Most Americans are expecting a stimulus check in the mail in the next few weeks. The stimulus checks were part of a record-breaking stimulus package passed by Congress to help with coronavirus relief.
Many people will receive a stimulus check of $1,200 if they earn less than $75,000. For a list of frequently asked stimulus check questions, check out our other post.
But what should you do with the stimulus check you get? Paying off debt or building up your emergency fund sounds like a good start.
How Much Money Will You Receive?
Your stimulus check is based on your tax returns. If you filed taxes for 2019, that information gets used to find your adjusted gross income.
If you haven’t filed for 2019, the IRS will use your 2018 tax return.
Unfortunately, not everyone qualifies to receive a stimulus check. If you earn less than $75,000 you will receive the full amount of $1,200. Parents get $500 for every child under the age of 17 as well.
However, if you make more than $75,000 the stimulus starts to taper off. For every $100 over $75,000 you earn, you’ll receive $5 less in stimulus. At $99,000 of adjusted gross income, you’ll receive no stimulus check.
Married filing jointly? Your income limits are a combined $150,000. Heads of household have income limits of $112,500.
Children over 16 years of age will receive nothing even if they’re still claimed as a dependent. Similarly, if you’re a college student still claimed as a dependent you won’t receive a check.
Mortgage and Rent Payments
First and foremost, you should make sure you can keep a roof over your head. With many Americans losing their jobs or having their hours cut, mortgage and rent payments can feel looming.
Your stimulus check could be used to cover rent or your mortgage if you don’t qualify for assistance.
For starters, many cities and states have issued moratoriums on rental evictions. If you’re behind on rent, check to see if your state offers eviction protections.
While you’ll still be responsible for paying the rent you owe when the crisis is over, you may be able to stay in your home right now.
Talk to your landlord about deferring rent payments a few months as well. If you’ve lost your job, contact your landlord immediately. See if they’re sympathetic to your situation and can offer a break on rent for a few weeks.
Check to see if your state offers rental assistance as well.
Your stimulus check may be best used to keep your rent paid so you don’t fall behind on payments.
Homeowners are in a better situation than renters.
Some mortgage lenders like Fannie Mae and Freddie Mac are offering borrowers forbearance programs. This allows borrowers to skip upcoming payments for up to a full year.
To qualify, you must contact your lender. They can then determine how long you can get assistance for. Contact them ASAP, as these programs can take a few days to get approved.
Even if you’re not with Fannie Mae and Freddie Mac, your lender may still offer forbearance.
Paying Down Credit Card Debt
Americans carry a lot of credit card debt. In fact, most American families have about $16,000 of outstanding credit card debt to their name.
Most credit card debt comes with high monthly interest rates. It makes it a prime candidate to pay down quickly so you’re not drowned in interest!
But in difficult times like these, paying down your credit card may not be wise. Here’s when it doesn’t make sense:
If your current job is at risk of being furloughed or cut, you may want to hold on to your stimulus check for a rainy day.
If you or your partner is currently without work, you can offset their income with your check.
Any situation that might mean reduced income in the coming months means you should hang on to your stimulus.
Asking for Credit Card Help
If your income is lower than it was before the crisis, your credit card lender may be able to offer help. Many providers are delaying interest payments and working with borrowers to find solutions.
You may be able to negotiate with your credit card company to find a way to pay less on your credit card bill each month.
A break of a month or two on monthly payments may help you get back on your feet when you get back to work.
If your credit card is unable to grant you special provisions to help, there are more options.
Credit cards with introductory interest rates may offer balance transfers of your remaining balance. You can reduce or eliminate your interest rate for a few months with a new credit card.
Building an Emergency Fund
If your credit card bill is paid or you’re able to defer your payments, there’s more you can do with your stimulus check.
Building an emergency fund is a great use of an extra stimulus from the government.
Experts recommend keeping three to six months of expenses lined up in an emergency fund for a rainy day.
Times like these when job loss or reduced hours seem imminent, an emergency fund can keep you afloat. A flat tire or a house emergency could put you back into debt.
A stimulus check is a great time to not only support your local economy. It can help you pay down existing credit card debt if your job is secure. Or if you’ve been waiting to build an emergency fund, your stimulus check can give a great head start.
Saving in times of uncertainty can give you more financial confidence as you go into the next few months.