7 ways to spend your $1,400 stimulus checkMarch 18, 2021
included a for those (check here to ). The are Wednesday and on Monday — Biden said there will be .
The IRS is well on its way to hitting that and said Wednesday it already sent 90 million payments via direct deposit with 150,000 paper checks in the mail.
With the money in hand, the question is what to do with it. We have some suggestions on what you could use thefor.
Pay for your most urgent needs first
The first priority is going to be whatever is vital for you to live. Buy some groceries, supplies for the family or pay for your housing. If that’s covered, then work on your bills. Prioritize what accounts to pay and try to get current. Make sure utilities are up to date so that the light, water and heat stay on.
While this $1,400 may not take care of every financial obligation you may have, it can help to give you more time if you need it. Keep in mind that the eviction moratorium has been extended, and depending on your situation, you could have a tax return coming thanks to theas well as the .
Set some money aside to help pay your 2020 taxes
Speaking of taxes, IRS is reportedly planning to delay it by a month. This would give more time for tax filers to make use of the benefits in ., although the
Two provisions in the plan that will be a big help are theand the . Families can receive a credit on their taxes of up to $3,600 a child as long as the family makes less than $150,000 a year. Those who were out of a job last year and received unemployment insurance can exempt the first $10,200 on their taxes.
Both can save taxpayers money, but if you still owe, the $1,400 will help take care of that tax bill.
Pay off your credit cards and loans
One way to secure your financial future is to reduce your debt. A significant payment made to pay down aand 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.
If you’re wondering how to prioritize your debt, there are two options to consider: the snowball method and the avalanche method.
“With the snowball method, you eliminate debts one by one, starting with the smallest. This method is motivating as you can knock down the small debts first and it helps you build momentum, however, you’ll end up paying more interest if your highest-balance cards also have the highest interest rates,” said Trina Patel, financial advice manager at Albert. “And with the avalanche method, you pay the debts with the highest interest rates first while still paying the minimums on all other cards. This method is great if you are looking to save the most on interest charges.”
Start or add to an 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. The $1,400 likely won’t cover that amount, but it’s a good starting point. An ideal place to keep the money is a where it’s easily accessible.
Now if you had to dip into your savings account in the past year, it’s time to rebuild.
“You want to make sure you are positioning yourself to get back on your feet quickly when the economy starts improving. This means cutting down on unnecessary purchases and building a cash buffer of 3-5 weeks of expenses,” said Corbin Blackwell, a financial planner at Betterment
Once you get some breathing room then it’s time to build back those savings up again.
Open a long-term investment account for a child in your life
Part of the relief package provides additional money 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.
Invest in yourself for the long term
The $1,400 stimulus payment can be a great starting point for an IRA or other. By letting that money grow and contributing a bit each month, you could have a nice nest egg by the time you retire.
Gift some or all of it to those in greater need
Those fortunate enough to find themselves not needing any of the money for themselves should consider giving it to people who do. There are many charities still fighting the pandemic, such as. Another consideration is to help out friends and family members who’ve been hit hard by the pandemic.
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