The 7 worst ways people use their stimulus checks
The 7 Worst Ways People Use Their Stimulus Checks
Do you remember the super helpful stimulus checks and $ 1,200 direct deposits made this spring? That probably seems like aeons ago, especially if you're still going through a tough time financially due to COVID.
A new aid package could be passed before Congress goes home for the vacation, and it looks like there will be more direct payments - but only $ 600 this time.
While Washington argues over the details, it's a good time to start planning what you would do with a second round of government money. Here are seven options you want to avoid: The worst way people have done the past stimulus tests.
1. Go shopping
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While it may be tempting to burn that "free cash" on something you've always wanted, think twice before getting a fancy new TV and stack of Blu-ray box sets for your Relieve boredom in quarantine.
Even if you don't need your stimulus money right now to cover your monthly expenses, you'll want you to put something aside if your financial situation changes.
Most financial advisors recommend that you keep enough emergency money on hand to cover at least six months of your essential expenses. If you don't currently have an emergency fund, the stimulus check is a great excuse to start one.
The smartest place to keep your emergency savings is in a high yield savings account, so your money earns the highest interest and grows without you spending or investing.
And if you want to buy yourself a little treat, use a free browser add-on that can help you find better prices online.
2. Put it straight towards debt
If you have a lot of debt, you may see the stimulus check as an opportunity to repay a large portion. Normally that would be a wise move, but building emergency savings is more practical right now.
You have other options for dealing with your debt.
The government has cut federal student loan rates to 0% and allowed borrowers to skip payments. However, this relief is slated to end on January 31st.
And if you got your student loan through a commercial lender, you probably had to make your payments all along. Even so, you may still be able to reduce the amount you owe and refinance your loan by a few years.
There are companies out there that will let you compare refinance options for free to easily find a better interest rate that can save you thousands of dollars in interest.
3. Trying to time the market
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The stock exchange has been taking investors with it since the beginning of the pandemic. While using your stimulus check to snap up discounted stocks is not a bad idea, trying to “terminate” the market for quick gains could cost you.
If you discover a rundown stock, there is no guarantee it will recover anytime soon. During this time of instability, government movements, business decisions or growing coronavirus cases can cause the market to collapse again at any time.
If you want to invest some of your relief payment, use an account that will automatically make changes to your portfolio to respond to changes on Wall Street.
A popular investment app offers five different automated investment portfolios with different levels of risk so you can find one that works best for your financial goals.
You can add to your account using a debit card linked to the app. Every purchase with the card is rounded up and the "change" is thrown on your balance to increase your investment.
4. Think only of the here and now
It is true that we live in a particularly frightening time, but future worries are not waiting for anyone.
A few years ago, the Government Accountability Office reported that half of American households 55 and over had no retirement savings. Many others almost don't have enough.
If you're still of working age, it pays off later in life if you invest even 10% of your relief payment in a retirement fund, possibly a 401 (k) or an IRA
Not sure where to start? Find a company that can connect you with a certified financial planner online or by phone. You can also use social distancing to prepare for your golden years.
Your CFP expert will create a personalized plan based on your financial goals and tell you exactly what to do if you want to retire in comfort.
5. Use the money as an excuse to sit back
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Having extra money in the bank can make you feel uncomfortable. The hard truth is that anything can happen during a global health crisis like this - and even a hundred stimulus checks wouldn't cause a family to lose a breadwinner.
The easiest way to protect your loved ones is to get life insurance. Many people think that getting insurance is a complicated process, but it can be as simple as booking a hotel online.
In just 90 seconds, you can find multiple life insurance plans tailored to your family's needs. Depending on how old you are and where you live, you can get $ 1 million for just $ 1 a day.
That's a small price to pay for security.
6. Blow everything up in chain stores
While big box stores are the easiest place to do your shopping during the pandemic, your stimulus check will make a bigger difference if you shop from local businesses instead.
You can save a few dollars on a chain, but failure to support your local economy at this critical time can have long-term ramifications.
If you want shops and restaurants near you to survive the lockdown, you'll need to make every effort to support them as much as possible.
Buy your groceries from independent markets - and use a money-back app to simply snap a photo of your receipt. Order takeaway from various locations near you. And if possible, donate a portion of your aid payment to local organizations that help individuals and businesses.
7. Get hold of useless supplies
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Panic buying is a natural response, but using your stimulus check to hoard things you don't need is expensive and wasteful.
Take, for example, all the people who buy bottled water. The water in your tap is treated and completely drinkable.
Instead, make sure you have an adequate supply of essentials in case you are exposed to the coronavirus and need to isolate yourself for two weeks. Be sure to grab:
Non perishable food for you and your pet.
Prescription and over-the-counter drugs.
Household cleaning products for disinfecting your living space.
If you want to buy these items online, download a free tool that you can use to instantly search thousands of sellers to find the better deals for you.
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