The IRS has already disbursed the first round of Economic Impact Payments. Otherwise known as the stimulus check, most people will not need to take any action to receive it. With an expected influx of cash coming, how should you spend your stimulus check?
The debate over how people should spend their stimulus checks
While there is not a current banking crisis, people all over the world are still adjusting to the new normal. Many Americans have already filed for unemployment or experienced a reduction in their work hours. Non-essential workers must stay at home, creating different needs than when they previously commuted. Everyone admittedly rations their goods, which range from toilet paper to fresh produce.
Where should the money from the stimulus checks go first?
Some experts state that financially stable households that are still generating an income could donate to those in need. On the other hand, some interpreters are unsure of the duration of the pandemic. They advise that it is better to save money for now.
It can all seem very overwhelming.
Below, we’ve gathered a range of smart advice articles to help with the decision. The key is to remember that every household is different. What works for some will not necessarily work for others. Regardless, having a plan is always better.
What to do with a lump sum of money
Under typical situations, having a lump sum of money go into your account is a good thing. Usually, the receivers will spend an equal amount of money on both wants and needs. With a lump sum of money you could:
Pay off debt – Interest rates throughout several industries are at 0% APR. Any payments towards debt you owe will make a dent on the principal.
Build your emergency fund – Having three to six months’ worth of savings is ideal for an emergency fund. If you are not able to receive an income, your emergency fund will be a lifesaver.
Do home improvements – When people receive an inpouring of money, they consider improving their residence. Essential home improvement ideas include installing a new AC unit upgrading to double-pained windows.
Necessities come first
Dave Ramsey, a financially savvy radio host to over 15 million listeners, states how to spend your stimulus check to protect your Four Walls:
If you’re someone who’s out of work or missing a paycheck right now, your necessities should come first.
Make health insurance a priority
Suze Orman is not only a money guru, but she was also one of Forbe’s top 10 most influential celebrities. She explains that having health insurance should be everyone’s top priority. “This is absolutely no time to be caught without health insurance.” She advises over her podcast regarding COVID-19, and the stimulus package, that those who lost their jobs should consider COBRA. “For 18 months, you have to assume all [COBRA] payments, but you can continue with health insurance.”
Focus on bill elimination
Trent Hamm, the founder of The Simple Dollar, states to focus on bill elimination. A necessary bill supports your needs. If it doesn’t, he suggests to downgrade or pay off the balance.
Stimulus checks are on their way
For security reasons, the IRS plans to mail a letter about the economic impact payment to the last know address of the taxpayer. It will be mailed within 15 days after the payment is paid. The letter will provide information regarding the stimulus check and what to do if it was not received.
The IRS urges taxpayers to be on the lookout for scam artists trying to use the economic impact payments as cover for schemes to steal personal information and money.