Money Health

3 Smart Ways to Spend Your Stimulus Check

Stimulus Check
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To support people across the country impacted by the pandemic, the president signed a $2 trillion coronavirus stimulus plan, also referred to as the CARES Act. The act includes sending a stimulus check to qualifying individuals and families to provide brief monetary assistance.

If you qualify and receive a check, how could you spend your relief money? These days, most of our spending can be boiled down to grocery supplies and online orders, though you may be tempted to hoard the money instead, in case times get even tougher. If you are unsure of how to use your relief check, check out these three smart ways you could put that money to good use.

How much will I receive from the coronavirus stimulus check?

First, find out how much you can expect to receive. Single income earners who made $75,000 or less on their last tax return will receive the full amount of $1,200. Couples who earned a combined $150,000 or less will receive a maximum of $2,400. You will also receive $500 per child. The check amount tapers off if you made more money.

Single Income Earners
Your Income Your Check Amount
$75,000 or less $1,200
$80,000 $950
$85,000 $700
$90,000 $450
$95,000 $200
$99,000+ $0
Married Income Earners
Your Income Your Check Amount
$150,000 or less $2,400
$160,000 $1,900
$170,000 $1,400
$180,000 $900
$190,000 $400
$198,000+ $0

Source: CNN, “When will you get your stimulus cash, and how?”

Cover the basics first

For those living paycheck to paycheck and/or recently unemployed due to the pandemic.

Money from the stimulus bill should first be applied to the cost of your basic living needs. That includes rent or mortgage payment, groceries, utilities, and car-related expenses like gas or insurance. If you are in jeopardy of not having enough money to cover your rent or mortgage payment, talk to your landlord or bank. You could have some relief options.

A quick way to understand how much money you need to cover your basics is to look back at your last three months of spending. For instance, add up how much you spent at the grocery store during those three months and then divide by three to get an average. The average amount helps you budget for future grocery trips and your stimulus money should be used to cover the cost. Remember that you can adjust your budget because while grocery spending has increased, money spent dinning out has probably gone down.

Pad your emergency fund

For those who have little to no savings

A study conducted by Freedom Debt Relief found that only 53% of respondents had a “rainy day fund.” In that same study, 38% have less than $1,000 in their saving and checking accounts. A potential recession could have many of us scrambling to make ends meet.

If you have less than two to three months of living expenses set aside but still have a paycheck, now is the time to use that check to build up your savings. Even if you are still employed, emergencies will arise. The pandemic doesn’t slow down things like bad transmissions, a smashed cell phone, or a broken arm.

In addition to using your stimulus money for your emergency fund, make a weekly or bi-weekly contribution if you can. Small amounts can add up, and could give you much needed reassurance and financial stability. If you are experiencing financial hardship, here’s how you can reduce your spending.

Pay down debt

For those who have a fully stocked emergency fund and/or still employed

If you have a fully stocked emergency fund that can last you several months and you are still employed, the relief check could help you pay down debt. The Federal Reserve cut interest rates to a near zero percent, which could help your debt payoff plan because variable rate credit cards may also decrease in interest as a result.

Though the decrease is slight, it may be enough incentive to make an extra payment towards your credit card debt this month. Take a look at your credit card statements and see if the interest rate has fluctuated.

In addition, federal student loan payments and interest is deferred until September 30. This pause on accumulating interest makes it a good time to pay down your student loans. Before the waiver went into effect, federal student loan interest rates were 4.53% for subsidized loans and 6.08% for unsubsidized loans for undergraduates. That’s money back in your pocket if you can afford to continue to make payments through September.

Apply all three ways to use the money

You could do a little of all three options depending on your situation. For example, if you are still employed with debt and little savings, you could break up your stimulus check to cushion your emergency fund and pay down a portion of your debt.

The CARES Act aims to provide much needed support, though you’ll need to formulate your own plan of action, too. The important thing is to make sure your basic needs are met first. Once that’s taken care of, ensure you have a healthy emergency fund to fall back on. Then you can decide to put more money towards debt.

Find more relief during the coronavirus pandemic

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Justine Nelson is the founder of Debt Free Millennials, an online community to help millennials eliminate debt and live a debt free lifestyle. As a freelance writer and YouTuber, Justine enjoys creating upbeat and educational personal finance content. This Midwest millennial paid off $35k in student loan debt and now resides in San Diego with her husband.