If you have checked the calculator and determined that you should be receiving a stimulus payment under the Coronavirus Aid, Relief, and Economic Security Act you may have already started writing up that wish list or planning that post-pandemic vacation. Before you spend a dime of that money please read this. And please, whatever you do, don’t spend or commit this money before you have even received it.
WILL YOU BE GETTING A CARES STIMULUS PAYMENT?
Under the CARES Act, stimulus payments of up to $1,200 will go out to adults who earned $75,000 or less on their last tax return. If you have not yet filed 2019 taxes it will use your 2018 tax return. You may also be eligible for $500 per child. Using this handy calculator from the Washington Post I was able to determine that our household is eligible for $3,400. You can use the adjusted gross income from your last tax return to determine what you may be eligible for as well.
IS THAT MONEY ALREADY BURNING A HOLE IN YOUR POCKET?
Please don’t let it. Whatever you do please don’t spend that money before it hits your account. It can be tempting to put that upcoming expense or charge that splurge item on your credit card, but don’t!
Yes, I have heard news reports that direct deposits could start hitting bank accounts this Thursday, but if you received your payment via check I’ve also heard it could take months, months to receive your payment.
Given the current situation with a global pandemic (which hasn’t even peaked in some states including Arkansas where I am) that $3,400 is a welcome addition to that safety net we call our emergency fund. If you’re new around here, I mention it a lot! Because it’s important!
We are currently building our three-to-six-month emergency fund (baby step three if you follow Uncle Dave) and this will help in getting us a lot closer to the mark. My husband is currently still working because as the leader of a survey field crew he can’t work from home. His only option if he wants to stay home is to use his PTO.
The stimulus payment can make a hard decision like staying home for his health a lot easier. If you are already experiencing economic effects of COVID-19 I highly encourage you to hold onto that stimulus payment as much as possible. Unemployment benefits alone probably won’t cover all your expenses.
If you haven’t been affected financially by COVID-19 yet, I am so glad. We are fortunate that my husband still has his full-time job, but his part-time job in retail has officially laid him off until further notice. We are reworking our budget to accommodate for the loss of pay and protect our savings before we feel the hit.
In case you’re feeling the urge to splurge your upcoming stimulus payment, here are a few suggestions on how to use this money to improve your financial situation.
SMART WAYS TO USE YOUR STIMULUS PAYMENT
BEEF UP YOUR EMERGENCY FUND
This is always a good idea in my humble little budget loving opinion. Use all, most, or part of the stimulus payment to increase your emergency fund. I’d say this situation qualifies as an emergency for thousands (if not millions) of families already and will be one for many more before this pandemic has run its course.
If you remember from Emergency: Why You Need an Emergency Fund Now the average American household isn’t prepared for a $1,000 expense. The simple move of saving your payment of $1,200 as an individual or $2,400 as a couple will put you in a much better financial position.
PAY DOWN YOUR DEBT
Interest rates are low, low, low right now (Fed rate is essentially at zero). Student loan debt interest isn’t even accumulating at the moment. If you have an emergency fund in place keep paying down that debt. You will make so much more progress on those student loans if you make payments on them during this interest and penalty reprieve.
Get ahead of the game by taking advantage of the no-interest period and keep making payments! If you need more information here is a fact sheet and FAQ from the Federal Student Aid Office. You can also check directly with your student loan servicer to see how/if your auto-scheduled payments will be affected during this time.
You can also pay down your high-interest credit card or auto loans with your stimulus payment as well. For instance, we plan to use a portion of the $500 dependent payment to pay down our son’s speech therapy tab.
INVEST IN YOURSELF
If you’re lucky enough to be consumer debt-free this is a great opportunity to invest in yourself. Take a course on a computer program you’d love to learn that would help advance your current career track.
Start that home-based business you’ve always dreamed of; register your domain name and start a blog or website on a topic you’re really passionate/knowledgable about. Market your services in graphics design, bookkeeping, or proofreading to other online entrepreneurs.
Not all of the suggestions above cost money and most won’t require much of the stimulus payment. But they can all help improve your financial position in the future. If you are content with your finances maybe invest in a new hobby to keep you occupied at home.
TAKE CARE OF OVERDUE HOME REPAIRS
This is a great way to get your windows professionally washed, a fresh coat of paint on the house. Take care of home repairs that keep getting back burnered due to budget restrictions. Lots of these can be accomplished with social distancing and it is a job that can’t be done from home. They will definitely appreciate your business.
ULTIMATELY, THE MONEY AND THE DECISION ARE YOURS… WHAT DO YOU PLAN TO DO WITH YOUR STIMULUS PAYMENT?
I’d love to hear what you plan to do with your payment. I’ve told you what we’re doing; paying down a speech therapy bill and sitting on the rest. What do you plan to do with your stimulus payment?
Other Resources:
https://www.businessinsider.com/irs-begin-sending-coronavirus-stimulus-payments-april-2020-4
As far as I’m aware, we won’t be getting a payment in Canada unless we lost our jobs due to coronavirus. Regardless, these are really good tips on what to do if you are receiving one. If we were to get one, we would likely save it, as we currently have no debt. If I did spend it on anything, I would use some of it to buy more gardening and canning supplies.
Ah, I need to get out there to our rock garden and get it more suitable to be a veggie garden! I’m not sure how many canning supplies we still have either. We actually caught ourselves considering buying a new SmartTV for the living room with the stimulus because ours is old and not smart and the fire stick was fritzing out with certain apps. Had to stop ourselves there! Thank you for reading Sarah!
I don’t think this is something we will be getting in the UK, sadly, but good tips for what to do with yours in the US!
Thank you Lisa!
Good points. I have already heard people talking about what they’re going to spend their money on instead of saving for a rainy day.
Thank you Sandra!
Great points! There are many who will really need this money. For those lucky enough to have a surplus, it’s a wonderful way to make some headway with a few goals.
Yes! I even thought of another one today I need to add! Some people can use it for closing costs to refinance their mortgages now that interest rates are lower!