By now, most of you have probably received your stimulus check of up to $1,200 per adult (and $500 per child) as part of the federal coronavirus relief package. This money is meant to help U.S. households withstand the coronavirus pandemic and pump some extra cash into the economy by encouraging consumer spending.
Depending on your financial situation, the best use of your stimulus check will be different. If you’ve been laid off from your job or experienced a loss of work hours or other income loss due to the COVID-19 crisis, then you’ll probably use this stimulus check to help meet your immediate financial needs. If you are still employed and receive your usual paycheck, this stimulus money could potentially help you to shore up your savings or invest for the future.
Here are some ideas on how to use your coronavirus stimulus check to get the most value, based on your financial priorities.
Cover Basic Essentials
Have your hours been cut because of the coronavirus, or has your employer reduced a certain percentage of salaries? Use this money in your paycheck to patch a hole. Depending on how much money you’ll be missing, you may be able to break up the stimulus check funds to help you get a “full” paycheck for a few months. Hopefully, you have already been able to sign up for the latest extended unemployment insurance if you’ve been laid off or furloughed from your work. But even if you get unemployment, your stimulus check will still be useful to pay bills.
If you’re unemployed, you should be strategic about how to use the stimulus check funds is important. Since the stimulus check is a one-time payout, and your unemployment benefits continue for a while, you might want to set aside the stimulus check as a temporary “mini-emergency fund.” You could use this mini-emergency fund for a few different financial goals during the next few weeks or months.
The stimulus check can also be divided to help you make partial payments on your rent or mortgage. If you are unable to make a full rent or mortgage payment, talk with your landlord or lender as soon as possible.
Pay Down Debts
At a time when so many lenders and credit card issuers are offering relief and forbearance to borrowers, it might seem strange to talk about using your stimulus check to pay off debt. But paying down debt also can be a good option for your stimulus cash, depending on your situation and goals.
For example, what if you owe just a few more payments on your car? $1,200 could potentially pay off a few months’ worth of car payments and save you some money on interest.
What if you have some debt that, for whatever reason, you don’t want to refinance, renegotiate or ask for loan relief for, such as medical debt, student loans, or a long-delayed credit card balance? If the $1,200 stimulus check will help you have peace of mind by paying off debt, go ahead and do that.
Paying off debt is almost never a bad financial move. But think carefully about how to prioritize your debt payments. Even in these uncertain times, it’s usually a good idea to pay off the highest-interest debt first, such as credit card debt.
Don’t feel like you have to be in a hurry to put all your stimulus money toward paying off debt. Look at your options for forbearance or payment deferrals first; many banks are offering relief to borrowers. If you can get some relief on your debts for a few months, you can hold on to that stimulus money and decide how to use it later.
Boost Your Emergency Fund
You may want to put some or all of your stimulus check into an emergency fund if you don’t have debt or if your debts are manageable, and you don’t have an adequate cash emergency fund in the bank. In times of uncertainty, by having cash in the bank, a lot of people feel an extra sense of calm and confidence.
If you don’t have any immediate bills that threaten to go unpaid, you might just want to put your stimulus check into a high-yield online savings account and let it accrue interest for now.
Invest for the Future
What if you already feel pretty stable financially, even in the middle of this crisis? You will want to use your stimulus check to save for the future if you already have an emergency fund of three to six months’ expenses, you do not have urgent debts, and your work is safe.
RMLEFCU is here to help our members. We are offering our services to help you and your family during these uncertain times and encourage you to contact us if you need financial help. If you have any questions, please call us at 303-458-6660 or email us at firstname.lastname@example.org.