Congress passed a $900 billion dollar stimulus plan Sunday that includes up to $600 in direct aid per person. The amount decreases if you made more than $75,000 in 2019. There’s no stimulus check for people who made more than $99,000. The plan also extends federal unemployment benefits of up to $300 per week, The Washington Post reported.
This may not be enough to cover major expenses, like your mortgage, but it can help pay off late bills, rebuild an emergency fund or pad your retirement account.
“There are people who have experienced a loss of income and if they need this money to catch up on expenses, there’s nothing wrong with that,” said Marguerita Cheng, certified financial planner and CEO of Blue Ocean Global Wealth.
Want the latest money news and moves? Sign up for our Easy Money newsletter, sent to your inbox each Friday.
If you’re getting a stimulus check or other windfall, here’s how to make the most of it.
Catch up on bills
Focus on unpaid bills that can have a lasting impact on your credit like cable, phone, utilities or credit card debt, said Cheng.
“If you have an extra windfall, don’t go back and pay larger bills like student loans. Catch up on essentials like utility bills,” she said.
For bigger payments, like student loans or mortgages, Cheng recommends calling your lender and explaining your financial situation. Your lender may be more understanding because of the pandemic and work with you on delaying payments, she said.
Pad your emergency & retirement funds
If you dipped into your emergency fund this year, the stimulus check can be a good way to replenish it, said Jen Grant, a certified financial planner and financial adviser at Perryman Financial Advisory in Dallas. Experts recommend three to six months worth of funds, but if the pandemic has shown us anything, it’s that having a year's worth of emergency cash may be better.
If you have enough in an emergency fund and your bills are squared away, you can bolster your retirement account, said Grant.
“You can use this to bump up your 401(k) a percent or two,” she said. If you don’t have a company sponsored 401(k), open an individual retirement account traditional or Roth IRA to let your money grow tax free.
Buy something you need
Don’t use this money to buy something that could put you in debt, like a down payment on a home or car, said Grant.
Rather, get something that will add value to your life with every use, like kitchen utensils or gym equipment, said Cheng.
“It’s OK to splurge but make sure you’re not impulsive. Buy something that you need to stay sane and healthy,” she said. “Just make sure it’s something you’ve had your eye on for a while.”
Image: Nastia Kobzarenko