May Topic of the Month: How Should You Use Your Stimulus Check?

Kevin Orsinger |

Considering COVID-19’s impact on the United States economy, a government stimulus plan was implemented. The stimulus is designed to help people struggling financially, or perhaps to allow them to save for potentially difficult times to come. The dispersal of checks has begun, though the IRS has until the end of 2020 to ensure recipients have received their money. Many checks are being direct deposited, should that information be on file with the IRS; other checks will come via mail.

Eligibility for the stimulus check is based on your taxable income from your last filed tax report. American taxpayers who reported $75,000 or less in taxable income are almost certainly eligible for $1,200. If you file jointly, you will receive $2,400 in your stimulus. This also includes Social Security recipients. Those reporting between $75,000 and $99,000 will receive a smaller amount. If you have children, you will receive $500 additional per child.

So, if you do receive this stimulus check, what should you do with the money? The answer to this question varies greatly based on your individual situation, and you should have a conversation with your financial advisor about the best strategy for your needs. However, here are some general suggestions you may want to consider.

First, you might consider catching up on any bills that may have fallen behind. Before doing so, you should call the company issuing the bill to see if they have any support for people who are behind due to COVID-19. Many companies are offering waived late fees, due date changes, or deferments. If, after checking on these options, you still have bills to pay, you should focus on basic bills first, such as your rent or mortgage. Unless you are in an extreme situation, your stimulus check should not go completely toward bills. You want to save some money should you need to rely on it for the future months. Negotiating how much of your check you should spend out of your stimulus is best done with your financial advisor.

Second, or if you are not behind on bills, you want to either establish or contribute to an emergency fund. You will want an account exclusively dedicated to your emergency fund so you will be less likely to pull from those resources. This should be a priority, as the next few months are quite uncertain.

Third, if you are up to date on bills and you have a substantial emergency fund, you might consider using your stimulus to repay outstanding debts. This decision should be made with the help of a financial advisor, though, as you want to be certain you are well prepared for the coming months before allocating that money elsewhere.

Please reach out to
Orsinger Investment Group, Inc. at (724)588-9067 today to schedule an appointment to discuss your stimulus check and the rest of your financial situation in the current situation.