If you’re like many Americans, you have probably been checking your bank account balance a little more frequently than usual. And while most of the recent charges you see probably represent large trips to the grocery store, one of the most recent deposits may be from the IRS in the form of an economic impact payment courtesy of the federal government.
Along with our schools, churches, entertainment, and social norms being interrupted, the economy, widespread and personal, is being disrupted as well with many families’ finances on the verge of being devastated.
That being said, the range of how we’re being affected is wide and the factors are as unique as we are. What part of the country do you live in? In what industry do you work? Are you a small business owner or an employee? A contractor or paid hourly? Are you married? Kids? Does your spouse work or stay home?
And the list goes on and on. Add to all these factors, the fact that personal finance situations were varied and complicated before the virus hit and it can be a recipe for confusion.
So what should you do with the money you received from the government? I wish the answer were simple, but as you can see, each household is unique with different perks and challenges. While the future sure feels uncertain, let’s remember there are never any guarantees it’s just that our immediate attention is drawn to that particular realization right now.
So I’d like to address the question of what to do with the stimulus money and break it down based on your personal situation just as I would do with any of my clients if they received any other type of windfall.
Kind of like a choose your own adventure story, here are five sample questions to ask yourself about your current financial situation to lead you to the best options for how to utilize your economic impact payment:
- Are you currently employed? Again, this answer used to be simpler to answer for many of us. Many companies have laid off, but many have furloughed or cut hours, some have even dismissed workers but continued benefits. The short answer here is, if you are unemployed or your employment feels particularly volatile, save your stimulus check. Put it away in a savings or money market account where you can access it easily, at least until your situation stabilizes. If you do not currently have an emergency fund that would cover a few months worth of living expenses in the case of a crisis, take this opportunity and money to start one. If you already have an emergency fund, add this money to it, at least until you’re able to secure consistent income again.
- Are you an affected small business owner or contractor? The answer is generally the same as above. Hold on to that money. You probably already have money set aside for a rainy day, but add this to it. You never know how long the storm will last.
- Are you working and your industry seems stable? This is probably the case for many workers in industries deemed as essential right now such as health care, law enforcement, grocery, some food service, postal and delivery, for example. First of all – thank you! You probably don’t have a moment to even stop and think about what to do with that deposit from the IRS, but when you do, evaluate your personal financial situation and your goals as you would if you received any other kind of windfall, like an unexpected gift or tax refund. Do you have an amount in savings that seems comfortable to you, especially given that we’ve all now seen what an un-forecasted event can bring? If not, put this money away and add to it when you’re able if necessary. If your savings goals are met, what about any outstanding debts (minus a mortgage)? Do you still have student loans, credit cards, or medical debt you’d like to wave goodbye to? Use this money to put a dent in any of those.
- Are you already debt-free with substantial savings (and your employment and/or industry is stable)? Maybe you can use this opportunity to be especially generous! Look around you for needs you could meet. Maybe your neighbor could use some extra groceries. Perhaps your church is making benevolence ministry a priority and you can chip in. What about the local soup kitchen, food pantry or other charity that might be overlooked during this time? A quick local Google search is not a bad place to start if that check is burning a hole in your pocket. There are plenty of people and organizations that could use the extra economic bump right about now.
- Finally, can you afford to just spend it? Part of the purpose of this money is to stimulate the economy. If you feel secure in your personal financial situation or you have some cash leftover after you’ve saved or paid off some debt, spend some. This may feel like a small thing, but every little bit helps. The economy will reopen soon and there will be places you’ll notice where spending your dollars will be mutually beneficial to the store or business owner and you. Is there a larger purchase you’ve been eyeing or a small business you love patronizing? Maybe it’s a small home improvement project or contractor you can hire. Be patient, hold onto your money just a little longer, and make it worth their while and yours when the economy begins to reopen.