As part of the coronavirus stimulus check package, the government will provide one-time payments to millions of employees and their families. The average American adult will get a $1,200 stimulus cheque, while children will receive an additional $500.
People who have lost their employment as a result of the epidemic would likely use the additional cash toward urgent needs like housing, food, and utilities. But if you get a salary, how should you spend it?
It’s a complicated equation since many families don’t sure how long the outbreak will last or whether companies will be able to open again soon.
Know How To Use Your Stimulus Checks
The effects of layoffs are being felt throughout industries, from the service industry (including restaurants) to the legal and insurance sectors. Credit card debt and other forms of revolving debt in the United States have reached record highs, adding to the uncertainty.
According to the Federal Reserve’s annual stimulus check-in on Americans’ financial health, about half of all people report that they would have difficulty coming up with $400 if they needed it for an emergency. Experts advise setting away some of the stimulus check in case of need, since millions of Americans are expected to experience a financial strain in the coming weeks.
Even in the best of circumstances, the advice of financial gurus to set aside three to six months of salary in an emergency fund may seem unrealistic to many families.
However, the JP Morgan Chase Institute found that most families only require a considerably smaller emergency fund—one sufficient to last for around six weeks.
Even though it’s a sizable piece of your stimulus check, having that emergency fund established may help you escape a never-ending spiral of high-interest debt, as Schulz points out.
It’s possible that some workers are under the impression that everything is OK in their workplace when, in fact, that could not be the case at all According to Northwestern Mutual financial consultant Chantel Bonneau, “the effects of COVID-19 on our society may be long-lasting.” “That would be a perfect time to build an emergency fund, if you don’t already have one.”
Keep in mind that you should have a liquid, risk-free emergency reserve. What this means is that you shouldn’t put your savings in the stock market. Instead, put part of the money away in a savings account until you really need it.
Schulz explains that “having that money accessible is more about giving yourself with a little bit of stability,” than than maximising return.
After you’ve established an emergency fund, some financial gurus recommend putting your stimulus money to work by paying down high-interest credit cards.
Make an itemised list of your debts and the rates associated with each card to better prioritise which ones to pay down.