Is putting your check in the bank the best course of action?
In mid-March, the American Rescue Plan Act was signed into law. Among other benefits, this Act provides $1,400 stimulus checks for each eligible adult and dependent in the United States.
Since this stimulus check is most likely the last one Americans will receive during the coronavirus pandemic, it may be in your best interest to use it in a way to help improve your long-term finances.
For many people, the best way to do that is to save the stimulus payment. Here are three signs to help you decide if saving is right for you.
1. You aren't behind on any bills
With the pandemic causing so much economic havoc, creditors have been more willing to enter into payment plans to help. And eviction moratoriums have protected most renters from being removed from their homes due to nonpayment. Meanwhile, mortgage forbearance rules have allowed many homeowners to temporarily stop paying their home loans.
However, many people still understandably fell behind on paying bills. If that's the case for you, your stimulus check can help. If you owe back rent, back mortgage payments, or any other unpaid balance, one of your first priorities should be taking care of your debt. For more information, check out our guide on what to do if you can't afford your bills.
If you're current on your bills, though, then you won't have this pressing financial need to address -- so saving your stimulus check instead could be the best move.
2. You don't have an emergency fund
Another priority for your stimulus check could be to bulk up your emergency fund. Having enough saved to cover three to six months of living expenses could help you avoid stress and financial disaster. This is especially true if your income is reduced, you miss work for medical reasons, or you face any kind of unexpected cost.
There's continued uncertainty around when life will return to normal and the economy will fully rebound. As a result, if you don't have an emergency fund, it's a great idea to save your stimulus check to create one. To learn more about how to get started or to find out the best places to keep your emergency savings, read our guide to emergency funds.
3. You don't have a lot of high-interest debt
If you have high-interest debt, your stimulus check could go a long way toward reducing the principal balance. This could help you become debt-free faster and reduce the interest you pay over your repayment period. If your high-interest debt comes from credit card use, our guide to credit card debt has plenty of advice and tips to help you get out from under this burden.
If you aren't behind on bills, have a solid emergency fund, and don't have high-interest debt, saving your stimulus funds for other financial goals may be the way to go. By putting the money into a savings account, it will be there for you when you truly need it.
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