By Andrea Woroch
The first round of stimulus checks was sent out to millions of Americans across the country, with $218.4 billion paid out so far in an effort to ease the financial strain caused by the coronavirus outbreak. Although these payments provide some relief, using the money wisely is crucial in creating more financial stability.
According to a recent survey from the financial services firm IPX 1031, it appears consumers are making smart decisions with their stimulus payments so far. The study found that 29 percent of Americans plan to save this money, while another 20 percent will use it to pay their mortgage. However, the survey also found that 17 percent will pay off debt, 7 percent will pay their utility bills and another 11 percent will use it for "other" expenses. Although these seem like sensible strategies, there is a lot to consider when it comes to your own financial situation and how to best use your check. Consider these eight ways to spend your stimulus check and maximize your money.
1. Determine which bills to pay.
Depending on your current financial situation, you may have to reduce or defer certain bill payments. Your stimulus check can help you get by; you just have to figure out which bills to prioritize right now.
Spend some time calling your creditors and service providers to find out how you will be required to pay off any balance after a deferment. For, Use your stimulus money to pay any loans in which interest will continue accruing during a deferment first. That interest could be added to your total loan balance, meaning you will owe more and pay more in the long run.
2. Build an emergency fund.
According to a new survey from MagnifyMoney, about 1 in 6 Americans don't have any money in savings. And even those who have some cash set aside, don't have enough to cover a minor emergency. Considering that we don't know the long term economic impact of this pandemic, boosting your emergency fund is crucial and your stimulus check gives you the opportunity to put a nice chunk away for those just-in-case life moments that can strike at any time. Even better, open a high yield online savings account which offers as high as a 1.75 percent annual percentage yield, so you end up earning something back on your savings.
3. Pay down your credit card balance.
If you have enough money set aside in savings, paying down your balance with your stimulus check is a smart move. Not only will you save on interest, but paying down debt will also lower your credit utilization rate and boost your credit score, something that is necessary if you're looking to buy a car or home, or refinance your mortgage.
4. Improve your credit health.
You can use a small portion of your stimulus payment to establish credit or improve your credit score with a credit building loan. This can be very useful during these uncertain times so that you protect your financial health even through a potential recession.
Through apps like Self, you can get a credit builder loan and make small monthly payments to yourself with a payment term of your choosing. They report the payments and balance to all three credit reporting agencies and, at the end of the term, the money you've paid every month unlocks in the form of savings less any fees, while boosting your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
5. Get a lower mortgage interest rate.
The Federal Reserve slashed mortgage rates to combat the havoc the coronavirus has wreaked on our economy. For many homeowners, this rate cut provides a major opportunity to reduce their monthly mortgage payment and save thousands of dollars on interest over the life of their loan.
Although some of the refinance fees may be rolled over into the loan balance, you could use your stimulus payment to cover some of these out-of-pocket costs so you don't increase your debt balance. Just make sure you are shopping around with different lenders to find the best rates and review fees before applying. MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.
6. Set up your estate plan.
Creating a will or trust is something people know they need to do, but often put it off because the process is daunting, expensive, and often thought of as something only elderly or wealthy need to worry about. However, regardless of age or wealth, all Americans over the age of eighteen should have an estate plan to protect themselves, their assets, and their loved ones.
The good news is you do not have to spend a lot of money on an expensive attorney. You can create an online will right from home in a matter of minutes through sites like TrustandWill.com for just $69, which offer step-by-step instructions through the process. This is a small portion of your stimulus check to spend on the peace of mind you will get knowing you, your family, and your assets are protected. You should even consider helping your parents set one up if they don't have an estate plan yet.
7. Stretch your stimulus check.
Although putting a limit on discretionary expenses right now is crucial, there are things you have to buy no matter what, such as groceries, household cleaning supplies, and maybe even clothing for your growing kids. When it comes to these essentials, think about how you can stretch your stimulus check to get more out of the one-time payment. For instance, always look for coupons for anything you are about to buy online and compare prices among several online retailers to make sure you are getting the best deal.
You can even make money on your grocery shopping trip by using an app like Fetch Rewards, which pays you for scanning your store receipts. Just snap a picture of your receipts and they'll award you points on all participating products and special offers. Once you have accumulated enough points, you can redeem those for gift cards to popular retailers, restaurants or even a Visa or Mastercard gift card to use toward other daily needs.
8. Give your pooch some extra love.
Finally, for anyone who is experiencing work overload right now, such as healthcare providers, first responders, or other essential workers, your fur babies may be feeling extra lonely these days. Since many of your regular pet care facilities are temporarily closed or offering limited services, and friends are off-limits with social distancing, your best bet will be to branch out and explore personalized, peer-to-peer options.
Use a portion of your stimulus check to book dog walking or doggy day care from a nearby pet lover via Rover.com. Through platforms like Rover, you can easily find someone in your area that is happy to offer reliable and affordable options. They will spoil your pup with one-on-one attention, so you don't have to feel guilty about working long hours. The service provides an update by phone when the walk starts and stops, a GPS map of the route, photos and notes, like pee and poop breaks, so you'll have peace of mind that Fido is well cared for.
You can check your credit score and read your credit report for free within minutes by joining MoneyTips.