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Did you get an extra $1,400 in stimulus money? If you were married, it may have been $2,800. What you should do with this money varies according to your own financial situation, but here are some suggestions to consider. These suggestions are obviously for those who aren't currently struggling to stay on top of bills and who have a reasonable cash reserve that allows them to be able to sleep at night.
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1. If you have debt
First of all, if you have debt, consider paying it down. The average credit card interest rate is 16.12 percent annually, according to CreditCards.com. Because credit card debt is not tax-deductible, paying it down is like getting a guaranteed tax-free 16.12 percent return.
You can't deduct the interest on most debt (except some mortgage debt and some student loan debt), so paying it down is like getting a tax-free return. Even if you have a low-cost mortgage with a 3 percent interest rate, paying that down may make sense as well. You are likely not getting much or any of a tax benefit from your mortgage. Only about 12 percent of households itemize, with 88 percent taking the standard deduction. So paying down your mortgage is like getting a guaranteed tax-free 3 percent return.
2. If you are debt-free but need the money in the next few years
The stock market is risky. In the 33 days between February 19 and March 23 last year, the U.S. stock market lost about 35 percent. There is no guarantee it will recover quickly the next time, so it's generally a bad idea to take much risk with money needed in the short run.
Investing in a certificate of deposit from a bank or credit union may be the way to go. DepositAccounts.com and Bankrate.com are two good places to look. I know rates are low right now, but at least you'll earn a few bucks in the meantime.