the Treasury Department and the IRS said last week that stimulus checks would be distributed over the next three weeks, deposited automatically for most people. A family of four could receive up to $ 3,400, depending on their income.
Stimulus checks are intended to stimulate the economy, but that doesn’t necessarily mean you have to spend yours right away. Here are a few things to consider:
1. If you are still working but don’t have a three-month emergency fund: Save your dunning check. Now is the time to stop unnecessary spending and build your emergency fund. You should have money for at least three months of basic expenses (rent and food) in a high yield savings account. If you don’t, deposit your stimulus check there.
2. If you are still working and already have a three-month emergency fund: Now is the right time to move on. You can find great deals, support your favorite businesses, and help boost our country’s economy. You may also be eligible for the current low refinance rates for home and auto loans. Now is the time to take advantage of these opportunities to reduce your monthly loan payments or shorten your loan term.
3. If you don’t have a job: Use your stimulus check to cover the basic essentials to help you live over the next few months. Remember, Federal Unemployment Insurance will cover four months of your full pay – much higher coverage than ever. Also, consider filing your 2019 tax return. The previous year, the average tax refund was $ 2,725 per return. If you don’t need to spend your stimulus payment – even if you don’t have a job – don’t. Put it in your emergency fund in case your unemployment lasts longer than four months.
4. Postpone your loans if you cannot make all of your monthly payments. You can now defer federal student loan payments, and many lenders allow borrowers to skip payments on mortgages, auto loans, credit cards, and other debts. Check with your lender to see if you qualify and what options are available to you.
5. Use this time at home to assess your financial situation. A quarter of Americans do not know their mortgage rate; almost half have not checked their credit score recently; and one in five doesn’t know if they have credit card debt.
A good financial assessment means knowing all of your debts and the interest rates you are paying. Pay off the debt first with the highest interest rate. Keep in mind that your costliest debt has the highest interest rate, not necessarily the highest payment. Next, budget all your expenses in order of priority.
6. Consider a credit union. The number of Americans using credit unions grew up during and after the 2008 recession. At the end of 2009, credit unions had 89.3 million members and $ 884.7 billion in assets; in 2019, they had 119.6 million members and $ 1.54 trillion in assets. The reason is that many banks were unwilling or unable to meet the needs of struggling consumers.
Credit unions, as nonprofit financial institutions owned by their members, do not respond to shareholders; instead, the profits are reinvested in the credit union for the direct benefit of the members. As a result, credit unions are often more willing and able to work with members in financial difficulty.
Full Disclosure: I am President and CEO of PenFed Credit Union.
7. Stay positive – and wash your hands. Yes, the stock market is down, workers have been made redundant, and a lot of our favorite places are closed. But now is also a great time to save and plan for the future. You can put yourself in a better financial situation. And, now that we have a little more time, don’t forget to wash your hands for a full 20 seconds. Protect yourself physically and financially.
James R. Schenck is President and CEO of PenFed Credit Union and CEO of the PenFed Foundation. PenFed is federally insured by the NCUA. Equal housing lender.