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Paying down debt may not be the best way to use your coronavirus stimulus check

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The three best ways to spend your coronavirus stimulus check

The stimulus checks are on their way.

The coronavirus relief bill, signed March 27 by President Donald Trump, provides payments of as much as $3,400 for families, based on 2019 tax returns for those who have already filed and information from 2018 if they haven't.

If you're one of the people looking froward to this money as a lifeline, now's the time to sit down and think about how you'll use it.

One problem for many people: uncertainty everywhere you look. No one knows how long the pandemic will last. No one knows for sure what will happen with their jobs and income.

"Try to focus on the next four to six weeks and budget for your essential expenses," said certified financial planner Matt Canine, a senior wealth advisor at the East Paces Group in Atlanta.

First, use one of these online calculators to see how much you might get. Then make a list of financial priorities and goals.

Age may play a part in how much people need the money. Younger folks and people with children may be the ones who most quickly feel some negative impact. "Unfortunately, many younger workers haven't had the time to build a nest egg," Canine said. "Or they have higher fixed costs due to children."

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One thing the coronavirus financial crunch has highlighted: how quickly many American families can find their feet in the fire. About 40% of Americans wouldn't be able to put their hands on $400 in an emergency, according to often-cited data from the Federal Reserve.

"Now people are realizing how important that emergency fund is," said Kelly Campbell, a CFP and CEO of Campbell Wealth Management in Alexandria, Virginia, "especially people being laid off. It happened quickly, and people were blindsided."

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Big-picture thinking

The first question to ask: What should you be doing with your entire financial life?

"People should step back and reassess everything," said David Flores Wilson, a CFP at Watts Capital in New York. The potential for long-term change is profound, not just in our everyday lives but our financial lives for years to come.

The financial distress could be severe, so start by evaluating your income potential and job stability. If you have emergency cash, estimate how many weeks or months of expenses it might cover.

People should figure out the "why" of their spending. "What's most important, and what are your values?" said Wilson, who is also the founder of personal finance site Planning to Wealth.

Intentional spending

"If you're paying monthly for some software, maybe it makes sense to go from the premium to the free version for a couple of months," Wilson said. "Even if you don't feel your job is at risk."

The instinct to spend this money is probably wrong, Wilson says. Run through different scenarios and work out your solutions for each. If the quarantine lasts two months, how does that affect you? What if you are without income for six months? "Work backward," Wilson said. "The last question to answer is, what should you spend this money on?"

Cash is king

"I'd rather keep cash in my account because we don't know how long this is going to last," Campbell said.

If late fees are being waived on your regular bills, if you can defer student loan payments, consider putting off some payments. It may be better to double up on a payment the following month if there's no interest, so you can hold onto cash.

Call your creditors and ask how you can work together. See if your landlord will accept a lower amount. "The more you need cash, the more I'd say to hold onto it, Campbell said.  

Go local

Use cash to buy staples for the next two weeks: bread, toilet paper and pantry basics. And instead of going to the big box stores, support your community in whatever way you can.

"Go to the smaller stores and keep the money in the local economy," Campbell said. "They are struggling just like everyone else."

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Stock up on cash