A pedestrian wearing a protective mask passes the iconic Macy’s Inc. store. from the Herald Square area of New York, USA, Tuesday, November 17, 2020.
Victor J. Blue | Bloomberg | Getty Images
Every day, the line in front of the Gucci boutique in NJ’s Mall at Short Hills revolves around the second floor near the escalator.
Buyers waiting to enter include typical Gucci customers, as well as new customers who have just become better by $ 1,400.
“The stimulus has certainly been beneficial,” said retail analyst Cowen & Co. Oliver Chen.
As the economy grows and the market grows to new highs, aspirational purchases such as handbags, belts and footwear – especially those with large, recognizable logos – are gaining momentum, said Chen, fueled by the latest round of direct payments. authorized by Congress and President Joe Biden through the American Rescue Plan.
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Like the first two direct checks, this stimulus is meant to provide a starting point for those who have been severely affected by the coronavirus crisis.
For the most part, checks are still used this way.
About 25 percent of households spend this third round of payments, according to the Federal Reserve Bank of New York. Specifically, 13% of the latest incentive checks are expected to go to food and other essentials and only 8% to non-essentials. The rest will be used to repay debts and savings.
But for many who have already managed to pay off debt and save more throughout the pandemic, “checking the stimulus feels like free money,” said consumer economics expert Andrea Woroch.
“People have this desire to go out and destroy themselves, almost as a reward for being imprisoned in the last year,” she said.
What Woroch calls “revenge spending” is perfectly OK, as long as there’s room for it in your budget (which can mean eliminating something else).
However, Woroch generally recommends not breaking into a high-ticket item. She says building wealth is a better option.
Jim Cramer of CNBC said that after people pay their bills, they should put most of their money into an S&P 500 index fund. In fact, many young retail investors already plan to spend some of their payments stock incentives.
Here are some numbers that show why you should consider this as well.
The S&P 500, which is now close to a record high, has achieved an average annual return of about 14% in the last 10 years.
Suppose you invested $ 1,400 in the S&P 500 in 2010, your investment would have increased to over $ 6,200 by the end of March 2021, according to data provided by Morningstar Direct.
Go back and the growth is staggering: a $ 1,400 investment in S&P in 1980 would now be worth more than $ 150,000, Morningstar found.