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How to Use Your Stimulus Check

April 23, 2020
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To help people suffering from business closures, stay-at-home orders, and other effects of the coronavirus, the government has decided to send out stimulus checks. If your adjusted gross income is up to $75,000 for an individual or $150,000 for a couple filing jointly, you should receive $1200 or $2400 respectively as well as $500 for each child under 17. 

Individuals earning up to $99,000 and couples earning up to $198,000 will receive a partial stimulus payment, while people over the threshold will not receive anything. 

The checks have already started showing up in people's checking accounts, and if you're anticipating funds, you may be wondering how to spend your stimulus check. Look at these ideas. 

1. Pay Bills

If your business has been shut down or your hours have been cut, you may be behind on a few bills. Ideally, you should use your stimulus check to catch up. To give yourself some breathing room, consider covering a couple months’ worth of bills. 

2. Check on Balloon Payments

A lot of lenders are deferring payments for borrowers during this time. If you have deferred your mortgage, car loan, or any other payments, contact your lender and make sure you understand the terms of your arrangement. In some cases, they may have simply deferred the payment to the end of the loan which means you don't have to worry for now.  But in other cases, you may face a balloon payment in a few months. A balloon payment is simply a large catch-up payment, and if you don't have the funds to cover that, you may risk defaulting on your loan. Contact your lender, and if you have a balloon payment on the horizon, consider paying it with your stimulus check. 

3. Pay Down Debts

All caught up on your regular bills? Then, consider using this stimulus check to pay down debts. To save money in the long run, make payments on the debts with the highest interest rates.  In contrast, if you're trying to improve your credit score, consider paying off credit cards that are closest to their limits. In most cases, your score increases if you reduce the percentage used of total available credit. 

4. Invest the Funds

Alternatively, you may want to invest some or all of your stimulus check. You can claim a tax deduction for investing in many types of retirement accounts such as traditional Independent Retirement Accounts (IRA) or 401(k)s. Even if you choose an investment that doesn't garner you a tax break, you are getting in the markets when they are relatively low. Although there is never a guarantee, historical patterns indicate that the markets always rebound.  

5. Spend Your Stimulus

In addition to helping people, the stimulus checks are designed to stimulate the economy. If you have everything else taken care of, you certainly shouldn't feel guilty about just spending this money. Give a boost to your local economy by ordering take-out from an independent restaurant. Or, buy some new clothes from an online boutique, support an artist by buying some of their work, book a vacation for next year, or treat yourself to whatever sounds fun for you.

Sources
https://www.thebalance.com/understanding-credit-utilization-960451

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.