The much-anticipated $2 trillion stimulus-relief package is soon to show up for many Americans in the form of cold, hard cash. The key, for some, will be avoiding blowing the new money on an Amazon spree or some other knee-jerk retail buy.
In coming weeks, many citizens will see the direct deposit from the government, which could equal up to $1,200 (and for some parents an additional $500 on top of that). The funds will be dire for some, including those who have been laid off or have reduced income, and a welcomed boost for others who have kept their income steady.
To determine how best to disperse those funds when they arrive, a number of financial experts have offered guidance. Here are a few things to note about the coronavirus stimulus checks and how to spend them:
Before the check comes
Bruce McClary, spokesperson for the National Foundation of Credit Counseling, told Yahoo Money that the first step to make before the deposit comes through in mid-April is assessing priority bills and debts. If the funds will be mailed, individuals have more time to assess that because it could take months for the check to arrive.
“It’s not whether or not they get the check, it’s what they do in the meantime,” McClary told Yahoo Money. “They have to make do until they get the check.”
Save the funds − if you can
Because the economy is insecure now − even if you aren’t an employment casualty − several experts have advised using the funds to build up emergency funds. One’s savings should be enough to cover three to six months of living expenses, according to experts. That safety net should also be placed in a high-yield account, Jonathan Bednar, a Tennessee financial planner, told Money.com.
“If the money is needed to pay immediate necessities like food, utilities, rent, etc., then that should be priority number one,” Bednar said. “The second priority should be to add it to your emergency fund in case this pandemic lasts longer than anticipated.”
Unfortunately, a new study shows that the leeway to save may not be there for many Americans. SimplyWise conducted a survey of 500 Americans over the age of 18 in the last week of March. The findings revealed that at least 15% of respondents will need another check in three weeks to survive. Another 63% will need the financial boost in the next three months.
Other findings from that survey show that:
● 40% have had their income reduced due to coronavirus
● 43% of those who lost jobs are not confident they will be employed in the next three months
● 15% will use the check to make late payments on their loans/mortgage
● Of those receiving a stimulus check, 45% will use it for basic necessities (groceries, rent)
Pay off debts
Many experts suggest putting a dent in the high-interest debt accumulated prior to coronavirus taking an economic toil. Even if employment isn’t in jeopardy, high-interest debt could complicate one’s financial stability now, certified financial planner Daniel Trumbower told Money.com.
“Consider putting the cash toward paying down your debt and putting yourself on a more stable path.”
Credit cards and other consumer loans with high-interest rates should be addressed first. However, if you’ve lost your job, you may be able to negotiate a lower interest rate to help ease the debt.
One of the most fortuitous ways to benefit from the current coronavirus relief period is taking advantage of the leniency lenders and other debt collectors are offering. Robert Leiphart, a certified financial planner at RB Capital Management, suggests being proactive about this circumstance. He told Yahoo News that those who don’t have the wiggle room to invest in savings or pay off debt can at least make payment arrangements for utilities, loans and more to give themselves their own relief until the economic climate changes.
“You can stretch your dollar a little further by having reduced or deferred payments,” McClary said. “Then consider those that are not being flexible. If a utility threatens to shut off service, then it becomes a priority to pay, especially if the service is key to your health and safety.”
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