Don’t spend your Coronavirus stimulus check foolishly. Here are 12 ways to put the money to good use and spend it wisely.
COVER YOUR NEEDS
1. Pay For Your Rent, Utilities, or Food
The stimulus check’s intent is to assist those who lost their jobs or part of their income due to the pandemic. If this happened to you then use the stimulus check to pay for your rent, utilities, or for food. First, make sure you have money to feed yourself and your family. So you may have to spread the stimulus money over various expenses.
2. Create an Emergency Fund
If you have zero to little savings this is a very good time to start an emergency fund. Take the stimulus check and put it in an emergency fund bank account. To help you avoid spending your emergency fund set up an account that is not at the same bank as your other accounts. Also, consider an account that pays higher interest rates than a bank. Consider a Marcus account from Goldman Sacks for your emergency fund.
REDUCE DEBT
3. Pay down Non-Federal Student Loans
Loans not owned by the U.S. Department of Education are still charging interest and require monthly payments. Examples are Perkins Loans, older Federal Family Educational Loans (F.F.E.L.), and private loans from Discover, So-Fi, Sallie Mae, and others. Use your stimulus check to pay down the principal on these types of loans. By doing this you can reduce the interest charges and pay off the loan much sooner.
4. Pay down Your Highest Interest Federal Loan
If you only have federal loans then you can use your stimulus check to pay them down faster. If you haven’t consolidated your federal student loans you will have several loans at different interest rates. Apply the stimulus check to the loan with the highest rate. If you consolidated your loans put the stimulus check to the single loan balance.
5. Pay Down Your Credit Card Debt
If you are carrying credit card debt this may be the best place to use the stimulus check. Credit cards carry the highest interest rates. Pick the card with the highest interest rate and apply the money to this card.
SAVE FOR THE LONG-TERM
6. Contribute To A Traditional IRA
You can contribute up to $6,000 ($7,000 if you are over 50) to an IRA in 2020. You can deduct your contributions in full if you and your spouse don’t have a retirement plan at work. If either one of you is covered by a plan at work the deduction may be reduced or eliminated. See the following information from the IRS on IRA Contribution limits:
7. Contribute To A Roth IRA
You can contribute up to $6,000 ($7,000 if you are over 50) to a Roth IRA in 2020. You cannot deduct contributions to a Roth IRA. But, there are income limits to make a Roth contribution based on your filing status and income. See the following information from the IRS on Roth IRA Contribution Limits.
SAVE IT FOR A MAJOR PURCHASE
8. Increase Your New Home Fund
Perhaps your goal is to buy your first home or move to another home. If so, then a new home saving account is a great place to put the stimulus check. Make sure your new home savings are in a high yield saving account that is not easy to access. Consider a Marcus account from Goldman Sacks for your new home fund.
9. A Down Payment On A New Car
If your car is in need of major repairs this may be a time to consider replacing it. The stimulus check can be a good downpayment for a new car. Car inventories at dealerships are climbing and there will be incentives to get you to buy a car. I prefer loans over leases. Keep the length of the car loan to 36 or 48 months. If you need more than 48 months that then you most likely cannot afford the car.
10. A Necessary Home Repair or Improvement
If you are a homeowner you may want to put the stimulus check towards a home repair or an improvement. It won’t be enough for major home improvements like a new kitchen or bathroom. But it may help toward paying for items like replacing a heating or cooling system, a new roof, or new appliances.
TRAVEL AGAIN
11. Start A Vacation Fund
Hopefully soon, we will be able to travel freely in our country and around the world. There are going to be a lot of places you miss visiting and other places you always wanted to see. So put the stimulus check into a separate bank account to fund your next vacation.
PAY SOME OF THE STIMULUS CHECK FORWARD
12. Contribute to a Charity
Starting in 2020, the CARES Act added a deduction for charitable contributions of up to $300. You can take this deduction regardless of whether you itemize your deductions. So if you are fortunate to have kept your job this may be a good time to help those that are not as fortunate as you.
Comments or Thoughts?
How do you plan to use your Coronavirus stimulus check? Any other good suggestions? If so please leave a comment below.
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