CNBC — A new stimulus check is in the works for millions of Americans.
If you’re eligible for a payment, it may feel either like a life raft or a sudden windfall, depending on how Covid-19 has affected you and your family.
When that sudden windfall of six hundred (600) dollars from the United States government hit your mailbox:
Because the second stimulus check stands to be just half the size of the first, it may not seem like a lot of money.
But that doesn’t mean it can’t make a meaningful difference to your financial health, provided it is used the right way.
Good for CNBC not getting swept up in the fever of a general public going wild for the massive cash influx they're about to receive. As we speak, travel sites across the internet are crashing every 2 seconds as people rush to book their dream trips to various vacation spots around the globe, flying first class to get to 5-star hotels. They could get a lot of analytics mileage out of some easy clickbait listicles like "top 7 ways to ball out like your favorite celebrity with 30 $20 bills." But this is what CNBC is all about. Shrewd financial planning. They're not going to come out and just straight up endorse goin' buck in the club like they may want to. They're supposed to be the adults in the room, the parents who tell you "not to spend it all in one place" or make comments about "not burning a hole in your pocket" especially now when you can't afford new pants.
It's admirable, trying to stick to your principles and your company's mission statement no matter what is going on in the world. And people would be smart to listen. To things like...
Why have $600 now, when you could have more than $600 maybe in a future you might not make it to?
“If you’re jobless, you should obviously pay for one of three things, either shelter, food or medication,” Winnie Sun, co-founder and managing director of Sun Group Wealth Partners in Irvine, California, said of the stimulus checks.
If you’re lucky enough to not be in that situation, then you can put the money to work to help you in the future.
“You could do a lot more so that it’s not just $600,” Sun said. “It has the potential to be larger later on.”
I get it obviously. It's been A YEAR, people are struggling, there are lines across the country for food and water, people deciding between their life-saving medication and life-required meals. Shady landlords are sneakily evicting entire families from their homes, and the ones lucky enough to to stay know it's just delaying the inevitable. But now… there's been a miracle: Congress AKA "The Professional Good Samaritans" aka "#RiseandGrind for the American People" are close to passing their SECOND coronavirus relief package, just 7 short months after they grinded out their first one.
No, they didn't hold it against the American people who were so irresponsible they couldn't stretch $1,200 (maximum) out for more than half a calendar year just because they "had no income". Despite knowing those people could have easily just picked themselves up by their bootstraps and gotten a nonexistent job in a non-functioning industry while forcibly locked down in their homes, they sat down at the table (in the room next to the one with the machines that literally print money, adjacent to the internet cafe) in good faith to negotiate just how much they could spare for their starving, dying constituents.
They could have passed out tiny amounts that would have covered two trips to the grocery store or 1/8th of one month's rent.
But no. They went with $600.
So first, consider yourself grateful. Second, maybe take these tips seriously.
The payments are said to be around $600 per individual, down from the $1,200 sums that were authorized by Congress in the spring, according to the latest reports out of Congress. Lawmakers are continuing to negotiate on new coronavirus relief aid.
That’s as 20.6 million Americans were receiving unemployment benefits as of Nov. 28. First-time claims rose by 885,000 for the week ending Dec. 12, the biggest one-week increase since Sept. 5.
At least CONSIDER what kind of example you're setting, before you rush to the computer to "online shop" for luxury items like groceries and an apartment to live in. Before you click purchase on those food items for your children, think about what kind of message you're sending them when you have the option to instead knock out 5 months' worth of minimum payments on your maxed-out AmEx at 21.99% APR.
If you have credit card debt, start by using the stimulus check to pay that down, said Roger Ma, financial planner at Lifelaidout in New York and author of Work Your Money, Not Your Life.
Those accounts can often come with interest rates of 20% or more, so knocking down card balances will give you an immediate return.
“It becomes a slippery slope when that’s accruing every month and the balance just keeps getting bigger,” Ma said. “The sooner you can extinguish that, the stronger your financial position will be.”
True, you can't eat "slightly improved financial position" but short-term thinking is loser thinking. And sure it may be the biggest emergency of your lifetime right now, but just think….what if you get lucky and survive it. Then what happens if ANOTHER emergency happens?
If you already have your credit cards under control, next think about beefing up your emergency savings, Ma advises. The rule of thumb tends to be having three to six months in cash in an online savings account that you can quickly access.
During the Covid-19 pandemic, however, you likely want to strive to have even more set aside — up to 12 months’ worth of living expenses — in case your income suddenly runs dry.
You probably won’t go from two months to 12 months in savings immediately, so you might also want to think about cutting some expenses to help get there, Ma said.
The kids will understand a few extra months of hunger pangs when you show them the statement to the savings account with 600 untouched dollars in it to cover two and one-half textbooks for one class during one semester of their college education.
And again, sure, you could argue that it's more ideal to look up in late-December and see a roof there instead of open air. But it's just 5 short months until temperatures rise above freezing; it's only, what, 10-30 years before retirement? (Assuming you find another job after getting permanently furloughed.)
Not all of the stimulus check has to go to one purpose, according to Sun, who said she likes the idea of putting some of it towards emergency savings and some toward retirement savings.
Ideally, that retirement money could go into a Roth individual retirement account, she said, which can also serve as a backup emergency savings. Of note, Roth IRAs come with some rules. You have to meet certain income thresholds in order to invest in one of these accounts. Certain qualified penalty-free withdrawals can only be made after five years.
Just saying, it's a lot easier to be homeless now than when you're 65. Those old bones don't settle in to the concrete the way they do when you're younger.
Ok ok…CNBC was young once too. They can't FORCE you to listen to their incredibly sound advice no matter how realistic their understanding of the spending power of 600 dollars in 2020. Just be aware, there IS a smart way to buy one of those dream items you've had on your bucket list, you've just been waiting for the moment you get lucky and receive a government stimulus check 10 months into a global pandemic. You know, things like ummm off the top of my head thinking of the most common items that my friends and I sit around dreaming about one day having ummmm shares of a company on the stock exchange and….skis.
Of course, you may be tempted to do something more extravagant with the money — say, buy a new pair of skis or invest in a favorite company’s stock.
Yeah, be smart about buying your stocks and skis. First piece of advice:
1) skip the stocks, you can't get that much.
Because it's six hundred fucking dollars.
Instead, find a sick deal on a webcam.
For retail items on your wish list, you may want to put aside a portion of the stimulus check and then wait for a good deal, Sun said.
Rather than buying individual stocks, it would be preferable to instead focus on your retirement savings or your children’s college savings, she said.
“I do think it would be a mistake to buy individual stocks with it, because the amount’s not that large,” Sun said.
Another great way to invest the money that will reap returns: Invest in yourself, whether it be an online course, book or even a new tool like a webcam, Sun suggests.
However you choose to spend your money, it's your decision and I wish you the best. CNBC just wanted you to know all the options available to you. Just a quick reader's guide to flip through while you're just about halfway through the 7 mile long line for bread.
“That’s definitely a smart way to use this money,” Sun said.