On Friday, March 27, President Trump signed a massive $2 trillion-dollar stimulus package to provide some financial relief for business owners and individuals across the country who may be feeling the financial effects that the coronavirus has had on our economy.
As part of the stimulus, tax filers with an adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns are receiving a deposit in their bank accounts of $1,200 per adult, and $2,400 per couple plus $500 per child. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds.
For a family in their 30s with 3 young kids at home, a $3,900 check is a nice financial boost. However, unlike your tax refund check that can too often get blown on that big screen TV you’ve been wanting, or Disney vacation, this government check is a little different.
First, many of us are in a financial rut because of the economic impact of the coronavirus. Perhaps you own a business and that business has had to shut down for the time being. Maybe your employer had to put you on furlough, or perhaps even lay their employees off. This stimulus check is meant to provide a little more financial stability if you are feeling the effects.
Another reason it is different than a tax refund is, a tax refund is money that is owed to you because it means you overpaid on your taxes all year, whereas a $3,900 stimulus check is simply a handout from the government.
Maybe you are in a good financial position already without that stimulus check. If that’s the case, here are some ways to take advantage of the extra money.
1) Replenish your emergency fund if necessary.
Many do not live with an emergency fund. Meaning, they are living paycheck to paycheck. If that’s you, by all means use this check to catch up on any essential living necessities and use the rest to replenish that savings account that could cover 3-6 months of lost wages. Financial security and covering living essentials should be your number 1 priority.
If you are one of the millions of individuals who lost their jobs, remember part of this package is an expanded federal unemployment relief fund for unemployed individuals (including self-employed) to replenish your regular income.
2) Invest it
With the market down so significantly, but considering the stock market’s track record, we can see that there might be a significant investment opportunity. Remember in 2008 when the market was down 54% from 2007? Many people bailed, but the ones that invested saw a nice return of 60% by the end of 2009.
Of-course we can never predict the future, but historically speaking a market coming back stronger than before has always been a matter of when, not if.
If you don’t know where to start, talk to a professional. Remember, it may or may not take a while for the stock market to recover, but if you are a millennial then you have investment time horizon on your side. Take advantage of that.
3) Be generous with it!
Studies show nothing gives us greater joy than giving. Buy up some of that intangible stock by finding someone in need and give a portion of it away. You might find that you are the one you receives the most out of this transaction.
4) Pay off credit cards
If you have any outstanding credit card debt, now is a great time to take the extra money and pay it off. Start with the higher interest rate debt. By doing so, you will lower your monthly interest fee and prevent yourself from simply giving the credit card companies free money every month.
5) Pay off your phone
Many of us are on payment plans with our cell phone carrier. You may not even realize what your phone payment is each month because your phone carrier might be lumping in your service fees along with your phone device repayment fee. If you pay it off, it will be like the gift that keeps on giving when you look at your new phone bill each month.
There you have it, 5 responsible ways to use your stimulus check!