As we are now over a year into the pandemic, it’s time for some real talk about some of the harder things we’re collectively facing, but not talking about all that much. For today, that means thinking about what we’re going to do with the latest stimulus check. Both what we should be spending that money on, as well as processing some of the emotions that come along with it so that we can not feel conflicted about what to do with it and make wise decisions.
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Today I’m talking with Beverly Harzog, an expert on debt and credit card and consumer finance analyst for US News & World Report. Beverly has a great way of making financial subjects–especially emotionally-charged ones, like debt–very practical, and I’m really looking forward to hearing her insights today.
Beverly, thanks for joining us, it’s great to have you here. A lot of people have mixed emotions about receiving a stimulus check from the government because they didn’t “earn it.” You know, it can bring up feelings of guilt. What’s your take on how to frame these payments so that we can think about them clearly?
Kate, that is a terrific question. You know, emotions and money, they’re so connected. And it’s something we really don’t talk about enough. My advice is if you get a stimulus check in the mail, you need to do what you need to do with that. And the right choice for one person might be to use it to stimulate the economy. You know, maybe go shopping. Spend it on whatever you want to spend it on.
But for another person, perhaps they’re in debt and they need to use the check to pay down some bills. Or maybe you don’t really have an emergency fund. This is a great time to do that. So I think that there is no wrong answer about what you do with your stimulus check. That’s a very personal decision. And even if you use this say to pay down debt or to pay your everyday expenses, you’re still stimulating the economy. Because other people are getting paid. So try to think of it that way.
But try to get rid of the guilt because you are certainly within your rights to spend this money the way that best supports you and your family.
I’d love to talk about some specific scenarios, because different listeners will have different situations and you’ve hinted on some of them. But maybe we could do a little bit of a deeper dive.
So what if you are someone who is in dire need of financial help. Like this $1,400 is saving your butt. Maybe you’ve lost your job and you’re having trouble paying rent. What’s the best strategy for making the most of this $1,400. In some ways it’s a lot of money and in some ways it’s not.
Yes, that’s a very good point. For some, it will be a lot of money. But for some, that won’t be nearly enough. So if you’re in that situation where you need this $1,400 just to keep surviving for another month. And let’s face it, for most of us, $1,400, isn’t enough to pay the rent and food. And if you have children, my goodness, that’s really difficult to make the money stretch very far in that situation, if you’ve lost your job.
So if you’re in a situation like that, and the stimulus check maybe helps you a little bit, not a whole lot, don’t hesitate to reach out to the national foundation for credit counseling. That’s nfcc.org. I have sent many, many of my readers to the NFCC whenever they’d been in a situation where they feel they’re drowning. Because the stimulus check might help you for a couple of weeks, you know, to stay afloat. But do not feel any shame about reaching out and getting help. These are unprecedented times. And so many people have suffered over the past year.
Now when the stimulus checks first came out, the first round of them last year, my advice to almost everyone was to save the money. Okay. And yes, it’s called stimulus check. But you know, if you can still pay your bills and save that money so you have an emergency emergency fund, so you could pay bills later. You know, when things pop up unexpectedly. You are still going to be stimulating the economy. Maybe not at that second, but you will in time. So try to think of it that way. Because your first duty really is to use that money the way you need to use it to support you and your loved ones. So try to think of it that way.
But if you are drowning, please reach out for help. If you can’t make your credit card payments, call your issuers. Some of the protections that were in place last year are starting to expire, but we’re starting to see some of them get renewed. So talk to your issuers and find out what they can do for you.
Thanks for sharing that resource, Beverly, that wasn’t something that I knew about it. What was it again?
National Foundation for Credit Counseling and online, you can find it at nfcc.org and you’ll get a free phone call with one of their counselors. You want to be sure it’s an accredited counselor. And if an organization of a credit counseling agency is associated with NFCC, then they are accredited. So it’s just a good place to go to start your search. Find something in your area.
I’ve had readers call them, get the free phone call and get enough information to help them get on the right track. It doesn’t mean you’ve got to go into a debt management plan or anything like that. So you just want to know what your options are. You want to stop from drowning, so reach out for help.
Fantastic. Okay. So let’s say you have a different financial situation. And you’ve mentioned a couple of options of ways we can spend the $1,400 if we’re not drowning. You know, we’re doing basically, okay. Maybe our finances haven’t changed all that much. So you mentioned saving it. Putting in an emergency fund. You mentioned spending it because it is a ‘stimulus’ check.
What’s a thought process that we can keep in mind that’ll help us sort of think about what’s the right choice for us?
That’s a great question. And you know, it doesn’t have to be one thing. You can save a little. You can invest a little. And perhaps you can put some of it away for the holidays. Or go ahead and start spending it on things you’ve got to spend money on this year, such as the holidays.
Or you can treat yourself a little bit. You know, we do need to keep treating ourselves just a little bit and I call that a budgeted splurge. And that depends on what your cashflow is. And if you can afford to do that. But if you’re in a situation where you’re doing okay, and you know, I have been incredibly lucky. I already worked full-time from home. My company is headquartered in DC, so that didn’t change for me. And I was pretty much able to weather the, you know, the, the storm last year. So I feel very, very lucky about that. And many others have sort of just stayed in place in terms of their finances.
I saw an expert the other day go on TV and say, don’t invest this money. Don’t ever invest this money. But you know what that is helping to support your future, your retirement. I think there’s nothing wrong with investing it if that’s what you choose to do. But I do suggest talking with a certified financial analyst. Because investing is not as simple as it used to be. And you can invest a small amount of money, but you’re in that for the long haul. So try to think it that way.
We recently saw what was going on at Robin hood and people making money on Game Stop. When you go into investing your money, you want to think of it though as a long-term situation. Cause you’re trying to get ready for retirement. So that’s one option.
If you’ve got credit card debt. And, you know, there are many people who have credit card debt and they don’t realize they’ve got money. Okay. But they don’t realize that they’re paying compound interest on balances. So they’re just kind of paying the minimum and going about with their lives. But if you’re paying high interest, you’re paying a lot of money. You’re losing a lot of money paying interest on your purchases. And I think when most people realize that, you know, they get really serious about this and try to get rid of it. Because it’s very stressful to have any debt.
So what you want to do is maybe put some of that stimulus check towards the credit card or cards with the highest APRs and start paying those balances down. And you’re in a good situation financially, if you’re paying all your everyday expenses. But get rid of that debt if you can. So, you know, think of the stimulus check is something that you can apply where you need it the most. And it doesn’t have to be to one thing. You kind of spread it out so that you can benefit from that. Because that’s really what the stimulus checks for. It’s for your own financial wellbeing. And only you can decide where you need to put that money.
Fantastic. I like that idea of spreading it around, that way you’re covering a lot of bases. Anything else you’d like everyone to keep in mind as they decide what to do with their stimulus check?
Yes. You know, I was just thinking about this when I mentioned the expert who had said, don’t invest this money. When you hear things like that, that might be the absolute best advice for someone who is drowning in debt. Or lost their job and has not been able to get another one. And with the loss of income, they’re barely squeaking by on unemployment. So if that’s you, that’s good advice. Save that money.
But remember that different experts give different advice. I take a customized approach to personal finance. I even do that with debt. You know, you have to use a strategy that works for you. So I just want to make it clear that choice you make, If it’s the right choice for you and your situation, then you don’t need to feel guilty about that. And don’t let anybody tell you you’re doing the wrong thing.
Great. Beverly for folks who’d like to connect with you and get more of your great advice, where can they find you?
All right. I work for U.S. News and World Report. And you can find me online at money.usnews.com and then click on the credit card channel. And I’m right there. I also have a website, if anybody wants to contact me directly. I’ve got a contact form there and it’s beverlyharzog.com.
Daily Tiny Assignment
I forgot when I was introducing Beverly to mention her wonderful book, which is called The Debt Escape Plan. So if debt is something that’s part of your life, I highly recommend you check it out.
Now for your tiny assignment. It’s super simple. And I want you to do it even if you don’t necessarily believe it to be true. Just say these words, if this is something that you’re struggling with, ‘It is okay for me to receive the stimulus money from the government.‘ I know that a lot of us have a mental block around getting money, quote, unquote for free. We have a real association in our minds between money and hard work.
And so getting a check in the mail from the government can sort of cloud your thinking. If you think, Oh, I’m not sure how I feel about this it can make you not sure what to do about it. So if you can just take a couple of seconds to try and clear that thought out of your mind, I think it’ll help you figure out what the right choice is for you. Again, just tell yourself it is perfectly okay for me to receive this money from the government.