On March 25, the US Senate unanimously voted to approve a $2 million stimulus package to mitigate the economic risk caused by the coronavirus pandemic. As part of the package, the government is expected to send out checks worth up to $1,200 to every eligible American.
A stimulus check could be your lifeline in these tough times, or you may not need it for instant relief. Either way, how do you make the most of the amount?
Here are some tips:
1. Build up an emergency fund
Your job may be safe for now, but no one knows what will happen in the future. The stimulus check may be enough to start your financial backup in case the worse happens.
Most financial experts agree that your emergency fund should be worth three to six months’ worth of expenses. If you save more than that amount, you’ll be in a better position.
Cover expenses for essentials like:
- Transportation for essential travel
- Utilities (e.g., electricity, internet, water)
If possible, stretch your dollars by considering alternatives for your usual purchases. For example, do away with takeout food and make meals at home. Also, identify items you can do without buying for now.
2. Pay down your debt
Use part of your stimulus check to pay bills, mortgage, or personal loans from the bank. Prioritize paying off loans with a high-interest rate, like insurance and mortgage. Also, use only a portion of your stimulus check, so you can save the rest for your emergency fund.
3. Support local businesses
Spend a portion of your check to help small businesses that are in danger of shutting down during the crisis. Buy gift cards to help them cover fixed costs like labor and rent. Order from them if they offer delivery and takeout. You can also donate to small businesses’ COVID-19 relief funds to help their employees.
4. Donate to charity
A lot of organizations need help right now, especially those that provide services for low-income communities. Determine the causes that matter the most to you — whether it’s the arts or the environment — and look for relevant organizations where you can donate.
5. Invest for the long term
Placing a portion of your stimulus check for long-term savings could earn you enough to pay for future fees and taxes. Now is an excellent time to invest in the stock market since the prices are low. However, if you’re unsure about taking a risk, consider low-risk investment options like Treasury securities and fixed annuities.
6. Splurge on something
If you have some money left from your emergency fund, debt payments, and investments, use a bit of the amount for yourself and your family. Make a fun date night with your family or order out from your favorite restaurant. Spend the remaining amount to release some tension from the quarantine.
In this crisis, a stimulus check from the government can slightly improve your financial situation. However, you shouldn’t squander the money. Take a moment to slow down and think about your short-term and long-term needs before spending your stimulus-check money wisely.