With millions of Americans filing for bankruptcy due to the coronavirus, stimulus checks have become essential. Even if you’re financially stable, the future is uncertain now more than ever. That lack of clarity has left many people wondering what, exactly, they should do with their stimulus checks. Two common options? Pay down debt or add it to an emergency fund. Here’s how to decide which choice is right for you.
You Might Want to Use The Stimulus Check to Pay Down Debt If…
Your job is stable. While there are no guarantees, if your employment seems stable, you might want to use your check to pay down your debt.
Your savings accounts are padded. If you already have a well-stocked emergency fund and have creeping debt, now might be the time to reduce that amount with this check.
You’ve thought this through. As USA Today notes, once you make a payment on your debt, that money is gone forever. Make sure you think through your strategy before doing anything.
You Might Want to Use The Stimulus Check for Savings If…
Your job is uncertain. If there is any doubt in your mind about your employment, you should probably pad your savings.
Your debt is manageable. You might want to deposit the check in your emergency fund if you can comfortably make the minimum payments. Once things settle down, you can address the debt with larger lump payments.
You’re worried your debt will only increase. If you can’t make payments on bills, you’ll likely end up having to add to your debt at some point. Better to keep making minimum payments and save your check.