The federal stimulus checks have come to an end, and it is up to the states to give out further relief in 2023. Both federal and state governments have been generous and many have found themselves with excess money in their bank accounts. For millions of families surviving paycheck-to-paycheck, saving a part of the stimulus check was an impossible task.
For such people, just surviving each month was a battle, and they barely managed to pay just for the basics including food, rent, and utilities. But for people belonging to the middle class, and also households whose income was not affected on the same level by the pandemic’s economic downturn.
This was especially true for the middle class, especially many whose source of income was not affected by the pandemic. But for most, it was a time of tribulation. But it was important to all to figure out how best to spend or save the money once it comes into your bank accounts. That way a clear plan of action can be worked out to maximize the money.
For many it was obvious how the money should be used. Paying a mortgage or home rent, buying groceries and other essentials, or moving towards other debts and expenses.
For those who have different expenses that you will need to pay, you should consider all your options. See if you can separate bills whose payments you can defer. Most financial companies and banks waived fees and deferred payments during the pandemic for customers affected by the pandemic.
But such facilities have been withdrawn with the easing of the pandemic and as the economy opened up. But there still are offers, and you will need to call your credit card issuer or bank to see what they can offer you.
The priority obviously should be to pay for housing and food. And then make minimum payments on any debt or other obligations including credit card payments, that cannot be deferred.
Making The Most Of What Money You Have Left Of Your Stimulus Checks
Once you have taken care of the basics, move the remaining funds into an emergency fund or use it to clear high-interest debts like debit card debts. This will save you more money than just investing your money. And to help stretch your stimulus checks as far as possible, catch up on how to budget the money still left in your account.
A growing percentage of Americans still are out of work or continue to have their hours reduced due to the economic aftershocks of the pandemic. And if you remain in that category and are starting to rely on emergency savings to get through this phase, you will have to be smart about how you utilize the little money that you have set aside from your stimulus checks.
Eliminating All Expense If It Hits Your Stimulus Check Amount
For those who continue to be cash-strapped due to the economic downturn, the first thing you would want to do is to look hard and true at how you spend your stimulus check savings. On these lines, you need to be ruthless with every discretionary expense and immediately eliminate everything that you can do without at the moment.
Make a list of all that you spend your money on and circle items that fall in the “wants” list. They might include clothes, electronics, take-outs, and subscriptions. Pause unwanted recurring subscriptions and move away from online purchases whenever possible.
Once you succeed in slashing those expenses, you should be down to your core budget for the most part. But you would still need to regularly revise your pared-down list. Keep searching for things that you could live without at the moment, like unlimited phone plans, cable, OTT subscriptions, and any items that might be perceived as important in normal times but should be set aside during recessionary times.
Eliminating such expenses need not be permanent. But during troubled times, they could free up some much-need money.
Thus, if you truly wish to set aside a part of your stimulus check expenses, your typical budget should be limited to expenses like rent, mortgage payment, insurance, utilities, and food. Thus you now have your bottom line expense numbers, the leaner version of your normal budget.
You thus have an idea of how much you have for the next six months and also how you can utilize your stimulus check money to save investments.
A Third Of Stimulus Check Amount Was Invested Says Study
About one-third of investors received stimulus checks both from the federal and state governments during the pandemic and after investing a part of it. However, this percentage is higher for young and new investors. Close to half of the beneficiaries below the age of thirty-four did so. While 15% invested in stocks, 11% purchased cryptocurrency, 9% bought mutual funds, and 8% bought exchange-traded funds.
Some financial experts have warned against totally investing in stimulus check payments, more so if you do not have adequate backing for the next six months.
Experts say that the key is to invest a part of your stimulus check while having that emergency fund, that security. They warned against spending it or even daring to invest in volatile markets like in stocks.
Moving From Stopgap Expenses To Investing Your Stimulus Checks
The stimulus checks were meant to provide a stopgap solution for individuals and families hit the hardest by the COVID-19 crisis. And for the most part, the payments continue to be used in that way.
While splurging is acceptable if there is room in your budget, that is rarely the reality for millions of households.
Stocks have been the favored investment option for most and have given decent returns in the past decade, especially the S&P 500 index fund. But past returns are not an indication of the future, and you would need to consider that before transforming your stimulus check payment into an expensive purse. The safe thing to do is to avoid splurging on one big-ticket item.