A recent survey asking how people spent their coronavirus stimulus package checks reveals that slightly more than half of Americans used it for critical expenditures, while about one-quarter put it toward less urgent financial goals. The rest either haven’t received their stimulus check, or haven’t spent it yet.
As of the week ending May 9, the U.S. unemployment rate was at 17.2%. However, the fact that more than half of Americans spent their checks on essential expenditures suggests that many people are being careful with their money, even if they’re still employed. Here is the breakdown:
|Essential Expenditures||Non-essential Expenditures||To Be Determined|
|Paid bills – 30%
Put in emergency savings – 14%
Bought essentials – 10%
|Paid toward debts – 8%
Non-essential items – 3%
Gave to family/friends – 2%
Gave to charity – 2%
Saved for a home – 2%
Saved for retirement – 2%
Invested in stocks – 1%
Other – 5%
|Haven’t received/spent – 19%|
|Total: 54%||Total: 25%||Total: 19%|
Note: Totals don’t add up to 100% due to rounding.
If you haven’t spent your funds yet or are hoping for another stimulus payment, how you should consider spending it really depends on which situation you find yourself in now.
How you can spend your stimulus check if you’re financially stable
If you still have a steady source of income and an emergency savings account, then it may make sense to put that extra money toward a long-term financial goal like paying down debt, investing for retirement, or saving for a house. You may even choose to donate the money to others in need during this time.
If you’re doing all right now but are less certain about the future, you may want to consider an even more conservative approach.
How you can spend your stimulus check if your financial future is uncertain*
If you’ve lost your job, had a reduction in income, or find that your employment future is unpredictable, then it may be more important to keep your options open and keep as much cash available as possible.
Obviously, your number-one priority should be paying for immediate essential needs. But what may be less obvious is what to do with your stimulus money if you don’t need it right now, but your situation isn’t exactly stable, either. When the future is uncertain, it could be better to hold onto cash instead of putting money toward paying down debt right away. Here’s why.
If you’re close to being maxed out on your credit card and hoping to free up some space on it for future emergencies by paying off a big chuck of what you owe, be aware that the credit card company could still lower your credit limit at any time. This could put you in a tough spot, potentially leaving you with much less credit to buy necessities, and less cash as well.
For example, if you have a card with a $10,000 limit that is maxed out and you use your $1200 check to pay the balance down to $8800, the creditor could lower your limit to $8800—leaving you maxed out on your card with no room to make purchases if an urgent need comes up. You’ll have paid off some of your debt, but you’ll also have lost your ability to use that money if needed.
This is why it could be good option to keep your stimulus money in a savings account if you see any possibility for financial instability in your future. In an emergency, you can use your savings instead of drawing on credit. Credit cards come with interest—but borrowing from yourself is free.
If your debt is so overwhelming that you feel the need to get it paid down as quickly as possible, then it’s probably a good idea to look for a comprehensive solution that can provide more lasting relief than what a single check or two from the government can provide.
Another option for handling a large amount of debt
If you’re only making minimum credit card payments and it’s still hard to afford essentials or you’re worried about falling behind on payments, you may still want to avoid using your stimulus money to pay off debt until your situation stabilizes. Consider putting that stimulus check into savings for now, and then find out if you qualify for the Freedom Debt Relief program. Our Certified Debt Consultants are here to help you understand your options for dealing with your debt so you can find a solution that fits your situation.
- Will We Get Another Stimulus Check? (Freedom Debt Relief)
- 3 Smart Ways to Spend Your Stimulus Check (Freedom Debt Relief)
- Here’s How Americans Are Spending Their Stimulus Checks (Kellogg Insight)
- Will We Be Able to Travel This Summer? (Afar)
*Editor’s Note: This section might seem to run contrary to suggestions made in other posts. This idea is one proposed way of dealing with the very specific situation of spending a stimulus check while facing uncertain job prospects during this difficult time for our economy, and our country.