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The Best Ways to Use Your 2020 Stimulus Check

April 13, 2020

Have you heard about the government stimulus check coming in 2020? Do you know how much money you expect to receive? Maybe you already have some ideas of how you can use the money. When you get newfound money, you should always consider the best ways you can spend so that it will pay off for you now and in the future. Here are a few tips for how to spend your 2020 stimulus check. 

 

By Caroline Farhat

 

What is the Stimulus Check?

The COVID-19 pandemic has caused a major financial impact. Experts say we’re heading towards a recession, if not already experiencing one. In an effort to stabilize the economy, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March. This provides, among other benefits, a stimulus check. Here is the information you need to know about the government stimulus check: 

 

Who will receive a check?

  • Eligible adults earning up to $75,000 will receive a check for $1,200. 
  • Couples earning up to $150,000 will receive $2,400.
  • Families will receive $500 for each child under the age of 17, if they meet the income requirements.
  • The check amount is reduced for earners making over $75,000 and disappears completely for individuals earning $99,000 or more. 
  • For couples earning between $150,000 to $197,000, they will receive a reduced amount. Couples earning $198,000 or more will not receive a check. 

 

What income is this based on?

  • The income thresholds to determine eligibility for the stimulus check is based on your 2019 adjusted gross income, or 2018 if you have not yet filed your 2019 taxes. 
  • When can you expect the money?
  • Although it is technically called a check, if the IRS has your banking information from your tax return, you may receive a direct deposit as early as mid-April 2020. However, if a paper check has to be mailed, you may not receive the money until May or later. As of April 13, 2020, the IRS is preparing to provide a tool on their website to track the status of your stimulus check. 

 

The Best Ways to Use Your Stimulus Check

Once you receive the money, here are some of the best ways to use it to help you financially:

 

1. Pay bills

A Pew Research Center study predicts 38.1 million U.S. workers are working in an industry that will most likely feel an immediate impact from the pandemic, including layoffs or reduced hours. If you have been laid off or if you’re uncertain how your job may be impacted, it is time to look at your emergency fund to examine how many months of basic living expenses you have saved. If you do not have an emergency fund, you should use the stimulus money for your basic living expenses, including rent or mortgage, food, or necessary household items.

 

2. Start or Add to Your Emergency Fund 

If your job is safe from layoffs and you have a healthy stream of income still coming in, you should consider using the stimulus money to start or add to your emergency fund. Financial experts suggest it’s best to have six to eight months of living expenses in your emergency fund. It can come in handy if you are dealing with a sudden job loss or an unexpected expense, like a car repair. To determine the amount you need for your emergency fund, do the following:

  1. Add up your living expenses for a month, including your mortgage or rent, car payment, money for food and gas, and any other necessary monthly expenses you pay.
  2. Multiply your monthly amount by 6 (or 8 if you’d like to aim higher).

 

For example, if your monthly expenses are $3,500 and you want to save a six month emergency fund, you will need to save $21,000 in a savings account. The stimulus check you receive can be a great foundation for a healthy emergency fund. 

 

3. Pay Down Debt

If you feel secure in your job and have an emergency fund, using your check to pay down debt may be a wise option for you. Look to see what debts have the highest interest rates and tackle those first. If you have student loan debt, research whether refinancing your student loans makes financial sense for you. In many cases, you may be able to lock in a lower interest rate and save on your monthly payment, as well as the total amount you spend on the loan. To see what you may be able to save, check out our student loan refinance calculator.* Lowering your expenses, especially in this uncertain economic time, is always a good financial decision. 

 

4. Invest

If you have a stable paycheck, a strong emergency fund, and no debt or at least a plan to tackle your debt, spending some of your check on investing in a retirement account is not a bad idea. Stock prices are low so your money will go further if you invest now. Note: This option is only recommended if you are able to live without the money you invest for many years.  

 

5. Donate and Support Local Businesses

If you are in a good financial situation with a stable paycheck and have the ability to help, think about donating some or all of your government stimulus check. You can donate to charities that are helping others that have been negatively impacted during this pandemic. Tip: Be sure to verify the charity is legitimate as unfortunately scams do happen! Another great use is to support local businesses in your neighborhood. Use some of the money to order takeout from local restaurants that are undergoing a large economic loss. Or consider buying gift cards from local stores or restaurants that may not be open at this time.

 

The government stimulus check may be helpful during this difficult time to help pay basic necessities or start you on a good financial path. Use your check for one or more of these uses and a brighter future will be ahead!

 


 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

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Current LIBOR Rate
2020-10-19
Current LIBOR Rate Update: October 2020

This blog provides the most current LIBOR rate data as of October 19, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

 

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

 

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

 

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

 

Current 1 Month LIBOR Rate – October 2020

As of October 19, 2020, the 1 month LIBOR rate is 0.15%. If the lender sets their margin at 3%, your new rate would be 3.15% (0.15% + 3.00%=3.15%). 

 

Current 3 Month LIBOR Rate – October 2020

As of October 19, 2020, the 3 month LIBOR rate is 0.24%. If the lender sets their margin at 3%, your new rate would be 3.24% (0.24% + 3.00%=3.24%). 

 

Current 6 Month LIBOR Rate – October 2020

As of October 19, 2020, the 6 month LIBOR rate is 0.25%. If the lender sets their margin at 3%, your new rate would be 3.25% (0.25% + 3.00%=3.25%). 

 

Current 1 Year LIBOR Rate – October 2020

As of October 19, 2020, 2020, the 1 year LIBOR rate is 0.35%. If the lender sets their margin at 3%, your new rate would be 3.35% (0.35% + 3.00%=3.35%). 

 

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

 
 

*Subject to credit approval. Terms and conditions apply.

 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Man feeling overwhelmed by student loans
2020-10-15
What to do When Your Student Loan Payment is Overwhelming   

Having student loans is not unusual. In fact, 45 million people have them. It’s also incredibly common to feel overwhelmed by your student loan payments.   A survey of student loan borrowers found that almost 65% of respondents said they lose sleep because of the stress caused by their loans. If you find yourself overwhelmed by your monthly student loan payment, there are some options you should consider to lessen the burden.   Before you can explore alternatives, however, you need to know the types of loans you have. Certain options are only available for federal loans as opposed to private loans. Check the Federal Student Aid website to determine any federal loans you may have, and request your free credit report to see any private loans. Once you’re familiar with your loans, you can consider new courses of action.  

Create a Budget

If you don’t already have a budget, create one! This will allow you to see if you can afford your current student loan payment. It will also show you areas where you’re spending unnecessarily. If you find there just isn’t enough income to cover all your necessary expenses, then you can begin working on different ways to reduce your student loan payment.  

Research Different Payment Plans

If your federal student loan payment is overwhelming, consider switching to a different payment plan. When you initially begin repayment, your loans are automatically put on the standard repayment plan. On this plan, your payments are based on a ten-year repayment term.   A Direct Consolidation Loan can help you change your payment plan to help make your payment more affordable. It can also help consolidate multiple federal loans into one loan. (Note: Consolidating your federal loans is different from student loan refinancing, discussed below.)   This will help you qualify for certain longer repayment plans, resulting in a lower monthly payment. One of the drawbacks of extending your payment term is you will end up paying more in interest costs over time.  

Income-Driven Student Loan Repayment

Certain loans are eligible for income-driven repayment plans. They can help make your payments more affordable and are based on your income and family size.  

Graduated Student Loan Repayment

If an income-driven repayment plan does not work for you, you can change to a graduated repayment plan. Your payment will begin low and increase over time for a ten-year term.  

Extended Student Loan Repayment

Another option is an extended repayment plan. To qualify, you must have certain loans over at least $30,000. Your payment may be fixed or may increase over time for a 25-year term.  

Look Into Refinancing

If you have overwhelming private or federal student loan payments, consider student loan refinancing. Refinancing may lower your interest rate and reduce your monthly payment. This is a good option even if your current payment fits your budget.   Refinancing can help lower your monthly payment, and can also save you thousands of dollars in interest over the life of the loan. Refinancing means obtaining a private loan to pay off your existing student loan or multiple loans.   Student loan refinancing differs from consolidation, which is only for federal student loans and may not necessarily reduce your interest rate. You can refinance private or federal loans, or both, and can also change your student loan repayment term to better fit your needs.   Here is an example of how refinancing can save you money:   If you have $65,000 of student loans with a 6% interest rate and have 10 years remaining on your loans, you will pay approximately $722 per month. If you refinance and qualify for a lower interest of 3.61%, your monthly payment would be reduced to approximately $646 per month. This equals savings $76 per month in savings. You will also save more than $9,000 in interest over the life of the loan.   To see how much you could save, try ELFI’s Student Loan Refinance Calculator.*  

Increase Your Income

Of course, increasing your income is easier said than done. If your student loans payments are becoming overwhelming, however, it may be a necessary step. Increasing your income through overtime hours or a side hustle can make your payments more manageable. A side hustle can be as easy as babysitting or dog walking, or more involved like starting a side business based on a passion.   If you haven’t begun repayment on your loans, but know you will face a significant loan payment after graduation, consider these steps:  

Build a Budget Early

Start a budget before repayment begins that includes your future student loan payment. This will allow you to see if you will be able to comfortably afford your payment. It will also help you build an emergency fund and a strong financial foundation.  

Seek Employer Student Loan Benefits

Look for an employer that offers student loan assistance. The number of companies that are offering student loan benefits is increasing, although the benefit is still rare. Some offer monthly benefits that can help you pay your loans off faster. Others offer a yearly benefit amount for a certain number of years. Either way, extra money from an employer to help pay loans will help you reduce your loan amount faster.  

Work Toward Public Service Loan Forgiveness

Apply for employment that may qualify for forgiveness. If you have federal loans, certain employment can qualify for forgiveness under the Public Service Loan Forgiveness program. Certain loans and types of employment are required so be sure to pay close attention to the requirements.  

Bottom Line

If you have an overwhelming student loan payment, explore your options to reduce your payment while furthering your debt-free journey.  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Millennial woman learning how to invest
2020-10-09
How to Start Investing: A Millennial’s Guide

One of the best things you can do for your finances is start investing. Over time, investing is one of the likeliest ways you’ll build enough wealth to reach your financial goals — and even achieve financial independence.   While investing can seem like a daunting task, the good news is that it’s easier than ever to get started. Here’s what you need to know about how to start investing.  

Decide how much you can invest

Figure out how much you can invest each month. The key to long-term investing success is consistency. Even if it’s a small amount, you can start investing.  
Look at your income and expenses. Review which items can be reduced to create some room for investing. Even if you can only invest a few dollars per week, it will help you get started.  

Paying down debt vs. investing

One of the big issues facing millennials is whether to pay down debt or invest. In the end, it depends on your preference, but having debt doesn’t mean you can’t invest. For example, if you have student loans, you might put 70% of your available money toward paying down those student loans and the other 30% toward investing. However, if you have high-interest debt like credit cards, it might make sense to put 90% toward debt reduction and 10% toward investing.   Depending on your situation, you might want to tweak where you put the money, but you don’t have to let being in debt stop you from investing if you want to start building wealth.  

Know your goals

Next, decide on your goals. What do you want your money to accomplish on your behalf? What you plan to use your money for, as well as your timeline, can determine how you invest your money.
  • Short-term goals: If you want to save for a down payment on a house, a vacation or a similar goal in the next one to three years, consider putting your money in high-yield savings vehicles, or, depending on your situation and risk tolerance, bond investments. Even for short-term goals, in some instances, a mix of stocks and bonds can work.
  • Long-term goals: For longer-term goals like saving for a child’s college education or your retirement, you might decide to invest more heavily in stock funds, real estate investment trusts (REITs) and other higher-yielding assets.
 

Your risk tolerance

As you learn to start investing, make sure you understand risk tolerance. You need to be familiar with how much risk you’re prepared to take on. For example, if you’re relatively young, you have more time to withstand and recover from market downturns, economic problems and investing mistakes.   You should also consider your emotional risk tolerance. Even if, financially, you can handle the ups and downs of the market, you must be able to handle them emotionally, as well. If you struggle with the idea of using a stock index ETF to meet your short-term goals, then look for something that better suits your needs.  

Get help to learn how to start investing

There’s nothing wrong with asking for guidance as you learn a new skill. A number of online investment brokers can offer you professional help as you make your plans. Betterment, Wealthfront and Wealthsimple can help you build a portfolio that matches your risk tolerance and goals. Additionally, it’s possible to get help from human advisors as you create a portfolio.  

Basic tips to help you start investing

Start ASAP

It’s all about compounding returns, so the earlier you start, the better off you’ll be in the long run. Many investing experts talk about “time in the market instead of timing the market.” For many investors, starting early and being consistent about investing, while increasing contributions over time, is most likely to result in long-term success.   You can start investing at any time. If you haven’t started already, begin now. It’s relatively easy to open an account and begin investing.  

It’s fine to start small

You don’t need a lot of money to start investing. In fact, there are a number of apps that allow you to invest using pocket change. Check out our recommendations for the best investing apps here.   It’s true that investing a few dollars each week isn’t likely to fully fund your retirement or other financial goals. However, starting small gets you in the habit of investing and growing your wealth.   As your finances improve, you can increase how much you invest, growing your contributions to meet your goals. But, for now, start with whatever amount you can. The money you do invest in will grow over time, and you can keep adding to your portfolio in the future.  

Consider index mutual funds and ETFs

When trying to decide what to invest in, some people are overwhelmed by the prospect of sifting through individual stocks and trying to pick “winners.” For many beginners, it makes more sense to focus on vehicles that offer “instant diversity.”   Index investments offer exposure to hundreds — or even thousands — of securities at once. Rather than trying to choose individual stocks, you can get access to a wide swath of the market. If you decide later that you want to invest differently, you can change your portfolio makeup. For beginners, however, index investments offer a way to start building wealth while you research other choices.  

Learn the basics

Finally, make sure you learn the basics. Read about how investing works, how different assets perform and when they might be appropriate. While you can start small with index investments, use that time to learn when (or if) it’s time to try other investing strategies.   In the end, no one knows your situation as well as you do. Before investing, carefully consider your own situation and consider requesting help from an investing professional.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.