With the recent passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, individuals and families across the United States are in line to receive one-time stimulus checks to help them deal with the financial implications of the economic impact brought about by this pandemic.
Even though those checks are still on their way to most of their recipients, most people are already making plans for how they plan to use those extra funds. Having a plan for that money is the best way to make sure you put your stimulus check toward the most important financial objectives. Here are some guidelines to help you prioritize your spending and use this influx of cash to improve your financial stability.
Make Sure Your Basic Needs Are Being Met
The primary goal of the CARES stimulus checks is to make sure recipients are able to pay their immediate bills. If you’ve lost income or suffered other financial hardships that mean you can’t pay your mortgage, rent, or even grocery bills for the next month, this influx of cash is designed to help you afford those expenses without suffering even more financial struggle.
If you need the stimulus check just to pay your bills, that’s exactly what you should do. Use the money to buy more time for you and your family as you figure out what to do amid this economic uncertainty.
Add the Funds to Your Emergency Fund
If you still have your job and don’t have any urgent financial needs, resist the temptation to spend the stimulus check on luxury goods. Instead, tuck the money away in your emergency fund—or start one, if you don’t already have an emergency fund in place.
There’s no telling what the future may hold in terms of layoffs, furloughs, or other financial hardships that consumers may face. It’s not a bad idea to keep the stimulus check in your back pocket in case you need it down the road.
Feeling Stable? Consider Paying Down Your Debt
Feeling secure at your job and happy with the size of your emergency fund? You can still improve your financial situation by using the stimulus check to pay down any debt you may owe. In general, consider using the funds to pay off debt that carries a high interest rate.
Don’t worry about lower-APR debts like your mortgage. Similarly, don’t use the funds to pay off student loan debt—not only does this debt have a low interest rate, but the federal government is giving most borrowers a six-month break from making payments, so this debt isn’t a top concern for right now. But if you have credit card debt or other personal loans with high interest rates, your stimulus check can help reduce your obligations, which improves your financial health.
Decide Whether a Loved One Could Benefit from Your Stimulus
In these uncertain economic times, you might be fine—but you might have close friends, parents, siblings, or other relatives who are facing immediate financial trouble as a result of this pandemic.
If you’re sitting pretty but you have close relationships with people who are struggling, you might want to consider using some or all of your stimulus check to give them some extra support. This is a personal decision that you’ll have to make on your own, but paying your stimulus forward by taking care of your loved ones’ needs could offer its own peace of mind.
Invest Your Funds into a Down Economy
If your finances are in good shape, your debt is low, your income is steady, and your loved ones are doing OK, you can always use your stimulus check to invest into stocks or other funds. A down market essentially represents a discounted entry price for investors looking to buy low and sell high.
The payoff for this investment could be months or years down the road, but it might be the best way to grow your stimulus check over time.
If you have questions about using your stimulus money or have other financial concerns to address, contact FSCB today to discuss your situation with one of our banking experts.