Many Americans have received a certain amount of money from the government to help alleviate some of the struggles that have come with the COVID-19 (Coronavirus) pandemic. If you’ve received an economic impact payment stimulus deposit or check, you may be ready to spend that money right away.
Before you do, consider some of the options you have when it comes to using that money in the best way possible.
Pay your immediate expenses and create a budget.
This is the true intent of the economic impact payment stimulus money. If you have current expenses that you need to pay (housing, food, utilities, etc.), use your stimulus check to get you through.
Now is an important time to put yourself on a budget, if you don’t have one set up already. During challenging times, it is critical to allocate your money to the necessities, and not over-extend yourself financially. What does that look like? Every person or family’s budget looks different, so you need to decide what makes sense for you. A budget calculator is a great place to start to lay out your income and expenses.
If you’re still not sure where to begin when it comes to budgeting, there are tools that can help you. Start with an online coaching resource that walks you through setting up and following a budget, step by step.
There are also many budgeting apps, including Mint and You Need A Budget (YNAB) that allow you to track your spending, and see how it impacts your savings. Just a note; Main Street Bank does not control or endorse the content in any of these apps, and we recommend you research and choose the best option for you.
Put it into an emergency savings.
If you don’t need the funds from your economic impact payment stimulus right away, you are not only fortunate, but can use it to build your emergency savings. Whether it is the loss of a job, illness or injury, or other unexpected circumstances, having an emergency fund to keep you supported will alleviate some stress from a challenging time.
The ideal emergency fund is six months’ worth of your monthly take home pay, which typically allows you to get through a prolonged period without income. If that number seems high to save all at once, don’t worry; most people starting an emergency fund must build their way to that point. Remember, anything you can afford to set aside for an emergency can help.
Getting an emergency fund started will help you achieve more financial security. Follow along with our online coach to make sure you’re on track to meet your emergency savings goals.
Use it to pay down current debt.
Oh no, the “d” word. Contrary to popular belief, debt is not always a bad thing. What makes debt a challenge is when it cannot be managed, controls your finances, and leads to financial and psychological strain. And when you can afford to pay down debt, it frees up more of your money to use for better purposes; investments, retirement, and other purchases you want or need.
If you can afford to, use your stimulus money to pay down outstanding debt you may have, such as student loans or credit card debt. Since these types of loans do not give you any equity like a mortgage, these are especially good to pay down and pay off as soon as you can.
Just like any other goal, paying off debt works a lot better when you have a plan in place, and resources to help you along the way. The debt management coach will help you determine which outstanding debts you should focus on, and develop a plan to pay them off without disrupting your daily expenses.
Spend it locally.
One of the best things you can do for your local economy is to spend your money at local businesses. These places employ people who live where you do and contribute directly to the growth and improvement of the community, more than their larger counterparts. In fact, according to the U.S. Small Business Administration, small businesses accounted for 44% of the nation’s economic activity in 2019.
You can contribute to the local economy by choosing to do business with these companies. A great place to start is researching your local Chamber of Commerce to find out who the local businesses are. You can also check your local media to see what businesses are listed there. Don’t worry – many print publications like newspapers have an online counterpart if you don’t like the extra paper!
If your favorite local businesses are temporarily closed, consider purchasing gift cards, or saving that money for when they are open again.
Make a charitable donation.
Doing good feels good, and it’s another way you can help the local economy. Choose a charity for a cause that is close to you. Before giving your money to a charity, it is best practice to make sure the organization is legitimate and find out how donations are used. The Federal Trade Commission offers advice on how to donate smartly.
However you decide to use your economic impact payment stimulus, it is important you plan in place for your own finances above all else.
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