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How to Use your Relief Check and Other Stimulus Tools to Prepare for a Better Financial Future

Updated: Nov 10, 2020

Making the most of your Stimulus check


Millions of Americans are receiving stimulus checks right now. If you haven’t received yours, you can check the status here. But what do you do with the cash when it hits your account? The answer, of course, depends on your current situation.


Basic necessities are the top priority


Putting food on the table and paying all of your necessary bills are the obvious priorities. But there are many ways to cut costs in this area.


Even if you still have a job and are earning money, making small sacrifices and shopping a little more frivolously than normal are great first steps to saving funds and being prepared financially. Buying in bulk, clipping coupons, and foregoing some of our favorite luxury food items are all good ways to reduce your spending burdens and the burden on grocery store employees.


These tips also extend well-beyond COVID-19 and are not dependent on CDC recommendations. In fact, you may have already realized how much money you are saving by not going to your favorite restaurant for drinks and dinner. By cutting out luxury items at the store and cutting back on eating-out when our restaurants eventually open up, you can be better prepared financially now and in the future. Try to think about your future, rather than instant gratification.


If your basic needs are met, saving your stimulus check is your best move. As discussed more below, there are countless savings options and there is no need, at this moment, to use the stimulus check if you still have your job and are still able to provide for you and your family.


Bill and Mortgage payment relief


What if you do find yourself without a job right now or you are experiencing a temporary pay cut? If you are unable to pay some of your most crucial bills, such as your mortgage, car payment or essential utilities, check with your provider to see if they are offering a form of payment forgiveness or deferred payment option. Most creditors and lenders are offering some form of payment forgiveness or deferred payment options, which are intended to help customers free up enough cash to cover their essential expenses. But it’s important to read the fine print to fully understand all unique repayment provisions.


Reports have shown that some lenders are requiring all payments (known as acceleration) due at the time the forbearance is over, which could be a huge financial burden once the economy restarts. Our advice is to speak directly with your mortgage provider or creditor to find out what your options are and which one works best for your particular situation. But do not hesitate to have the conversation.


It’s always best to be upfront, open and honest about your situation rather than avoiding uncomfortable discussions. Missing a mortgage or bill payment without discussing with the lender or creditor before missing the payment can have huge implications on your creditworthiness and future financial wellness. Usually, a short call is enough to resolve some of the most frightening financial problems. This is especially true in the current economic environment where there is significant corporate compassion for those in need.


Student loan forbearance


The federal government has suspended all interest and payment obligations for federal student loans until September. This does not apply to private loans.


If you have federal student loans, the ultimate question is whether you should take advantage of the deferred payment obligation and hold onto the extra money or continue making payments to begin paying down the principal balance.


The answer depends on your personal circumstances. As the Wall Street Journal detailed, there are many benefits to continuing to make your payments including paying down your principal and paying off your loans earlier. Clearly, however, if you have lost your job or are at risk of losing your job (which many of us are) it’s a good idea to hold off on the payments and save the money until there is more financial certainty in your life. This is especially true if you are like most people and have little or no savings. If you are in this situation, this is a time to start a solid savings account to be prepared in the current environment and have a bit more cushion in the future.


2019 Tax Returns


Do you really need to do home repairs right now? Does your basement really have to be finished during a pandemic? Is your 55 inch TV so bad that you need a 70 inch? The answer is no.


Any tax return you have already received or will receive should be used only for essential needs and if you still have your job, we recommend saving the return. Again, a lot of us come up short when it comes to our emergency savings so using the return money to start a savings account is a great idea and will put you ahead when the COVID threat subsides.


There are countless resources online that permit you to open a savings account from your computer with reputable banks. In fact, a simple Google search will turn up hundreds of results with leading financial institutions in the US. And remember: the tax filing deadline is now Wednesday, July 15, 2020.


As always, be smart where you send your money and always confirm that your bank is registered appropriately and lawfully insured.


Unemployment options


If you are like millions of Americans now facing furloughs or job losses, your state and federal governments have measures in place to assist you. The federal government is backing state programs by providing unemployed Americans with up to $600 a week and state programs offer other options, usually based on a tiered system using your former salary as the benchmark. Although these measures are only temporary, unemployment can certainly bridge a gap in employment to ensure you meet your financial obligations and keep your family fed. Again, do not be ashamed to ask for this help if you are truly in need.


Adjusting your 401k contribution


As a general rule, you should always contribute at least enough in your 401k to receive the maximum employer match (it’s free money and it forces you to save for the future). If you do not need the money to pay your essentials, you should definitely keep your contribution going. But in these tough times, reducing your contribution can free up cash and provide you some relief if you are having financial difficulties. This isn’t the most advisable move, but if you’re struggling to pay for the essentials it may be enough to provide needed temporary relief.


Subscription Services


Monthly subscriptions have a way of compounding over time. We sign up for a great service, enjoy it, and the charge continues month over month. Eventually, we become blind to these charges and end up being billed more than we ever expected. Now is an excellent time to review your subscriptions and cancel the non-essentials. Though we are not advocating to cut your Netflix account during a quarantine there are definitely subscriptions that deserve your attention to cut costs. If you have Netflix or Hulu now may be a good time to consider completely “cutting the cord” if you haven’t done so already and removing your cable box. Today, cable and satellite are generally regarded as offering poor value for the price, given the availability of cheap internet and streaming services.


What’s Next?


We believe in saving and spending in an efficient and conservative manner regardless of how much money you have or where your money is earned or provided. And we know our employers can eventually help us achieve this goal.


We all want our loved-ones to stay physically healthy during this unique and challenging time but it’s more important than ever to also manage your financial wellness. Along with the savings options discussed, employers must offer financial wellness programs to their employees so we can develop and pursue a clear path to excellent financial health.


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