Whether by direct deposit or paper check, another round of economic impact payments are making their way into Americans’ wallets. Receiving a lump sum payment does raise the question for recipients: What do I do with it?
When determining this, you’ll want to take into consideration your current financial situation. For some, economic impact money is essential to keep their household running, while others may be on relatively stable financial footing. For ideas on how to use your money responsibly, read on.
You Need the Money to Make Ends Meet
In this scenario, you should take a look at your budget (or make one) to prioritize your spending. Examine each item to make sure it is truly a need (like rent or a mortgage payment) or a want that might have felt like a need before the pandemic hit. Dining out with friends is one such example. After a long week, it might have felt essential to unwind on a Friday night. Today, getting take-out falls into the wants category if you’re looking to trim expenses. Especially now, having at least one streaming service might feel like a need. But if you have multiple subscriptions, it might be time to check usage and cancel the ones that aren’t used much.
Keeping your bill payments current is important and a wise use of the economic impact payment. You want to avoid making late payments (or no payments at all) because of the negative affect it could have on your credit score. Because you might need to stretch every dollar, review your bills and identify those that could possibly be deferred or put on a payment plan. But don’t assume each can be! It’s very important to contact utilities, landlords/mortgage companies, and anyone else you owe to learn about your options. After deciding what bills can be deferred and which ones must be paid, prioritize your list of bills and use your economic impact payment to keep them current.
You Make Ends Meet Without the Money
If you can maintain your bill and loan payments, you have some other options for using your economic impact payment. The first is to create, or add to, your emergency fund, aiming for a minimum of three to six months of net income. You might want to consider covering a longer period of time since there’s no way of knowing the long-term economic effects caused by COVID-19.
A second responsible use of your economic payment is paying down credit card and federal student loan debt. A Visa® balance transfer offer that lowers your interest rate will allow you to pay off other credit cards faster. Our Visa balance transfer rate and terms are consumer friendly, and there is no PSECU balance transfer fee.
We offer two more ideas, if you’re situation allows them. The first is making a charitable donation. Many organizations who depend on in-person events to raise monies are hurting right now. Also, there are many relief funds for healthcare and other frontline workers. A word of caution: Be sure to vet any organization to ensure their legitimacy. Charity Navigator is a trusted source to help you choose where to contribute your dollars.
The last idea we have for using your economic impact payment responsibly might seem to go against most advice: Buy stuff! Our economy is driven to a large degree by consumer spending. If you’re in a financial position to do so, making purchases to help the economy could be another good use of your payment.
For more money management tips, visit our blog. And for more information on the latest piece of legislation recently passed to help Americans manage financial challenges caused by the COVID-19 pandemic, read this news release from the IRS.