To help individuals that have been affected by the pandemic, President Trump signed into law a $2 trillion COVID-19 relief bill known as the CARES Act. The law calls for sending a stimulus check to folks and families that meet certain criteria to bring them some relief during these tough times.
If you meet the criteria and receive a check it is important to have a plan in place on how to deploy this much-needed cash. Currently, many families are limiting their spending to basic necessities like food and shelter. In some cases, folks are trying to find a way to save this money in case things get even tougher. In this article, we’ll review some strategies that can be used to deploy these funds.
How much will I get from the CARES Act?
First, it’s important to ensure you know how much you are entitled to receive under the new law. If you are single and you make $75,000 or less, you should be receiving $1,200. Working couples making $150,000 should be receiving $2,400. If you have children, there is a provision to get $500 per child. If your income exceeds these limits you will be receiving less.
We have covered how much you should be getting. Now, let’s explore ideas of what you should be doing with the funds.
Cover the essentials first
Many of us currently find ourselves in a situation where we are living paycheck-to-paycheck. Many folks have lost their job because of the pandemic and the resulting economic crisis. Do you have a good idea of how much you need to cover the basics? A good way to find out is to do an analysis of your last three months and look at your spending patterns. Add up how much you spent on food, utilities, rent, and other basic necessities. The average of these three months should give provide a good ballpark of what that monthly spend is.
It may be the case that you need that check to cover these essentials. If that’s the case, by all means, use it for that.
Create or increase your “rainy day” fund
Studies have shown that many Americans do not have the money necessary to cover an emergency car repair or an unexpected visit to the hospital. A study by Bankrate revealed that only four in 10 adults (41 percent) could cover an unexpected $1000 emergency. The results of this study reflect similar findings by other institutions including the Federal Reserve and the Pew Charitable Trusts. They have also found that many Americans lack “rainy-day” funds.
If your rainy day fund could not cover 2 or 3 months of living expenses, using the stimulus check to pad your savings, maybe the best use of this money. Emergencies and bad things happen. And as they say – problems with money are less.
If possible, in addition to using your stimulus check for this fund, try to make a monthly contribution to this pot, even if it’s small.
Eliminate or reduce debt
If necessities have been covered and if the rainy day fund is in place, another good use of this check would be to pay down existing debt. Every dollar applied to the loan principal is another dollar that will not be generating interest and fees. The smartest way to deploy this cash for this purpose is to pay the highest interest cards first and make the minimum payment on the rest of the cards.
Combine all three
Lastly, it may also make sense to spread the love and use some of the money for all three of these things – covering the essentials, save a little and pay down your debt. If you are unemployed or underemployed it may be difficult to decide how to spend this money. But in this case, it’s even more important to give some serious thought about where to deploy these resources.
We can help
If you have more than $20,000 thousand dollars in credit card debt, our program will be able to help. You can find out more about how the program works here. Or you can call us today at (800) 558-2718 to talk to one of our specialists about your unique situation and your individual circumstances.