Around $250 billion of the $2 trillion stimulus package is going straight to the people. The first checks were supposed to be cut as early as April 9th, so you may have already received it. 1 But it’s most likely that this week is the earliest you’ll see it. Let’s look at how much you’re getting, when to expect yours specifically, and how to spend it wisely.
How Much are You Getting?
The amount you’ll receive is based on your most recently filed tax return. If you reported an adjusted gross income of $75,000 or less as a single person, or $150,000 as a married couple, you can expect to receive the full amount: $1,200/per person.
If you reported an adjusted gross income of more than $75,000 or $150,000 for single and married, respectively, you’ll receive $5 less for every $100 you earned over those amounts. So if you earned $80,000, you’ll receive $250 less than the max, which comes out to $950/per person.
If you earned over $99,000 for individuals, or over $198,000 for married couples, you won’t be receiving a check.
In addition, parents will receive $500 for each child under 17 years old, as long as they were listed as a dependent on your most recent tax return. There is no limit on this. All your children who meet the requirements warrant a $500 check each. If you have 12 qualifying kids, you can expect an extra $6,000, as long as you meet the income requirements.
If you’re unemployed, your unemployment insurance will increase by $600 for 13 weeks.
There are exceptions to this, of course. If you’re behind on child-support payments, for example, expect that to come out of this check.
Feel free to ask about specific situations in the comments below.
When is Your Check Coming?
It’s impossible to know for sure when you’re getting your check, but you can get an idea based on how you filed your taxes.
If the IRS has your information for direct deposit, that’s how you’ll receive the check, and you’ll be receiving it sooner than those who don’t have direct-deposit information on file. If you’re in the direct-deposit group, and you haven’t got the check yet, you’ll see it as early as this week, and as late as mid-May, assuming all goes according to plan.
If you don’t do direct deposit, and typically get a paper-check refund, that’s how you’ll get this check. If you’re receiving a paper check, you most likely won’t get it before the beginning of May, but there’s a good chance you’ll get it in May.
There’s a chance it could be later, but September is the latest anyone should expect the check. Bloomberg points out, “The IRS will send approximately 100 million checks at a rate of 5 million per week, which could take 20 weeks, according to the committee’s document, meaning the final round of payments may not go out until September.” 2
For security purposes, the IRS will mail a letter about the payment to your last-known address within 15 days after the payment is made. 3 The letter will explain the payment method, and when it was made.
Ways to Spend the Money Wisely
Regardless of when you get the check, you should be ready to spend it wisely before it disappears into the abyss of your checking account.
Some people need the check right now to catch up on payments and other bills. You may not have the luxury of spending it how you please. But if you do, these are some good options. You’ll have to decide how to spend it, but I hope this guides you in the right direction.
1. Pay Off Debt
Debt would always be first on my list. If you’re in debt, the first step should be to dump the debt as quickly as possible. Whether you receive enough to make a huge impact on your debt, little impact, or pay it off entirely, paying off debt is never a bad option for a lump sum of money.
2. Finish Your Emergency Fund
If you follow Dave Ramsey, you know he suggests putting $1,000 into a savings account immediately, and then starting the Debt Snowball. I agree with him on that. If you’ve already paid off all your debt, except the mortgage, consider using this check to fully fund your emergency fund.
2020 has taught us the importance of an emergency fund. I’ve personally witnessed people losing everything because they didn’t have an emergency fund.
In all of my adult life, I would’ve never expected something like the current coronavirus pandemic to happen. Many people have planned for a lot, but being quarantined, businesses being completely closed for weeks, and the amount of people losing their jobs overnight is not something I saw coming.
The importance of an emergency fund has never been more apparent.
A fully-funded emergency fund should be at least three months of living expenses on a bare-bones budget. Just think of how you would live if you lost your job today. You’d stop eating out, going to the movies, and buying expensive toys. Calculate how much you would need for a month of living like that, and multiply it by the number of months you want in your emergency savings.
This check could fully fund it or at least get you started.
3. Start Your Next-Car Fund
I’m a big fan of car payments… made to yourself… in an interest-bearing account.
Instead of paying interest on a car loan, why not make payments to yourself, earn interest, and pay cash for your next car? It’s possible.
I use Marcus by Goldman Sachs (not an affiliate link) to get a 1.7% interest rate, which isn’t bad for a savings account. There are plenty of other options for a decent return, but they don’t get much higher than 1.7% for a savings account, at least, not without limitations.
4. Pay Down Your Mortgage
The finance blogging world is full of opinions, and this is a hot topic for those opinions. Many people believe you shouldn’t pay off your home early, because you can earn more in interest by investing than you can save by paying off your home early.
They’re right. Paying off your home early isn’t always the best decision from a mathematical standpoint, but it is from a financial-freedom standpoint. The recent financial markets have shown us how things can go south overnight, and having a paid-off home would be a lot better than the returns we’ve seen lately.
If you hate debt, like I do, consider paying a large payment on your mortgage. Regardless of how much more you could earn by investing, the feeling of a debt-free home is unbeatable. It frees up your cash flow and your mind.
If you don’t want to add an extra payment to your mortgage, or if it’s already paid off (congratulations!), consider using your stimulus check for a home-improvement project that adds value to your home. Focus on kitchen and bathroom projects to get the most bang for your buck.
5. Contribute to Your Retirement
It’s never a bad idea to put money into your retirement.
This check could max out an IRA for the year, or come close ($6,000 is the current standard annual limit). If you invest in a 401k plan or TSP (Thrift Savings Plan), you have a lot more room to work with ($18,000 is the current limit).
You may have to increase your allocation through work, and live off the stimulus money, to “add it to your retirement,” but it still works.
6. Start Living a Month Ahead
If you don’t need the stimulus money to make current payments, consider using it for future ones.
This could be the time to stop living paycheck-to-paycheck.
Use the stimulus money to get a month ahead on your bills, and start budgeting a month ahead from here on.
7. Contribute to Your Kid’s College Fund
If you’re not currently contributing to your children’s college, you could start with this check. I always like to ask the question: should you be paying for your children’s college in the first place? But I’ve already dove into that question here.
If you decide you want to help your kids out with college, consider a 529 plan. You have other options too. You may not need to contribute to their college at all, especially with all the scholarships out there, but it’s an idea.
8. Pay Ahead on Car Insurance
Consider paying your car insurance for the rest of the year.
That’s one less payment you have to worry about if you usually pay it monthly.
9. Pay for Christmas Now
If you find yourself struggling to pay for Christmas presents when the time comes, why not pay ahead? Set aside the money to pay for the holidays, or start buying presents now, before stores start marking things up for the holidays. 4
Or consider taking a new perspective on giving, not buying presents at all, and using your stimulus check elsewhere.
I know this is the minority, but some people actually feel bad for getting this check, because they haven’t been affected at all by the quarantines. If that’s you, or if you’re just doing well financially, consider giving some or all of this money to your church or a charity of your choice.
I know, this is laughable to many, but even if you don’t feel like you’re in a position to give, you may be amazed to see the results throughout the year if you do. We’ve had some of the most supernatural results and blessings when we’ve given large amounts of money, especially when we could barely afford to do so.
You could also consider helping a parent or other family member with bills and debt, if they’ve been hit harder than you during these difficult financial times.
11. Start a Home Business
If you’re debt-free, and your emergency fund is in place, you’re doing pretty good. Better than the vast majority. Consider using your stimulus money to start a side hustle or a home business. Most online side hustles, like blogging for example, take little to no money to get started.
If you sink a couple grand into an online business that doesn’t require much money in the first place, you could get in the game quickly. If you’re still quarantined when you get the check (I know I will be here in Italy), you’ll have plenty of time to get the business up and running.
12. Go Back to School
Going back to school is always an option. Whether you’re finishing your associate or bachelor’s degree, or starting a master’s or doctoral program, you likely have some extra time right now.
If you’re in a good financial position, and a degree makes sense for your career path, consider starting or finishing one.
Still stuck at home? Here are 40 ways to use your time wisely.
Worried about the economy right now? Here’s how to stop worrying.
Further Book Reading
- S, Tomptor. (2020, April 8). Americans Could Start Receiving Stimulus Checks Starting on April 9. Yahoo! Finance.
- L, Davidson. (2020, April 2). Some Virus Stimulus Checks May Not Arrive Until September. Bloomberg.
- Economic Impact Payment Information Center. IRS.
- A, Ohlheiser. (2013, November 26). How Retailers Trick You With Their Amazing Black Friday ‘Discounts’. The Atlantic.