Here’s what Warren Buffett, Suze Orman and Mark Cuban would do
(NEXSTAR) – After months of negotiations during some of the darkest days of the pandemic, Americans are finally receiving their $ 1,400 stimulus checks. Now the question for many is: “What should I do with my money to help from COVID?
Incentive check money is credited by bringing a flood of retail dollars to the stock market as people search for new income and perhaps a distraction from the pandemic. Before pouring stimulus dollars into the stock market, however, experts say there are important steps to be taken first.
Legendary investor Warren Buffett says the first thing people should do when they get unexpected cash money repay credit card debts, according to MoneyWise.
Buffett, who longed for a credit card debt warning, explained his stance during Berkshire Hathaway’s annual shareholders ’meeting last year by the case of a friend who recently received a hefty sum of money. This may interest you : Protect Your Retirement Accounts From the Tax Man. That friend had credit card debt with 18% interest, he said.
“If I owed any 18% money, the first thing I would have with the money would be to pay it back,” Buffett recalled telling his friend. “You can’t borrow money at these rates throughout your life and be better.”
Buffett said he understands the pandemic has forced many to use their credit cards out of necessity, but warned that they are not being used as “a piggy bank to be attacked.”
If $ 1,400 does not cover credit card debt, there are multiple ways of debt consolidation and bring down the interest rate.
Bestselling author and presenter “Women and money” podcast Suze Orman dedicated the episode to preparing Americans for $ 1,400 stimulus checks and aid fees.
Orman, 69 years old, had these suggestions for people wondering what to do with their money first:
- Take care of your basic needs – if the pandemic has consumed your pantry and refrigerator, “take a lump sum of this money and buy as many canned foods as possible … at least you can have food to feed your children.”
- Use the money to build a 12-month emergency fund.
- Give bills to priorities – make sure you have health insurance, pay your cell phone bill, pay your home bills. The closet doesn’t like credit card debt, but for people who may be out of work, for example, it is vital to pay minimum monthly payments to be able to save as much as possible.
- Don’t invest money in the market right away, says Orman, because “that wasn’t the goal of the stimulus test.”
- Put money in a Roth IRA account that will allow you to withdraw money tax-free, “if you want to be smart”.
Shark Tank investor and Dallas Mavericks owner Mark Cuban agreed with Orman, saying CNBC that the first step is to take care of basic things like food.
If there is money left, it should go to pay the debt, according to Kuban. Read also : Do you have to take distributions from an inherited Roth IRA?.
“Pay off credit cards,” he said, adding that the remaining funds should go to the bank.
Credit card debt is crippled for many who have balance due to the complex nature of debt.
“If you owe money on credit cards, the wisest thing you can do is pay off the remaining amount as soon as possible,” it says. U.S. Securities and Exchange Commission. “Virtually no investment will bring you a return that matches the 18% interest rate on your credit card.”