5 Smart Ways to Use the Upcoming Stimulus Payment
On Friday, March 27, the president signed into law the CARES Act (Coronavirus Aid, Relief, and Economic Security) to help Americans manage the financial implications of the COVID-19 pandemic. A major part of this legislation calls for Americans to receive stimulus funds directly from the government. Beginning in late April, individuals with incomes up to $75,000 and married couples with incomes up to $150,000 will receive one-time payments of $1,200 and $2,400, respectively. Households with children under the age of 17 will receive an additional $500 per child. Individuals with incomes between $75,000-$99,000 and married couples with incomes between $150,000 -$198,000 will receive lower payments on a sliding scale.
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 in the mail. By now you’re probably wondering what’s 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, dedicated just for emergencies, and add to it consistently.
Pay Your Taxes
The deadline for filing 2019 taxes has been extended to July 15, 2020. But 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 has been laid off.