Trump's Proposed $5K Dividend: What To Do If You Actually Receive a Large Windfall
President Donald Trump is once again promising a $5,000 dividend check to every American adult, with a catch: Republicans must retain control of Congress in the November midterm elections if you want to see that check hit your bank account. That isn’t the only hangup to the plan, though, as the proposed checks currently have no congressional authorizations, funding mechanism or delivery timeline.
For the sake of argument, though, imagine that the checks do happen. What should you do with the money if it actually arrives?
Read Next: The $500 Obamacare Refund: Are You Eligible?
Earn More: 5 Low-Risk Accounts Proven To Grow Your Money Up to 13x Faster
The best likely answer is to consider the payment as a hypothetical windfall. Should Congress actually approve the checks, then using the money to shore up a household’s finances could make a one-time payment more valuable long after the cash is spent.
First, Don’t Budget Around It
Details remain rather murky as to how the federal government would fund $5,000 checks for nearly every American adult. Vice President JD Vance suggested tariff revenue could help, but the Associated Press noted that tariff receipts fall woefully short of the amount needed. Meanwhile, CNN reported that paying out the $5,000 checks would cost over $1 trillion in total.
All of this makes the check a major hypothetical for the time being, not a guarantee. It would be extremely risky to take on any additional debt, make a major purchase or budget change based upon your expectation that you’ll receive a $5,000 check.
Knock Out Expensive Debt
If these checks do arrive, consider knocking out any high-interest debt before using the money to go shopping. A 24/7 Wall St. analysis puts the average U.S. credit-card APR near 21%. A $5,000 payment applied to a balance charging any kind of interest of that level would reduce your future interest costs immediately.
J.P. Morgan’s windfall guidance similarly recommends addressing all high-interest debt as an early priority after any kind of sudden influx of money. It also cautions that homeowners considering an early mortgage payoff should check for potential fees.
Build a Big Cash Cushion
After you can get your expensive debt under control, then consider using some of the money to provide yourself with breathing room during emergencies. J.P. Morgan recommends setting aside accessible cash for unexpected expenses (but also notes that holding excessive amounts in cash can leave the money vulnerable to inflation). If your household doesn’t have much in the way of savings, this windfall could be extraordinarily useful as a safety net.
Use What You Don’t Need to Invest
Money you don’t need for near-term expenses could also go towards investments, either as a lump sum or through regular contributions.
Keep in mind that your ability to tolerate investment losses depends greatly on upcoming financial needs – money earmarked for an upcoming mortgage payment or car purchase needs to stay more accessible.
Leave a Little Room for Fun
A windfall doesn’t mean you have to put every dollar towards a financial obligation. J.P. Morgan explicitly suggested spending a little on travel, education or hobbies among the possible uses after more pressing obligations are handled. Setting aside a safe amount for something enjoyable can allow the money to improve your life without turning the payment into one massive impulse shopping-spree.
The Bottom Line
Trump’s proposal remains very conditional and incomplete at the moment, so it shouldn’t become part of your household budget just yet. However, if the payment eventually becomes real, remember to treat it as exactly what it is (a one-time windfall), and have a plan for it. A surprise $5,000 can disappear quickly. A deliberate plan can make the same amount be meaningful for years.
Editor’s note on political coverage: MoneyLion is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on MoneyLion.com.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: