Have you heard the news? America’s small businesses are getting a major boost from the CARES Act. Because of the coronavirus crisis, business loans are a major component of this government stimulus package. These SBA small business loans offer low interest rates and are ideal for borrowers who don’t have other options available for capital.
Cash payments will also be included in the coronavirus stimulus package. If you make no more than $75,000 as an individual or $150,000 as a married couple, you’ll get $1,200 per adult in your home. As for the kids, they’re worth $500 apiece.
If you make more annually than the limits mentioned above, you still might receive a smaller check. Individuals earning between $75,000 and $99,000 will likely get a smaller payment, as will couples earning between $150,000 and $198,000. Those bringing in salaries above these limits will not qualify for the special payments.
Let’s assume that if you’re still reading this article, you qualify for one of these stimulus checks. So how should you spend the money?
“Ordinarily, when governments are trying to stimulate the economy, a transfer of cash can allow people to spend more, buy more, eat out more, all of which helps to keep the economy growing,” Aparna Mathur, a scholar with American Enterprise Institute, told NBC News.
This is not to say you should order a lobster dinner and buy a new TV with your check. Every recipient has unique financial situations, so the optimal uses of the check will vary drastically.
Here are some possible avenues to consider:
- Cover your immediate business expenses: If your business has been struggling during the crisis, the money from your check could help relieve the strain. Earmark the money for the most pressing needs and resist the urge to spend it on something unnecessary, like a new sectional for your family room.
- Cover your immediate household expenses: Many families have fallen behind on their financial obligations due to the coronavirus pandemic. For some, it’s missing rent or mortgage payments. Others are struggling to afford groceries. In these cases, the money from the federal stimulus check is best used to immediately address these pressing needs.
- Knock out some major debt: If your basic needs are all being met, perhaps you should use the cash to pay off your most impactful debt. For many recipients, this means credit card debt. By eliminating or reducing major debt, you’ll be able to free up money in the future that would otherwise have been used on recurring debt payments.
- Put it in a rainy day fund: This might seem like a strange way to use the money, since we’re already experiencing such turbulent times. But for those who still have steady income and aren’t in financial distress, it could be wise to deposit the money in a high yield savings account. Your goal should be to have enough money available that even with no income, you could meet all expenses for 6 months.
- Bolster your retirement: You could lower your tax bill by contributing to a traditional or Roth IRA. Not only will this allow your stimulus check to grow in an investment account, but it will save you money in the near-term by reducing what you owe the IRS.
- Use it for an investment: Here’s another option that might raise some eyebrows. But if you’re in a secure situation, you could carefully consider investing it. There are some good opportunities available right now, assuming you know how to identify them and capitalize on them.
- Buy gift cards from local businesses: Small businesses are feeling the full brunt of the COVID-19 crisis, with sales dropping across the board. You can provide a local stimulus with your check by purchasing gift cards, delivering immediate cash to businesses in need.
- Make a donation: Because discretionary income has evaporated in many American households, nonprofits have been feeling the pinch. You could provide some relief. Consider making a donation to the CDC, a local food bank, or some other cause you feel passionate about.
- Help a loved one: On a more personal level, many of us have friends and family members who have been drastically impacted by the coronavirus pandemic. You could make a positive difference on the homefront by donating your stimulus check to someone who needs it more than you do.
There you have it—9 different ways of looking at your stimulus check. Evaluate your situation and then decide where your money will have the most upside. Perhaps your preferred choice isn’t even on the list. What matters is that you make it work for you.