The government is sending cash payments to many Americans to ease the financial strain of the coronavirus pandemic.
The stimulus checks will be $1,200 for individuals earning under $75,000 per year. For married couples, you’ll get a check for $2,400 for adjusted gross incomes under $150,000. Reduced checks will go out to individuals making up to $99,000 per year or couples making up to $198,000 per year.
The stimulus checks will also include $500 per child.
Payments are expected to arrive in April.
Before you decide what you’ll do with the money, take time to consider your own financial situation and what would best work for you.
Use it to stay afloat.
If you’ve lost your job and are struggling financially, this money can help you with your essential monthly purchases. Here are some additional steps to take if you have lost your job, had a change in income or are struggling due to the coronavirus pandemic.
- Apply for unemployment.
- Apply for Temporary Assistance for Needy Families.
- Apply for the Supplemental Nutrition Assistance Program (SNAP). If your children are under age five, consider also the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).
- Call the company of any bill you owe. Let them know you are struggling to make payments and ask what they can offer. Many companies are waiving late fees, not reporting late payments to the credit bureaus and even may offer a payment plan.
- Pause your student loan payments.
- Despite a rise in unemployment, some companies are hiring during the coronavirus crisis.
- Reduce your spending. There are creative ways you can save money, including compare your current rates (car insurance, cell phone, etc.) to see if you could get something better.
Save it in an emergency fund.
If you don’t already have an emergency fund, you can start building one by saving this money away for when you need it. Then, if you lose your job, have unexpected costs or a change in income, you can turn to this emergency fund.
How much you have saved in an emergency fund depends on your income, your children (if any) and your monthly expenses. Some experts say you should have at least half a year’s salary.
Pay off high-interest credit card debt.
If you not concerned about losing your job and already have several months of expenses saved in an emergency fund, you can opt to pay off high-interest debt. This can include credit cards, a personal loan or an auto loan. When paying off debt, the avalanche method (tackling the highest interest debt first) is the way to save the money money. However, many people do enjoy the snowball method (tackling the smallest balance first) to achieve wins faster and stay motivated.
Pay down student loan debt.
You can use the money to pay down your student loan debt, focusing on paying off high-interest rate student loans first, such as private student loans.
Payments can be paused for some federal student loans right now, but this doesn’t pertain to private student loans. And even if you have federal student loans, you can still choose to make payments.
There are dozens of ways to pay off student loan debt faster. Here are a few creative examples:
- For private student loans, consider refinancing to potentially lower your interest rate and save money. Be sure to understand the pros and cons of student loan refinancing. If you refinance federal student loans, you’ll lose out on perks including any potential federal student loan forgiveness, income-driven repayment plans, option to pause payments if you become unemployed or other circumstances and a discharge for death and disability.
- If you can trust yourself to pay off the balance completely, use a credit card with cash back rewards. Buy things you do anyways, such as groceries and gas, and then use the cash towards student loan debt. Sallie Mae has a credit card that actually gives you a 25% cash back bonus when you use your cash back to pay off any student loan debt, both federal and private.
- Find a job that offers student loan repayment assistance. Legislation has passed that makes employer student loan repayment assistance tax-free, so it’s likely more companies will offer this.
Save for college.
Don’t put your college savings goals on the back burner. You can open a 529 college saving plan and use this money to invest in your child’s future education. The money will grow tax-free and is not taxed when it is taken out, as long as it pays for qualified expenses. Many states offer tax breaks as well.