In response to COVID-19, the federal government adopted a $ 2.2 trillion stimulus package to help the Americans and provide relief in a time of great financial difficulty. This bill, also known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), was signed in late March and has added one-time checks to millions of eligible citizens who have been hard hit by the Coronavirus.
Using the tax return information for 2018 and 2019, the IRS provided authorized individuals $ 1,200, married couples $ 2,400, and an additional $ 500 per child. More than 23.1 million Americans have applied for unemployment since mid-March 2020, so this stimulus check has helped those who have difficulty staying afloat. If you have not yet received your payment, check whether you qualify for the stimulus check.
In these unpredictable times, managing your finances and maximizing funds for your stimulus testing are critical. Read more to learn 10 ways to use your stimulus check wisely.
1. Create a budget
Reassess your budget as soon as you receive your stimulus check. Since we are facing uncertain times and the future is unclear, you can extend your stimulus test over a longer period of time by creating a new budget for yourself. A budget is the best way to control where you spend your money and make sure you get the most out of what you have. For example, a budget can clarify where you need to reduce additional expenses such as unnecessary services or subscriptions.
2. Address basic needs
It is important to take care of your basic needs when considering how to use your stimulus check. Use this money for essentials like food, rent and other bills. Make sure you find out if you are eligible for financial relief. Many lenders, such as financial institutions, car service providers and utilities, offer some allowances during this difficult time.
3. Add an emergency fund
You never know what can happen in the future. Consider directing your stimulus check towards an emergency fund if you can afford it. A financial backup fund provides security and can be used on a rainy day. Usually, these funds should include enough money to cover three to six months of spending, but something is always better than nothing.
Using your stimulus check this way can get you off to a good start for this type of account. Another plus is that over time you can earn interest on your emergency fund if you put it in a high-yield savings account.
4. Pay off debts
If you have the means, use your stimulus check to pay off high-yield debt. For example, this type of debt includes all high-interest loan or credit card debt. In February 2020, the average annual percentage for a credit card, according to the Federal Reserve, was 15.09 percent. This is a good reason to focus on fighting these debts first.
Consider a repayment strategy and contact your credit card provider to discuss other payment options or plans, if necessary.
5. Help your local community
During this time, many local businesses have difficulty making ends meet because of the pandemic that has forced them to close or minimize working hours. You can use your stimulus check to provide much-needed financial help to these companies or their employees, as many people are now unemployed.
One way to do this is to buy a gift card at your favorite places, such as restaurants or other small shops, that you can use after removing the restrictions. Food delivery is another option. Think about whether you want to give the delivery agent or employee a great tip. Many GoFundMes have been created that you can contribute to.
6. Pay your taxes
Due to COVID-19, the deadline for filing taxes has been postponed to July 15, 2020. If you have not yet submitted or paid your income taxes, you can use the stimulus check to help with your outstanding tax payments.
Paying your taxes on time is important, even if you can't pay the full amount due. A good rule is that if you have to pay late, the sooner your taxes are paid, the less interest and penalties will be owed. There are some payment options, such as For example, paying out electronic funds (the quickest and easiest way), same-day transfers, checks or money orders, or even cash.
7. Open a high yield savings account
When your bills and essential needs have been met, you may want to increase your savings and put your stimulus check on a high-yield savings account. High-yield savings accounts are comparable to traditional difference accounts, with one difference: they offer a much higher annual percentage return.
While we are currently in a low interest rate environment, these high yield accounts typically pay up to 25 times the national average of a traditional savings account and are low risk.
8. Contribute to a 529 or college savings account
Use the stimulus check money to open a long-term investment account for your children or to contribute more, such as: B. a 529 plan. With this type of account, you can withdraw the growth of your investment tax-free. Depending on your state, there may also be additional tax benefits.
With the money you have saved in this account, you can use it tax-free to pay for qualified expenses such as books, consumables and tuition fees. The stimulus check package also offers $ 500 per child. If you don't need this money, you can consider investing the money in a 529 account and saving for the future.
9. Invest in yourself
With all the new time gained, investing in yourself and continuing your education on how to use your stimulus check is another great option. Prepare for success and consider which areas you are interested in or how you would like to improve your skills.
You can invest this money and time in learning a new skill, e.g. For example, one that is required for your career, or even a language that you were curious about. If you're still in college, you should use this money for your tuition fees for the next semester, or use it to repay your student loans.
10. Donate to the needy
If you don't need the extra money from the stimulus check, you can make a charitable donation to the needy or to a purpose you believe in, or to friends and family who need additional help.
Many aid platforms are fighting for the cause, such as charities, food banks, nonprofits and hospitals. These include trusted sources such as the World Health Organization and the American Red Cross. Check with your local and state agencies for other ways to help those in need.
There are many ways you can use your stimulus check since the choice ultimately depends on your personal preferences and your financial situation. However, following smart financial decisions such as budgeting, personal needs, and debt repayment should be a priority to get the most out of your stimulus check. Following these 10 tips can help you find the right way and figure out how to use your stimulus check wisely.