This is How You Should Spend Your Stimulus Check

It’s coming. The Treasury Department estimates most eligible Americans will receive their stimulus checks by April 17. If you’re out of the loop on why the government is sending you a check, here are the bullet points:

• The stimulus is a part of the $2 trillion coronavirus relief package recently approved by Congress and signed into law by the President.
• As part of the stimulus, eligible individuals will receive a one-time payment. For most of us, that payment will be $1,200. (For a married couple, you’ll each receive the payment, so you’ll get $2,400 in total.)
• To receive the full amount, you need to have claimed no more than $75,000 in adjusted gross income on your last filed tax return for an individual, or $150,000 for a couple filing jointly.
• If your income is above that threshold, you’ll receive a smaller stimulus – unless your adjusted gross income was over $99,000 for an individual or $198,000 for a couple, in which you won’t receive a stimulus check at all.

You don’t have to do anything to receive your stimulus money, either. If the IRS has direct deposit info for you (from a previous tax refund), the funds will be deposited electronically into that account. If the IRS doesn’t already have your account information, they’ll mail a check to your last known address.

So there you go - $1,200 coming your way. The question now is how you should spend it. Here’s a simple way to figure out where the money needs to go.

Do You Have Income Right Now?

The underlying reason why we’re all receiving these checks is because an enormous chunk of the economy has stopped and we don’t know how long that will last. It’s frankly pretty terrifying. An incredible number of people aren’t working right now, and while this $2 trillion relief bill includes expanded unemployment benefits, it’s a certainty that people are going to have to make hard choices with their money for the foreseeable future.

So if you don’t have income right now, I suspect you may not need this article to figure out what to do with that stimulus money. You probably already have a plan. And if that plan is, “Buy food, buy essentials, make sure the lights stay on,” then that sounds like a good plan.

The only thing I would add to that plan is this – make sure you’re using all the resources available to you. If you’re waiting on this stimulus to buy food, find your local food bank and get the basics you need today. If you’re worried about the water getting shut off or the landlord evicting you, get in touch with local resources to see what help is available. In many communities, evictions and utility shut-offs have been paused during this crisis.

Put your health and safety first, but don’t hesitate to use the resources that are available.

Are You Confident in Your Income?

A lot of American workers currently fall into one of three buckets:

1. Temporarily out of work
2. Working more than I ever have and (hopefully) ever will
3. Working…for now?

The truth is that things are changing all the time during this crisis. Nothing feels guaranteed. Even the people who have steady work probably don’t feel completely confident.

For those that are working and perhaps viewing this stimulus as “extra” money, I would suggest a bit of caution. It’s hard to take anything for granted these days, and that goes double for jobs and financial stability. Unless you’ve already amassed a sizable rainy day fund, you may want to think of that stimulus as insurance against an uncertain future. I know that’s not a fun answer, but it’s the answer that future you will most appreciate should things take a turn for the worse.

Are You Delinquent on Your Mortgage?

You may be tempted to use your stimulus to get caught up on various debts. That’s not a terrible idea, but it’s also not something you should prioritize over basic essentials. If you have a mortgage, however, things get complicated.

Mortgage relief programs are available and many lenders are offering variations on loan forbearance, but some of those forbearance programs can be tricky and require homeowners to get caught up on missed payments in a really short period of time. If you’re struggling with your mortgage, make sure you understand your options. You can even connect with a housing counselor to figure out what makes the most sense for you. If you’re going to use your stimulus on debt, using it to rehabilitate delinquent mortgage debt makes the most sense.

Do You Have Six Months’ Worth of Expenses Saved?

That was a trick question. No one does.

But let’s say you have steady income and a massive emergency savings account – then what? Again, I can’t fathom why you’d be asking me this when you’re already a financial beast, but the smart answer is to pay down high interest debt. You could also give to charity – those food banks we talked about earlier need all the help they can get these days.

Long Story Short: Treat Your Stimulus as Insurance

At the end of the day, if you need your stimulus funds for high priority things like medication or car repairs, then that’s what you need to do. But if you don’t need to use your stimulus funds right away, then don’t. Hold on to the money. Let it serve as a cushion and an insurance policy.

And if that money is still there when things get back to normal, then keep it as an emergency savings fund or buy a new couch. I imagine we’re all getting pretty sick of our furniture by now.