The coronavirus (COVID-19) pandemic has had a financial impact on millions of Americans. Thankfully, some relief is on the way in the form of a stimulus check. Lawmakers recently passed a stimulus package to combat the economic impact of COVID-19.
As part of the bill, those who qualify are expected to receive payments of up to $1,200 for each adult and $500 for every child. There are some people spreading misinformation on social media and we want everyone to know that the government stimulus check is non-taxable income.
Here are three key things to remember about the stimulus check:
- You will not pay taxes on this income.
- You will not have to pay it back at a later date.
- The stimulus check does not affect your tax refund.
If you are expecting a stimulus check, you may be unsure how to best use the money you receive.
Tips to Keep in Mind
In general, here are five areas to prioritize:
In general, prioritize your essentials first: medication, food, and utilities, like water, heat, and electricity, are all top priorities. Taking care of your immediate needs to stay healthy is crucial!
Once you’ve taken care of yourself and your family’s immediate needs, you can look at other areas to allocate the money.
- Emergency Savings
No matter the amount, setting aside funds for future use is a powerful step to take.
Consider putting at least part of the money toward emergency savings, whether it’s an existing emergency fund or one you’re starting from scratch. Setting aside as much as you can and knowing it’s available if you need it provides peace of mind. You don’t have to think of this as money you won’t touch ever, think of this as an emergency fund to help for next month’s immediate needs and expenses.
Next, look at housing costs. These costs will likely include rent payments or your mortgage. Many states and lenders are taking steps to provide support for homeowners and renters, including suspending evictions and foreclosures, and deferring payments. If you can afford to make these payments you should. These payments will eventually come due and staying current will be much less stressful than falling behind.
Reach out to your lender or landlord directly for the most accurate, up to date information on programs available if you cannot make your full payments. If you feel stressed about calling your lender or landlord, please reach out to us. Our financial counselors are here for you and can help you navigate this conversation.
Try to keep current on your auto loan or lease if you can. If you have fallen behind, you may want to use the stimulus money to catch up on late payments. Many auto lenders are offering payment or debt relief options. Options may include deferred payments or waived late fees. These options help get people through the next several months. Most lenders don’t want to see you default on your loan or face repossession, so be sure to stay in contact with them and keep them up to date on your situation.
- Credit Cards and Unsecured Loans
Last, put money toward your unsecured debt payments like credit cards. Lenders and the government are working to provide support for these debts as well. Check your lenders’ websites to see what concessions may be available to you if you cannot afford your minimum payments. Keep in mind that interest will likely continue to accrue on these debts.
If you’ve made your minimum payments, set aside money for an emergency fund, and handled your home and auto loans, you might put some of the money toward paying down the principal. The more you pay off now, the more you will save in overall interest.
Once you’ve made a plan, you might consider having a buddy — a friend, family member, someone you trust — look it over. This may give you more confidence that you are making the right decisions for your situation.
Haven’t Received Your Check?
The IRS started sending payments out on April 13, 2020, and will continue to over the next few months. However, there may be steps that you need to take to receive your stimulus check. Check out our resource guide1 to learn how you can get your check as soon as possible.
Content provided courtesy of GreenPath Financial Wellness.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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