July 13, 2024

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Stimulus check: 6 ways to use your $600 payment

4 min read
Stimulus check: 6 ways to use your 0 payment
Stimulus check: 6 ways to use your 0 payment

How will you spend your household’s new stimulus check?

Sarah Tew/CNET

Did you already get your second stimulus check? The direct payment for up to $600 per person and even more for households, has already made its way to the bank accounts and mailboxes of millions of Americans last week, with more on the way this week (here’s how to track your check). The payments come after President Donald Trump signed a $2.3 trillion omnibus spending bill on Dec. 27 that included $900 million for COVID-19 relief

The stimulus checks are arriving nine months after the passage of the CARES Act last March, which included a $1,200 check. Following a five-day delay by Trump on signing in the omnibus spending bill and calling for larger payments of $2,000, the House of Representatives passed a standalone bill to increase the $600 to that amount. The legislation, however, failed to pass the Senate. President-elect Biden says he wants to see larger checks and his stimulus plan calls for even more payments sent to Americans. 

The second stimulus checks began hitting bank accounts on Dec. 31 and will continue processing this week. The agency has until Jan. 15 to send checks out to people who qualify for another payment (here’s who isn’t eligible). Whether you received your stimulus check or are still waiting, here are six ways to make the best use of your money. 

Take care of your immediate needs

Above all else, make sure your immediate needs are met. This includes food, monthly bills, and rent or mortgage. But before you prioritize rent over, say, food, consider that many jurisdictions, utility companies and even banks are offering relief due to the pandemic. See which programs you can take advantage of, then allocate funds accordingly. For example, a federal eviction ban until Jan. 31 is expected to be extended under President-elect Joe Biden.

Save up to pay your taxes

It’s January 2021, and it’s unlikely the IRS will postpone tax filings like it did last year. This means taxes will be due in four months. Stimulus checks will not be taxed according to the IRS, but unemployment benefits will be taxed. If you don’t need to immediately use the $600, keeping it around to help pay your taxes would be ideal.

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Pay down your debt

One way to secure your financial future is to reduce your debt. A significant payment made to pay down a credit card and loan will help reduce the amount of interest paid on an account carrying a balance. The less interest you have to pay, the more funds you’ll have available in the future. But before you do that, check with the debt holders, because some are offering relief, including deferred payments and waived interest. Just be sure to read the fine print, as some of the assistance offered could delay interest rather than forgive it. 

Start or add to an existing emergency fund 

It can’t be stressed enough how important it is to have an emergency fund. As this pandemic shows, the world can change very quickly. The fund should be equal to the amount of money spent on expenses for three to six months. While the $600 stimulus check won’t cover that entire amount, it can be used as a starting point. If you exhausted or spent some of your emergency funds, this second stimulus check can help get you back on track. A simple savings account can be used to keep the money safe. 

Give to those in need

Those fortunate enough to find themselves not needing any of the $600 for themselves should consider giving it to people who do. There are many charities still fighting the pandemic, such as food banks and hospitals. Another consideration is to help out friends and family members who’ve been hit hard by the pandemic. 

Open a long-term investment account for your children

Part of the relief package provides an additional $600 per child. If your family is already comfortable, there’s a way to make use of that money to help your kids’ 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 will come your way if you open one up. 

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