We’re sure everybody is wondering about their stimulus checks (or Economic Impact Payment) and many have begun to entertain their money-spending activities as they consider ways to spend their stimulus checks. With talk about money filling the air, people are excited about the idea of having more money in their bank accounts and pockets.
The team here at Prospect Financial Solutions is proud to be a tax and accounting firm in the Inland Empire; we understand finances, and that includes offering practical guidance on how you can spend your 2020 stimulus check is beneficial for you and those around you.
In this two-part discussion, the Prospect team will be discussing planned and spontaneous ways you could use your stimulus check. Today, we’ll be focusing on planned ways you could use that cash. But, before we get into the money-spending, it’s important for you to know whether or not you qualify for a stimulus check. We wouldn’t want you to get your hopes up only to find out that you don’t qualify. With that in mind, we’ll answer some general questions to help you determine if you qualify for a stimulus check then we’ll consider how to spend (or save) that money.
Do I Qualify for a Stimulus Check
According to the Forbes website, you qualify for a stimulus check if you filed for taxes this year or last year. Regarding the amount received, if you’re an individual, the amount would be $1,200; if you’re a married couple, the amount is doubled to $2,400. Your income will also determine your eligibility to receive a check or not.
A great aspect of this check is that you don’t need to do anything to “claim” your check. If you’ve already filed a tax return then the IRS will automatically send a check directly to your mailing address or will directly deposit it into your bank account within a few weeks or months depending on the preferred method.
If you haven’t filed your taxes yet, you still have time. As long as you file, you’re eligible to receive a stimulus check. For more information on whether you qualify for a stimulus check or not, check out this Forbes page that breaks down the eligibility criteria. You could also check out Prospect’s Stimulus Check FAQ on our website.
How to Spend Your Stimulus Check
There are both planned and spontaneous ways to spend or save your stimulus check. Today, we’re focusing on ways you can use your check in a strategic, calculated way. You could consider this as the more the “serious” of the two-part article (for our more calculated individuals…this one is for you).
When it comes to deciding on the best way to use your stimulus money, the Grow website summarizes our perspective on stimulus spending well: Experts say the best use of your stimulus money will depend on a number of things, including your employment situation and your debts.
Let’s consider some considerably responsible ways you can spend your $1,200 (or whatever amount you qualify for) once you receive it. And please keep in mind that although we’re using words such as “responsible” and “calculated” to refer to this part-one article, this is not to say our part-two blog on financial spontaneity is the opposite of being responsible and calculated; we’re simply creating a distinction between spending in a more calculated manner versus spending in a more carefree way. With that in mind, let’s talk money!
Planned Ways To Use Your Stimulus Check
- Fund an emergency savings account.
If you can afford to do so, put some money from your stimulus check into an emergency fund. You can put this money either into an existing fund or one you’re starting from scratch.
COVID-19 has reminded all of us that there’s no such thing as being too prepared. Putting some of your stimulus money into an emergency fund is smart because we recognize that emergencies arise at unexpected times, and being able to use that cash during an emergency is not only convenient but also stress-relieving.
For more information on how you can use your stimulus check in this way, visit Bankrate.
- Replenish your emergency fund.
We talked about starting an emergency fund, but now we’re focusing on replenishing your emergency fund.
Many people over the course of these last several weeks (and even months) have been prompted to dig into their emergency funds because, well, the world’s been catapulted into an unexpected state of emergency. This means emergency funds have dwindled for many, and for some, emergency funds are completely wiped out.
There’s never a better time to have an emergency fund than now–downturns and unexpected events like these are what these funds are built for. Typically, an emergency fund consists of three to six months worth of expenses. Sometimes, it can cover an entire year. Now might be a good time to add extra money to your emergency fund, or replace any money you’ve had to use.
Having those savings can add a level of comfort in turbulent times, and will also be a useful asset if you find yourself with a medical crisis or job loss. With no telling just how far economic impacts of the coronavirus could go, putting some of this check into an emergency fund could be helpful — especially if it can grow with interest in a high-yield savings account. Visit Business Insider for more information.
- Pay high-interest credit-card debt off.
In a recent Bankrate survey, just four in ten adults in the United States (41 percent) would cover the cost of a $1,000 car repair or emergency room visit using their savings.
Not receiving a paycheck and still having to purchase necessities for an unplanned emergency is bound to make some people use their credit cards for these purchases. If you fall into this group, try to pay the bill as soon as it’s due or as soon as possible.
There’s no doubt this recent pandemic has forced many people into accruing unexpected dept, so you can use the stimulus check to pay your bills (or a portion of them) that accumulated during the period of time that your unemployment started, if applicable. Visit Bankrate for more information.
- Pay your taxes.
The deadline for filing and paying income taxes has been pushed back to July 15. Those who haven’t filed–and will owe the government money–could use the stimulus check to cover their tax payment! (Hello, responsibility!)
If you haven’t already saved for federal and state income taxes and are facing financial hardship, consider giving the money right back to the government. This might not be everyone’s favorite way to spend their stimulus check, but it is practical and convenient for you in the financial long-run.
If you’re curious about paying off some government-owed money using the stimulus check, visit Cnet for more information.
- Give to those in need.
Those fortunate enough to find themselves not needing any of the $1,200 for themselves should consider giving it to those who do.
Yes, we’re talking selfless, sincere spending. There are many charities fighting this pandemic such as food banks and hospitals. This option is not only selfless but also gives you the opportunity to help those who might not have the financial freedom to even help themselves.
Another similar consideration is to help out friends and family members who have been hit hard by the pandemic. Visit Cnet for more information on how you can use your 2020 economic impact payment to help those in need.
- Open a long-term investment account for your children.
The Simpsons said it well: Won’t somebody please think of the children? Part of the stimulus package provides an additional $500 per child. If your family is already comfortable, there is a way to make use of that money to help your children in the future.
“Provided you don’t need this money, consider opening a 529 plan for your child,” said certified financial planner Marguerita Cheng. “Your state may offer a tax benefit. This money can grow tax-free. If appropriate, you can even contribute modest amounts of, say, $50 to $100 regularly.”
To start a 529 plan, contact your bank or investment firm to see what they have available and what benefits you can have opening one up. Feel free to visit Cnet for more information on using this check toward your child/children.
- Donate it (if you can afford to).
Similar to our friends over at CNet, if you could afford it, donate your stimulus money. Food banks and other charities are going to see a rising demand for their services, but their budgets were set before the pandemic started.
“If you’ve kept your job and [already] have an adequate emergency fund, you might want to consider donating a portion of the stimulus check…,” said Doug Garrison, a senior wealth adviser at Investec Wealth Strategies in Houston, Texas. “Times such as this call for compassion and solidarity.”
Visit Market Watch for more information.
- Prepare for the Holidays.
If you’ve got some extra money from this check, you could make an additional deposit into your Holiday Club savings account or open a new one.
This could motivate you to regularly make additional deposits over the coming months. Whatever you save in this account will go a long way toward avoiding credit card debt during the upcoming holiday season.
If having a financially stress-free holiday sounds like something you’re interested in, visit Rutgers for more information.
Do You Know What to Do With Your Stimulus Check Now?
After reading this article, we can see that there are many great ways to spend your stimulus check once you receive it! And Prospect Financial Solutions is happy to assist. Understanding how you can spend your 2020 stimulus check could make having this extra money enjoyable instead of potentially stressful or confusing. If you have questions about taxes or would like more information about the stimulus check, contact us.
The Prospect team wants to remind you that this is a two-part discussion. In the next article, we’ll specifically be sharing spontaneous ways you could use your stimulus check. Stay tuned, because we’ll still be talking money.