Not only that, but it also had a huge economic impact felt by people worldwide. In America, over 36 million people have filed for unemployment as of mid-May, and that doesn’t seem to be the end of it either.
As relief for Americans, stimulus checks were issued in mid-April, which gave each resident $1,200 if they had an adjusted gross income of below $75,000. While this amount certainly helped those who were struggling, it hasn’t been enough for many others.
Read on to find out about the news on the economic stimulus package and what you can do to spend your stimulus check wisely.
About The Stimulus Payment In 2020
As we’ve said earlier, the US government started sending over 150 million Americans stimulus checks back in mid-April. That was thanks to a $2 trillion stimulus package that came from the CARES (Coronavirus Aid, Relief, and Economic Security) Act. This money support not only American families but also small businesses.
Because the country has shut down for much longer than expected, there is now talks of a second COVID-19 stimulus check. The House passed the Heroes Act earlier in May, which proposes that Americans receive a second $1,200 check with more generous terms.
For example, there’d be a cap of $6,000 per household, which is higher than the first stimulus package. Another key difference is you’d be able to claim children who are 17 and older. Also, it’d continue the extra unemployment benefit of $600 a week, which would expire in July.
Other vital aspects of the Heroes Act are:
- Hazard pay for essential workers ($200 billion)
- Pay for vital workers who might lose their jobs ($1 trillion)
- Housing assistance ($175 billion)
- COVID-19 testing, tracing, and isolating ($75 billion)
This new act was passed in the House of Representatives, and the next step will be to see whether it gets passed into law by the Senate.
As you may have guessed, all these added benefits come at an added cost: this Act would require $3 trillion in funding, significantly more than the initial CARES Act. We currently don’t know exactly when the Senate will vote on the Heroes Act. However, it’s a good idea to think about an extra stimulus payment. Getting a hold on your finances can help while you’re trying to make it through these troubling times.
The Best Ways To Use Your Stimulus Payments
While these stimulus checks may seem to be quite generous amounts, it can be very easy for you to spend all of it before you know it. Whether you’re unemployed and struggling to pay bills, or you’re still earning a steady paycheck and have decent savings, you need to be smart about how you use your relief checks.
Whatever your situation is, here are some great ways to prioritize how you spend a check.
Pay off Outstanding Bills
If you couldn’t pay your bills at the start of this new reality, you’ll know just how difficult it was to face such uncertainty. That stress and anxiety were probably crushing, and you want to do everything you can to avoid feeling that way again.
While most landlords and companies have halted the collection of payments, others aren’t so generous. The first item to pay is rent and bills if your current income or unemployment checks don’t cover them.
With anything leftover, you’ll want to consider allocating the money to necessities for your family, such as groceries. Make a weekly or monthly budget to get a clear picture of how much money will come from work, unemployment, and your stimulus check. That way, you won’t find yourself suddenly short on cash for these vital things.
Make Extra Payments For Credit Cards
Many credit cards come with very high-interest rates. If you’ve been struggling to make payments, it may feel like you’re running on a treadmill with your balances. That can be especially true if you have multiple cards, and all of them have balances.
After paying off outstanding and urgent bills, you should use your stimulus check on these balances. By paying off as much of the balance as possible, you’ll be paying less in interest. As a result, you’ll find it easier to make payments each month, so long as you’re not putting additional charges on them.
If your credit card payments are getting out of control, it may be a good time to consider debt consolidation. That is where you put all your debt in 1 credit line and pay just that. Often, you can get 0% or low interest rates for the first year or so, which can help with payments.
Debt consolidation, in addition to extra payments on your credit lines, can help you get ahead of your debt.
Make Extra Payments For Student Loans
If you’re under the age of 45 and went to university, then chances are, you’re still paying this massive debt off. It can be a real burden when added on top of everything you need to take care of. The good news is, as of March 13, 2020 individual student loans will have 0% interest rates until September 30, 2020.
When you’re looking at such a significant amount of debt, each payment may feel like you’re barely chipping away. If you’re not struggling to pay your bills, then you’ll want to take advantage of this no-interest period.
During this time, every cent you pay will go directly to your principal balance. This means you’ll be able to pay off your student loans much more quickly with each additional payment you can make. As a result, you’ll save some money in the long run, since you’re not putting money toward your accrued interest; instead, you’re paying directly into your balance.
Put It Into Savings
If you don’t have a savings account, now’s a good time to open one. In that case, you should use your stimulus check money to pay off the things we pointed out above.
On the other hand, if you haven’t lost your job and you still have a relatively comfortable lifestyle, it’s a good idea to build up an emergency fund like these. You never know if something unfortunate will happen or if tragedy will strike.
The global economy is still very fragile, and things can change in an instant. One could become ill, and rendered you unable to work and earn a paycheck.
In that case, you want to have some funds you have something to fall back on until your unemployment check comes in or until you’re able to work again.
Make sure this money is separate from your regular savings so you know not to touch that amount. We recommend putting it in a high-yield savings account so you can earn some interest on it as the money sits there. In time, you’ll receive a nice chunk of extra cash.
Donate Your Check
Are you one of the lucky Americans that don’t urgently need their stimulus check to pay off bills? Plus, you already have a decent savings account and investments? Then you might want to consider donating the money from your stimulus check.
If you want to keep things close to home, take a look at your social media accounts to see if any of your friends are struggling and need a little boost. Often, they’ll have GoFundMe campaigns or will post their details if you wish to contribute to their funds.
Or you can purchase some much-needed PPE and donate it to your local hospitals. Even buying something that may lift their spirits (such as some treats) can be a good use of your stimulus check.
On a broader scale, you can also donate your check money to some COVID-19 non-profit organizations. Do some research and donate to organizations that speak to you the most, such as helping feed children who usually get meals at school.
If you’re lucky to be in a fortunate position during this new reality, it can always be a nice gesture to help out those who aren’t as fortunate.
Keep Afloat During These Tough Times By Spending Your Stimulus Check Wisely
COVID-19 has thrown the world for a loop, both medically and economically.
While the government has slowly been relaxing measures, we might not return to normalcy anytime soon. You might need to stretch your stimulus check and be smart with your spending so you can take good care of your household.
Hopefully, by reading this article, you now have some great tips on ways to use your money during these trying times. We hope this reduces your burden and stress enough for you to get some much-needed relief.
Do you need more advice about your personal finances? Then check out our blog today!