On Thursday, March 12, President Biden signed into law the American Rescue Plan to help Americans manage the financial implications and many other aspects of the ongoing COVID-19 pandemic. A major part of this legislation calls for Americans to receive a third round of stimulus funds directly from the government. Individuals earning up to $75,000 and couples earning up to $150,000 will receive the full direct payments of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns. Payment amounts phase out as incomes increase.
If the IRS has your current bank account information on file, funds will be deposited directly into your account. If not, you will receive a check or prepaid debit card in the mail. You can track the status of your payment here. If you’re wondering the best way to make use of those funds once they arrive. Let’s take a look:
Pay for Immediate Expenses
If your income is reduced or eliminated as a result of COVID-19, use the stimulus funds to pay for essentials and everyday expenses, such as food, gas, and paying bills. Use our expenses calculator to help plan a budget to make those funds stretch as far as possible.
Pay Down High Interest Debt
If your employment situation is secure and you foresee maintaining your regular income for the next several months, use your stimulus funds to pay down high interest debt, such as credit cards. Even if you just pay off one bill, think of how good it will feel not to have that hanging over your head. Plus, you’ll be able to add the money you’d use for the monthly payment back into your budget or use it to make larger payments on other debt.
Start or Replenish Your Emergency Fund
The coronavirus crisis is shining a spotlight on the need for everyone to work toward having three-six months of living expenses saved. If you don’t have anything saved for emergencies, or if you’ve had to dip into your emergency funds since the crisis started, the stimulus payment is a great way to establish or replenish your emergency fund. Set up a dedicated savings account, separate from your checking and savings accounts, designated just for emergencies, and add to it consistently.
Pay Your Taxes
The deadline for filing your 2020 taxes is quickly approaching. If you know or suspect you’re going to owe money, use the stimulus check to pay your taxes. It’s definitely not the most satisfying way to spend it, but giving it right back to the federal government will free up money in your budget to pay for other things.
Share with Others
Unemployment filings are at an all-time high. Food banks are seeing unprecedented demand. And vital charities are experiencing a drop-off in donations. If you are fortunate enough to maintain your income during this crisis, consider using some your stimulus payment to help others.
Donate cash to a local food bank — they know how to stretch those dollars to the max. Buy gift cards from your favorite local businesses or restaurants to help them maintain cash flow now (and give you something to look forward to later). Or simply purchase a week’s worth of groceries for a friend or neighbor who is struggling to make ends meet.