In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as a way to help those impacted by COVID19. This $2 trillion aid package included payments directly to American households to help stimulate the economy and cover essential expenses. More than 80 million Americans were expected to receive these economic impact payments via direct deposit on April 15. However, if you did not file a 2018 or 2019 federal income tax return, you’ll need to submit information here, and it could take a bit longer to receive your payment.
As with any unplanned extra income – whether a tax refund, bonus from your employer or winning the lottery – it’s important to think strategically about how best to spend it. There’s no rush to burn through it right away.
First, evaluate your finances. Take a look at what you need to make it through the next few months – keeping in mind we don’t know exactly how long social distancing measures will continue. Prioritize your expenses and create a plan to cover them.
If you’ve recently lost your job, it might be best to apply your economic relief payment to essentials like food, utilities, rent, mortgage or transportation.
If it’s possible you could lose your job in the near future and unemployment benefits coupled with cash savings wouldn’t cover essential expenses, it might be best to hold off on spending your stimulus check for now. Save it for that likely-to-come rainy day.
Next, pay off debt. Once you’re confident essential expenses will be covered for the next few months, consider using your check to pay off high-interest debt such as credit cards. Although this is less fun than a shopping spree, it sets you up for stability and more flexible spending in the future should the health and economic impacts of COVID19 continue longer than expected. With so much uncertainty in our world today, it’s wise to take action now to put your family in the best possible situation for the future. Speaking of paying down debt, remember that Federal student loan payments can be deferred without penalties until Sept. 30, 2020. However, if you can afford to keep making payments during this interest-free timeframe, you’ll be able to get ahead by paying down your loan principal faster.
Help someone who needs it. COVID19 has impacted nearly every family and business in America in some way, but some have fared better than others. If you are among the fortunate group – those in good health, with stable employment and sufficient income to cover your needs – pay it forward. Donate to your local food bank or homeless shelter. Give blood through the American Red Cross. Support causes that improve our communities, like the Central Oklahoma Arts Relief Fund. Deliver food to your frontline healthcare workers. There’s nothing like a global pandemic to make you feel grateful for what you have. So, be generous to those who haven’t been as lucky.
Shop local. If your job is secure, high-interest debt managed and you’re able to invest that cash back into the economy, do it! Support local businesses first, if possible. Prioritize the hardest hit industries – buying carry out from your favorite restaurants and coffee shops or shopping online with local retailers. Many small businesses are offering special deals or unique delivery options, so consider spending your money with local businesses you want to make sure survive COVID19!
If you want to talk in more specific terms about your financial situation or the best way to spend your economic impact payment, schedule a complimentary consultation with one of our advisors. We’d love to help!
Category: Financial Service Team