Stimulus Check?
The government continues to debate the terms of a second stimulus package, but it appears that both sides wants to provide something to the American people. The latest bill is called the Health, Economic, Assistance, Liability Protection, and Schools (HEALS) Act. The government sure does love their acronyms. The HEALS act has several dimensions to it but is similar in nature to the CAREs Act when it comes to the one time stimulus check. They are currently purposing that individuals making less than $75,000 a year would receive $1,200 and couples who file jointly making less than $150,000 would receive $2,400. The bill also calls for a family to receive $500 for each dependent. The difference is that with the CAREs Act, the dependents had to be under 17, but with there is no age limit to the HEALs Act. This means that if you have a college-age child who you still claim as a dependent on your taxes, you will get the additional $500. They are hoping to have a package approved by August 7 when the senate is supposed to take a month-long recess. If they do pass the bill in the next day, checks may be distributed in September. You may ask yourself, what do I do with my stimulus check?
The answer of where to spend your stimulus check really comes down to where you are with your finances. There is no moral or legal obligation to spend the money in effort to “stimulate” the economy. You need to take care of your household first prior to spending the money. If you are have had a job loss or see one in the near the future due to COVID, save that money in an effort to protect your family’s four walls: food, utilities, shelter, and transportation. The four walls are the bills that you take care of first before any other bills or debts. Anything other than those four walls can wait until your household is stable and you are back to being employed.
If you are in the process of paying off all your debt and your job is stable, then use the money as a bonus to speed up your debt snowball. Don’t let that money stay too long in your checking account because it will get spent and you will have missed out on a bonus. Stay focused on getting rid of the debt.
If you are out of debt and your job is stable, but you haven’t completed your fully funded emergency fund (3-6 months of expenses), then the stimulus check can assist you in finishing that fully funded emergency fund. The emergency fund is your safety net that protects you from the unexpected expenses of life (i.e. car repair, emergency room visits, new water heater, etc.). The emergency fund ensures that you don’t go back into debt after working so hard to get out.
If you job is stable, you are out of debt, have an emergency fund and are already investing 15 % of your income for retirement, there is more freedom on how you allocate the stimulus check. You may want to upgrade some items in your home, buy a new mountain bike, add it to the kid’s college funds, go on a vacation or put some of it down on your house to quicken the pace that your mortgage is paid off. Whatever you choose, be intentional with your spending.
If you need advice or a plan on where to allocate your stimulus check, schedule a free 15-minute consultation.
Stay safe and stay well.