Updated May 26, 2020

How Should I Use My Stimulus Check?

COVID-19

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Along with its effects on public health systems around the world, coronavirus has already had a massive impact on the economy—both within the US and internationally. Congress recently passed the CARES Act to help people stay on their feet during these unpredictable times.

One of the law’s main provisions is a stimulus plan that provides $1,200 to most adults along with $500 for dependents age 16 and younger. While $1,200 is enough to improve anyone’s financial situation, how you should use it depends on both your short-term outlook and long-term goals.

How Are Americans Planning to Use Their Checks?

In response to the CARES Act, the Money Done Right team cooperated with Google Customer Surveys to find how Americans are planning to use their checks.

Our survey asked users how they would use most of their stimulus checks. We provided four options: spend, save, invest, and pay off debt. 43% of all respondents chose paying off debt, nearly double the percentage of any other response.

Saving the money was a distant second at just 24%, while spending was just behind at 20%. Finally, only 13% of those who took the survey plan to invest the majority of their stimulus checks.

By Gender

While gender didn’t appear to have an effect on spending or saving, the numbers were surprisingly different with respect to investing and paying off debt. In fact, roughly twice as many men (17% vs. 9%) claimed that they intend to invest their stimulus checks.

Similarly, men were significantly less likely to report paying off debt, although this was still the most common response for men and women. 47% of the women who responded plan to use their checks to pay off debt, compared to just 39% of the men.

How Much Will I Receive?

You’ve probably heard that the government is paying out $1,200, but the exact amount depends on information from your 2019 tax returns. If you haven’t filed for 2019, your 2018 returns will be used to determine eligibility. Keep in mind that you aren’t eligible for a stimulus check if someone else can claim you as a dependent.

The maximum income to receive $1,200 is $75,000 for single filers and $150,000 for joint filers, who will receive $2,400. You’ll also get $500 for each child age 16 and younger as long as your income is less than $99,000 ($198,000 for joint filers).

People who made over $75,000 in 2019, or $150,000 for joint filers, receive a smaller sum based on their income. Every additional dollar leads to a decrease of five cents.

If you earned $75,001 as a single filer in 2019, you’ll receive a check for $1199.95. That number continues to drop until it reaches zero at an income of $99,000 for single filers and $198,000 for joint filers.

How Should I Use My Check?

While everyone’s circumstances are unique, there are a few good options to consider if you’re wondering how to use your stimulus check.

Cover Necessities

Of course, if you’ve lost work hours or other sources of income, you should make sure you have the basics before thinking about anything else. While you might be worried about rent, utility bills, or other costs, food and medicine are the most important things if you’re forced to choose between expenses.

A number of states have already suspended evictions. Furthermore, mortgage relief programs are now widely available, so your landlord may be willing to work with you.

Similarly, numerous cities and states have taken steps to suspend utility shut-offs for nonpayment. Unfortunately, these measures have only been taken in certain areas of the country.

Contact service providers, landlords, and any other creditors if you don’t think you’ll be able to make an upcoming payment. Don’t put your short-term health and safety at risk for less immediate concerns such as rent, utility bills, or credit card payments.

Save Up

If you have enough to cover your current expenses, you may want to add to your emergency fund in case your financial outlook changes. At such an uncertain time, it’s tough to predict how your situation could change in the near future.

Experts generally recommend keeping enough money to cover roughly three to six months’ worth of expenses.

However, given the current circumstances, there’s nothing wrong with going above that number if you’re concerned about your financial future. Don’t forget to consider your health insurance deductible and any other potential costs when evaluating the size of your emergency fund.

While it’s good to keep at least some emergency savings in a checking account for immediate access, you can put the rest of the money in a high-yield savings account if you want to earn more interest.

Pay Off Debt

Debt can make it extremely difficult to focus on other financial priorities. If you have enough money saved up, you should consider putting some or all of your stimulus check toward debt, especially if you’re paying a high interest rate.

Credit cards, for example, often charge 20% or more in interest. It might be tempting to spend your stimulus check, but it will go further if you put it toward debt. Getting out of debt is one of the best ways to improve your financial situation.

Invest for Retirement

Tax-advantaged retirement accounts like 401(k)s and IRAs are a great way to invest, and it’s never too early to start thinking about retirement. Traditional 401(k)s and IRAs are tax-deferred, while Roth accounts allow you to deduct the money you withdraw in retirement.

These accounts come with strict annual contribution limits. If you miss a tax year, you won’t be able to make up for it later on. You can contribute to an IRA up until the filing deadline, so you have until July 15th to make IRA contributions for the 2019 tax year.

People often recommend buying or selling stocks in order to time the market, but this isn’t a practical strategy for most investors. Rather than trying to get in at the perfect time, try to make regular contributions without worrying about short-term performance—studies show that time in the market consistently beats timing the market.

Donate

If you’re fortunate enough to have cash on hand during a challenging time, think about putting some of it toward a good cause. Charitable organizations of all kinds need our help more than ever, and they rely on the generosity of people who have more than they need.

Of course, money isn’t the only way to make a difference—volunteering your time can be even more beneficial to others and rewarding for you. Search for mutual aid organizations in your area if you’re interested in giving back to your community.

Receiving $1,200 will affect everyone’s finances in different ways, but it’s important to have a plan for the money rather than simply treating it as extra cash. These are just a few options to consider if you’re not sure what to do with your stimulus check.

Alex McOmie

Alex McOmie is a writer focused on providing insightful, actionable content that can truly change the way readers approach their finances. He joined the Money Done Right editorial team in summer 2019. Learn more about Alex.

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