix an appliance, fly home for a funeral, incur a coinsurance payment on a medical expense…the list goes on.
Unexpected expenses are to be expected from time to time. Having cash on hand to pay for them so you don’t have to put the tab on a high-interest rate credit card is helpful.
3. Save for Short-Term Expenses
In addition to emergencies, there may be some short-term expenses you have planned. You might be moving this summer as you transition from residency to fellowship. Maybe you have to pay for boards. Travel for interviews once the pandemic is over. Side note – if we have learned anything from this pandemic, traveling for in-person interviews is almost always unnecessary when you can do a videoconference.
If you have an expected expense coming up and don’t already have the money to pay for it, stick your stimulus money in your savings account, and you’re $1,400 closer to your goal.
4. Pay off Debt
Paying off debt is an obvious idea to make the list of 10 things to do with your stimulus check. Target your highest interest rate debt. If you have a balance that carries over on your credit card each month, knock it down by $1,400 with your stimulus money. If you have a high-interest rate personal loan, it could be worth putting the money towards that. Any debt with an interest rate higher than 6-7% would be a prime candidate for a stimulus smackdown.
6. Give The Money To Those Who Need it More
There are plenty of people in need during this time. Kids who are missing out on school lunches. Families who have had to scale back at work to accommodate kids being at home for virtual school for the past year. People working in the service industry not making nearly as much in tips as they used to. Zoos are struggling to take care of their animals with the massive decrease in patrons coming through the gates.
You could even get creative with how you donate the money. If you live in the city and walk to work, go to the bank and get 140 $10 bills and give one to every homeless person you see on the way to and from work.
Find a cause that you care about and share the wealth.
7. Invest In a Roth IRA
There is still time to fund a Roth IRA for 2020! You have until April 15th to make prior-year Roth IRA contributions. If you do a bunch of moonlighting in residency or have a spouse who works, and your household income is above the Roth IRA income limit, consider funding a Backdoor Roth IRA.
You are allowed to contribute up to $6,000 to an IRA each year currently. If you’re not maxing your Roth IRA or Backdoor Roth IRA each year, consider depositing an extra $1,400 this month.
8. Contribute $1,400 More to Your Retirement Account at Work
If you’re already fully funding your Roth IRA each year in residency, kudos to you. If you want to save more for retirement, many residents have access to a 403b through their university hospital. Now, you can’t contribute to a 403b at work directly from your checking account. Contributions have to be withheld directly from your paycheck. However, you could adjust your contribution amount for the next couple of pay cycles to have an additional $1,400 withheld from your paycheck and deposited into your 403b.
In fact, I would encourage most residents and fellows to make Roth contributions to their workplace retirement account rather than pre-tax contributions. You don’t need the tax deduction while in residency. Deposit after-tax Roth dollars so qualified withdrawals in retirement can be made tax-free.
9. Add it To Your Kids’ 529 College Savings Account
If you have kids, what better way to utilize your $1,400 stimulus money than to put it towards their college savings. Every little bit adds up when it comes to education planning. You weren’t expecting or needing this $1,400. Why not save it for your kids' education if you have children and paying for their education is a priority for you?
10. Invest in Something Speculative
Finally, now that we have covered all of the logical things you could do with your stimulus money in residency, maybe you want to roll the dice a little bit. You didn’t plan on receiving this money. You probably don’t need this money. Why not invest in something speculative and see what happens? If you lose it all, it won’t impact your long-term financial well-being. If your investment turns out to be a success, then it’s party time!
Heck, forget “investing” in something speculative. Why not throw the money down on a 5 or 10 team parlay for the opening rounds of March Madness this week!? I don’t know what the odds are, but that payout could be nice!
Disclosure: Gambling should be done for entertainment purposes only in states where it’s legal. This is not a recommendation to gamble with your money. I’m just having some fun writing a blog post over here.
What Will You Do With Your Stimulus Money?
Whatever you choose to do, consider your financial circumstances and what areas need the most attention. If you’re light on cash, fund the emergency reserve. If you have credit card debt, pay that down. If you’re on a FIRE mission, invest the money. If you are in a good spot financially, maybe donate the money to those who aren’t as fortunate. I support whatever you decide.
Disclosures: Investments involve the risk of loss, including total loss of principal. Consult with your financial advisor before making any investment decisions.