The U.S. government has approved the use of $2 trillion in an attempt to stimulate the U.S. economy and help Americans who might be suffering financially in light of the coronavirus pandemic.
The relief package provides direct cash payments of up to $1,200 for most adults — or $2,400 for married couples who file their taxes jointly — plus $500 per child under 17.
So how should you plan to use this money if you receive it?
What You Do With Your Check Should Depend on Your Circumstances
What you do with the money the government sends you is a personal decision. But money expert Clark Howard says that your current financial situation and prognosis for the next few months should factor into your choice of whether to spend, save, invest or donate the money.
Here are some scenarios and what Clark recommends:
The government is trying to get cash into the hands of the people who require it to meet their basic needs in this time of crisis.
“The best guess is that upwards of 20 million people are going to suffer severe financial harm because of coronavirus,” Clark says. “They’ll either be laid off, have their hours cut back, or there will be no work available for people like contractors and gig workers. For those people, any money that comes in will be precious and must be used very, very carefully.”
If you are in this situation — or expect to be in the near future — you will probably be trying to figure out the best way to budget your money.
“In medicine, it’s called triage,” Clark says. “It’s exactly what’s happening in the hospitals right now as they decide who to treat when or who not to treat. You have to look at your bills the same way. You’ve got to think about what you must have.”
Here’s how Clark says you should prioritize your spending to meet your basic needs:
“At the top of the list is food. You either need money to buy food or you’ve got to come up with a way to get food. It could be through food stamps — we’ll almost certainly have expanded availability of food stamps for many people,” Clark says.
“Next would be paying for your housing, because you need to maintain a place to live.”
“Once we can work again, for most of us that means having access to our vehicles. So paying vehicle loans would follow housing.”
You should still pay your utility bills if you can, but what if you’ve spent all you have and still owe for power, water and internet?
“There are not standardized policies,” Clark says. “However, many state regulators have outlawed shutoffs for now for electricity or natural gas.”
He says you should look on their websites for coronavirus accommodations and how to contact them for assistance. Again, don’t ignore bills — stay in touch with each company if financial hardship puts you behind and you can’t pay.
What does Clark not want you to focus on if you’re without a job and have little or no savings?
“The lowest priorities are any unsecured debt,” he says. “That’s credit cards, any personal loans — anything that is not absolutely necessary.”
So what if you are receiving government aid, but are still employed and are able to meet your immediate basic needs? Clark says you should strongly consider putting the money in a safe place for now.
“There are a lot of us who have not lost our jobs yet and may not lose our jobs, but we don’t have rainy day accounts,” he says. “I really need you to think about how you handle this next time period where you’ve been a lot luckier than a lot of other people who are now — or soon will be — unemployed.”
Clark says the important thing is that you save that money from the federal government for the unexpected things that could occur in your life later this year.
“Thinking through every bill you have now is very much to your advantage. You’ve dodged an early bullet, but we don’t know what’s going to happen later.”
If you’re looking for a place to save your money that will still pay you a little interest, check out our list of the Best Savings Accounts for 2020 here.
If you’ve taken Clark’s advice in the past and established an emergency fund that could last you several months if you need it, you might be in a position to take any money you receive from the government and put it to work for your future.
“If you’re in a position where your job looks good and secure and your savings are solid, this is a time to increase the amount of money you’re saving for retirement and keep that amount up,” Clark says. “With stock prices back to where they were in 2016, this is an opportunity for you to buy shares in companies that eventually will be very healthy again at relatively low prices.”
By increasing what you’re saving in a 401(k) or Roth IRA, you will benefit long-term from having increased what you’re putting in further down the road.
Finally, you may be one of those people who has taken all of the steps to not only weather the current crisis, but feel confident that you are set up for a comfortable retirement. If that’s the case, you could consider passing along any government aid you receive to someone who’s suffering right now.
“Any time we face a disaster or crisis in the United States, I’m so touched by the huge number of people who want to do what they can to help others in a time of need,” Clark says.
But he wants you to be sure that you really can afford to donate right now. Clark says the people in that position meet these criteria:
- Are either retired with a secure source of income or working in a secure job
- Have money in savings
- And have money in investments or are already saving well for their retirement years
If you choose to donate, Clark says it’s probably wise to start close to home.
“My thing right now is that the best efforts are those that are local — that you know how any things you give or any money you donate will be put to work.”
Just remember that no matter how strongly you feel compelled to help out others, you have to be sure you can take care of yourself and your family first.
It’s important to keep in mind that the aid money that may be coming is just that: aid. It won’t replace a regular income or even be enough to be considered a windfall by most standards.
What you chose to do with it — which of the above buckets you chose to fill — depends on your personal circumstances. Just make sure you carefully consider your choices and put yourself in the best possible position for the uncertainty of the coming weeks and months.