What to do if you get a second stimulus check

Ramsey Personality, Financial Expert and Author of "Everyday Millionaires," Chris Hogan, joins Yahoo Finance’s Zack Guzman to discuss how Americans should use a second stimulus check if it passes in Congress and also shares his top financial tips amid the coronavirus pandemic.

Video Transcript

ZACH GUZMAN: Of course, we've been watching Washington DC to see what updates might come through in terms of the discussions being held by top Republicans and Democrats slated to meet again today to discuss what they might be able to agree on in terms of that round of fourth phase here in stimulus tied to the coronavirus pandemic.

And as we've noted, it looks like another round of stimulus checks is already agreed to. Americans that qualify could receive up to $1,200 in those checks. But how should you be spending that if it is to come through? Here to chat that with us is Chris Hogan, "Everyday Millionaires" author and financial expert. And Chris, we've talked about this last time. This isn't the first time we've been dealing with this. But obviously, a lot of Americans dealing with unknowns through all this. Millions of Americans on unemployment benefits that expired at the end of July 31. So what is the advice you're giving people out there now as they prep for what could come through next?

CHRIS HOGAN: Well, Zach, you know the reality is we've been dealing with a whole lot of unknowns. And I think a lot of people still have that fear and those nerves. But looking at this second round of stimulus, whenever this does occur, I think it will be important for people to really take note of how did they handle it the first time around and really want to make sure that you're doing better.

So I've got a couple scenarios for you. If you've had a job that was cut or hours that were reduced, with this next round of stimulus, you really want to go into conserve mode. You want to preserve this money to make sure you're able to take care of the things that are necessary.

I talk about housing, utilities, keeping food on the table, keeping gas in your automobile. That'll be very important. However, if your job is stable and you have debt, I want to encourage people to keep using that money to attack debt. We want to get it out of our lives. Remember, interest that we pay is a penalty. Interest that we earn is a reward. So I'd encourage people there.

And then you've got the other side of it. You've got people that maybe they don't have any debt. And so I would encourage them to boost up their emergency fund. You always want to keep three to six months of expenses sitting around because life does happen. COVID has shown us this. And so you may want to beef up your emergency fund. Or if you've got an emergency fund in place, then go ahead and invest this money. It's OK.

ZACH GUZMAN: When we talk about that-- you talk about reducing the debt load-- we got the update there from a study out of the Federal Reserve Bank of New York. Their new report showing that household debt fell for the first time in six years. So Americans must be watching you on this show talking about doing exactly that, because that's what the data is showing. So I mean, I guess it's a good start.

But it could be because we saw so much stimulus come through, whether it be those stimulus checks or a boost in unemployment benefits, Americans not knowing how long this is going to last. But eventually, you come into the point where you can't save that much more. So what do you make of that? And kind of, I guess, an encouraging trend.

CHRIS HOGAN: Well, I think especially with the COVID, the pandemic, it definitely caused people to really pull in. I think people got a saving mentality for the first time, not knowing when this is going to end. And Zach, you know, like I did-- everyone expected this to potentially be a two to three-month thing. And now as we look, this is an ongoing situation we're wrestling with in 2020.

So the fear of the unknown, I think, is causing people to preserve, be a lot more careful. But they're understanding the threat of debt. We've got these moratoriums on student loan payments that's supposed to end in September. And so we got rent and all the forbearance things that are happening.

This can't continue forever. So people have to have the mindset that's going to have to be repaid at some point. So we can't wait on the government. We've got to help ourselves and put ourselves in a better position.

ZACH GUZMAN: Yeah, and do the most with what you're given in terms of trying to put yourself in a better position. And as we wait for more of that aid, I guess, make do with the best you can. And we've seen that in a separate study from the Philadelphia Fed showing about 45% of respondents said that they used some of those stimulus through here on debt payments. But I guess, as we've always said, sometimes you really just can't make those debt payments. So what are you trying to tell people in terms of being proactive about whether it be rent, auto payments, or whatever?

CHRIS HOGAN: Well, here's the reality. Some stimulus money coming around-- it may not be enough. So I tell people, if you can't pay, pay attention. And what I mean by that is, reach out and talk to your landlord. Talk to your mortgage holder. Talk to the credit card company. Let them know what's going on in your world.

You're not the only one dealing with this, but you may be one of the few people that are actively communicating with them and being open and honest. Ask them to document your account. Don't make a promise to pay that you know you can't keep. Your minimum payment may be $100, but if all you have is $20, send in the $20. But again, communicate with them monthly. Make sure they're documenting your account. You're going to have to advocate for yourself. So stand up for yourself, make the call, communicate clearly, and don't over-promise.

ZACH GUZMAN: Always great advice there from Chris Hogan, "Everyday Millionaires" author and financial expert, and putting a T in expert there. I appreciate you joining us again. Be well.

CHRIS HOGAN: Thank you, my friend.