Congress just passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help consumers cushion the financial impact of the Covid-19 spread. The amount of the benefit will vary depending on your income and family size. Adults with an adjusted gross income up to $75,000 ($150,000 MFJ; $112,500 HH) will receive $1200 ($2400 MFJ) plus $500 per dependent child. The benefit is not taxable. For more information, visit the IRS Coronavirus Tax Relief website.
What is the best way to manage the funds? Sit down together with your family and prepare a plan before you receive the check. It is a proven fact that managed money goes further. For example, you may decide to use 75% of the money for practical purposes and the remaining for long-term savings.
Continue to pay bills. If you are not able make a payment, contact the creditor to discuss options. Not making payments or defaulting can affect your credit history and have long-term consequences.
Pay Down Debt
Paying down outstanding balances will save your money on high interest rate debt. Debt can be hard to pay off when only making minimum payments because the majority of the payment goes toward interest. The stimulus payment provides a nice chunk of change to apply toward reducing the amount owed.
Save for Emergencies
Open an emergency savings account to provide easy access to funds to take care of unexpected events. When the tire goes flat, the car battery needs replacing, or the washing machine goes “ping”, money in an emergency account will let you pay for these expenses without using credit.
How you choose to use your stimulus payment is an individual or family decision. Take the time now to develop a plan that will benefit you financially. There is nothing wrong with saving some of this money, or paying off debt, or spending some of your payment, or all there is. It is your money, so make the most of it.