Your Stimulus Check – Choose Wisely

As part of the government’s $2.2 trillion stimulus package, most individuals will be receiving a check from the government to help bridge any gaps in income during this mandatory shutdown of the economy.  People with adjusted gross income, based on 2018/19 tax returns, below $75,000 are set to receive $1,200. Married couples filing taxes jointly who earn under $150,000 will get $2,400. Each qualifying child is worth an extra $500. The amounts paid to individuals start to decline if you earn above the $75,000/$150,000 thresholds.

To get the assistance you do not need to show that you are being financially harmed by the COVID-19 crisis.  It is available to every citizen of this country if you make less than a certain amount of money.  These stimulus checks have already started to arrive in people’s bank accounts. 

For those of you that have lost your job and have nothing saved, this payment may not be enough to cover your lost wages but hopefully it will allow you to provide life’s basic necessities (shelter, food, clothes) to you and your loved ones.  

If you are getting a payment but have not seen a loss of income due to COVID-19 then do not waste this windfall.  Appreciate the unexpected payment; give thanks that you are doing okay financially when so many are not; and take advantage of this opportunity to get a little further ahead financially.

Here is how you should think about using your stimulus payment, in order:

1. Provide Life’s Basic Essentials to Your and Your Family:  This is what the checks are meant to support and if you are unable to meet life’s basic needs due to this forced shutdown of the economy then this is what you need to spend the money on.   You should really make sure you are prioritizing basic needs versus other expenses if you are depending on these payments for food and shelter.  The next relief package from Congress may not come so quickly.  Congress and the President acted with record speed to get these payments out to individuals but you can’t rely on that kind of efficient behavior to continue in D.C.
2. Avoid Defaulting on Expenses that can affect your Credit:   If you have life’s basic needs covered then make sure you are avoiding defaulting on any payments that can affect your credit.  If making certain payments on your mortgage, car, or credit cards are becoming an issue then you need to first check to see if any of these payments can be deferred without affecting your credit and then pay the ones that will have the biggest impact on your future financial health.  There are websites that you can check to see if your bank provides potential assistance.  Mortgages, car payments, credit card payments – you need to check to see which ones can be pushed out without impacting your credit and then try to take advantage.  Then make make the minimum payments debt that cannot be pushed out without hurting your credit or having a large lump sum due after the deferral period. 

A NOTE ON PAYING OFF DEBT EARLY WITH YOUR STIMULUS CHECK:  I would not be paying down cheap debt right now if you have items 1 and 2 on my list covered.  You may want to pay down expensive credit card debt (if you are sure you have a handle on 1 and 2) but in times like this it is better to just make the minimum payments on your mortgage and any other cheap debt you have.  Make the necessary payments to avoid any credit issues but then focus on getting items 3 and 4 on this list in place.

• Start, Replenish, or Build-Up Your Emergency Savings:  If you can pay your bills for now but do not have much of a back-up plan then use this money from the government to start, replenish, and build-up your emergency savings.  Odds are we are going to have a struggling economy for several quarters to several years so you might want to boost that 3 months of an emergency fund to 6 months or more if possible.  Do it while you can and use this money from Congress to help increase your emergency fund to a more conservative level. 
• Start Investing or Diversify Your Investments:  Now that the stock market is down 20+% from its recent highs you should add to your investments if everything else is looking good.  Over the long-term making an investment right now in the stock market should end up being a good decision.  If you already have money in the stock market and don’t want to add to your stock portfolio then consider diversifying into another asset class with your government check.    You cannot buy a single family investment property with a $1,200 check but, as an example, you can invest in some real estate funds through Real Estate Crowdfunding opportunities that are available to individual investors.  You do not need to invest your stimulus payment tomorrow – assets are likely to go on sale over the next few quarters so right now you should earmark the money for investing and then do some homework on understanding how and when you want to invest the cash you have on hand that can be invested.

If you have items 1 through 3 covered and already feel like you have enough invested then you are doing awesome.  Do what you want with your check – I think donating it to a charity you support or giving it to someone else in need would be a great way to help others less fortunate than you.  If you do not need the money then how great would it feel to get that stimulus check, head to a neighborhood less fortunate than the one you live in, and pay for a dozen people’s groceries?