The Best Ways to Use Your 2020 Stimulus CheckApril 13, 2020
Have you heard about the government stimulus check coming in 2020? Do you know how much money you expect to receive? Maybe you already have some ideas of how you can use the money. When you get newfound money, you should always consider the best ways you can spend so that it will pay off for you now and in the future. Here are a few tips for how to spend your 2020 stimulus check.
By Caroline Farhat
What is the Stimulus Check?
The COVID-19 pandemic has caused a major financial impact. Experts say we’re heading towards a recession, if not already experiencing one. In an effort to stabilize the economy, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March. This provides, among other benefits, a stimulus check. Here is the information you need to know about the government stimulus check:
Who will receive a check?
- Eligible adults earning up to $75,000 will receive a check for $1,200.
- Couples earning up to $150,000 will receive $2,400.
- Families will receive $500 for each child under the age of 17, if they meet the income requirements.
- The check amount is reduced for earners making over $75,000 and disappears completely for individuals earning $99,000 or more.
- For couples earning between $150,000 to $197,000, they will receive a reduced amount. Couples earning $198,000 or more will not receive a check.
What income is this based on?
- The income thresholds to determine eligibility for the stimulus check is based on your 2019 adjusted gross income, or 2018 if you have not yet filed your 2019 taxes.
- When can you expect the money?
- Although it is technically called a check, if the IRS has your banking information from your tax return, you may receive a direct deposit as early as mid-April 2020. However, if a paper check has to be mailed, you may not receive the money until May or later. As of April 13, 2020, the IRS is preparing to provide a tool on their website to track the status of your stimulus check.
The Best Ways to Use Your Stimulus Check
Once you receive the money, here are some of the best ways to use it to help you financially:
1. Pay bills
A Pew Research Center study predicts 38.1 million U.S. workers are working in an industry that will most likely feel an immediate impact from the pandemic, including layoffs or reduced hours. If you have been laid off or if you’re uncertain how your job may be impacted, it is time to look at your emergency fund to examine how many months of basic living expenses you have saved. If you do not have an emergency fund, you should use the stimulus money for your basic living expenses, including rent or mortgage, food, or necessary household items.
2. Start or Add to Your Emergency Fund
If your job is safe from layoffs and you have a healthy stream of income still coming in, you should consider using the stimulus money to start or add to your emergency fund. Financial experts suggest it’s best to have six to eight months of living expenses in your emergency fund. It can come in handy if you are dealing with a sudden job loss or an unexpected expense, like a car repair. To determine the amount you need for your emergency fund, do the following:
- Add up your living expenses for a month, including your mortgage or rent, car payment, money for food and gas, and any other necessary monthly expenses you pay.
- Multiply your monthly amount by 6 (or 8 if you’d like to aim higher).
For example, if your monthly expenses are $3,500 and you want to save a six month emergency fund, you will need to save $21,000 in a savings account. The stimulus check you receive can be a great foundation for a healthy emergency fund.
3. Pay Down Debt
If you feel secure in your job and have an emergency fund, using your check to pay down debt may be a wise option for you. Look to see what debts have the highest interest rates and tackle those first. If you have student loan debt, research whether refinancing your student loans makes financial sense for you. In many cases, you may be able to lock in a lower interest rate and save on your monthly payment, as well as the total amount you spend on the loan. To see what you may be able to save, check out our student loan refinance calculator.* Lowering your expenses, especially in this uncertain economic time, is always a good financial decision.
If you have a stable paycheck, a strong emergency fund, and no debt or at least a plan to tackle your debt, spending some of your check on investing in a retirement account is not a bad idea. Stock prices are low so your money will go further if you invest now. Note: This option is only recommended if you are able to live without the money you invest for many years.
5. Donate and Support Local Businesses
If you are in a good financial situation with a stable paycheck and have the ability to help, think about donating some or all of your government stimulus check. You can donate to charities that are helping others that have been negatively impacted during this pandemic. Tip: Be sure to verify the charity is legitimate as unfortunately scams do happen! Another great use is to support local businesses in your neighborhood. Use some of the money to order takeout from local restaurants that are undergoing a large economic loss. Or consider buying gift cards from local stores or restaurants that may not be open at this time.
The government stimulus check may be helpful during this difficult time to help pay basic necessities or start you on a good financial path. Use your check for one or more of these uses and a brighter future will be ahead!
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