Things That You Can Do With a Second Stimulus Check
- Author: Michael Bordonada
- Posted: 2024-06-28
If a second stimulus bill goes through, you may be getting an additional stimulus check. The amount and threshold for the stimulus check are still to be determined, and the two parties are still not close to an agreement on the details of the bill, but you can at least start planning about what you could do with the money if you get the check in the mail. If you have your monthly bills covered, you can use this money to help yourself get ahead. Here are five things that you can do with a second stimulus check if Congress passes another relief bill.
Pay Down Your Debt
Paying down debt actually increases your monthly income. Allow us to explain. When you owe money on your credit card, you are paying interest at the rate of up to 30% annually. Hypotehtically, assume that your credit card debt is $5,000. You can be paying up to $1,500 each year to the credit card company in interest alone. Every $1,200 in credit card debt that you pay off could increase your annual income by up to $400. Accordingly, the first thing that you should do that will have the biggest impact on your financial situation is slice your credit card debt. If you are thinking about paying off other debt, you need to look at the interest rate to see if it is worth it to use cash to pay of what you owe. It does not make sense to pay back debt with low interest rates.
Top Off Your Emergency Fund
You could be dealing with an unexpected medical expense or some other cost that threatens to put you in debt. Your emergency fund is your bulwark against having to go into high-interest debt when the unexpected happens to you. Experts differ on the amount that you need to have in your emergency fund. We think that the experts that advise you to have a year's expenses in your fund are unrealistic, especially when 4 in 10 Americans do not have the money for an unplanned car repair. Regardless, you should have at least $1,000 in an emergency fund. If you do not have it, you should put all or part of your next stimulus check into the account,
Invest the Money
Nobody knows the exact details of the stimulus checks, but if they are like they were last time, you could be looking at $3,400 for a family of four. Another area where Americans fall behind is in their investments. Many people are on the cusp of retirement with no money saved. If you are not in debt and have your emergency fund topped off, you can start a brokerage account and invest the money. If you already have an account, you can put the money in it. The best place to put the stimulus check would be into an IRA account. This way you will get favorable tax treatment and will not have to pay any capital gains until retirement.
Buy Something Durable
If you need a new car, now is the time to do so. Dealers have cut their prices because tough economic times are keeping them from moving cars off the lot. Moreover, low interest rates mean that your monthly payments on the amount that you finance will be even lower. While many would say that this is the worst time to buy a car, if you have the money, you will get the most bang for your buck. On the flip side, this is not the time to splurge. If you still have a job, you cannot really breathe easy about job security until COVID-19 passes. Therefore, unless you are buying something durable, this would not be the best time to go home with the big-screen television.
Donate to Charity
If you have not donated to charity yet this year, there was a provision in the CARES Act that will encourage you to do so. You can take an above-the-line $300 tax credit for charitable donations in 2020. This is regardless of whether you itemize deductions or not. Thus, if you donate a small amount to charity, it will help them out now and you will get the money back at the end of the year. There are many worthy charities that are in need due to the massive economic and medical dislocations caused by COVID-19.
