COVID-19 Notes: The CARES Act Stimulus Plan

In an effort to assist a great number of American households during the global COVID-19 pandemic, the US Federal government has decided to send money directly to those who qualify based on legislation passed in the CARES Act. It is expected that many of us will begin receiving stimulus checks by the end of April if your banking information is on file with the Internal Revenue Service. If the IRS only has a mailing address, expect your check to arrive a number of weeks after that. Your eligibility to receive a benefit check will be determined by your adjusted gross income (AGI) on your last filed tax return (2018 or 2019). 

• Individuals with AGIs of $75,000 or less will receive a one-time payment of $1,200. That $1,200 will be reduced $5 for every $100 in income above $75,000 up to the limit of $99,000. 
• Married couples with AGIs of $150,000 or less will receive $2,400 in checks with the benefit reduced by the same $5 per additional $100 of income above $150,000 up to a maximum of $198,000.
• Individuals filing as head of household will be eligible for a $1,200 check if their AGI is $112,500 or less. The benefit will be phased out as above until they reach an AGI of $136,500.  
• Parents/guardians of children under the age of 17 will also receive $500 for each child. 

The point of this post isn’t to praise the government for this action, nor is it to shake a finger at them for the obvious groups of people they’ll miss with these guidelines. Rather, I want to talk about what you should do with your stimulus benefit. I believe there is a very clear order of priorities you and your family should follow in order for this money to be used for its greatest personal benefit.StabilizeA great number of people have found themselves without jobs in the past few weeks. It’s not unreasonable to think that number will continue to rise in the foreseeable future, as well. If you’re among this group, you’re most likely making every effort you can to keep things above water for as long as possible. You’ve probably done the math and know how long you can hold out until the unemployment checks start arriving. Even then, there may be some expenses you can’t cover. The stimulus check you’ll receive could go a long way in creating some additional stability for you. For example, if you have rent due and can’t work out an arrangement with your landlord, this check may give an additional resource to draw on. Things like car payments, utilities, child support, etc… They’re all obligations that need your attention. If you’re going to have a difficult time making ends meet, your stimulus check could be a big boost for you. Use the money to help maintain a basic standard of living for you and your family.By the way, if you haven’t gotten in contact with each company you make a regular monthly payment to, I encourage you to do so. Many companies are instituting special policies around payments right now. It is in your best interest to spend however much time is required to see what kind of grace can be extended to you. Check the company website for information regarding changes in payment policies or terms. If you have any questions, or don’t see any indication of options being offered, find their customer service phone number and call them, or chat with them online if they provide that service to find out if you can get help.Finally, it is very possible that the stimulus check and all of your other resources won’t be able to cover your basic needs. If you don’t know where to turn, I encourage you to call 211.org to get a list of available services that may be available to help with your specific need in your area. 211 is a program provided by the United Way and is an amazing resource for times just like these. There may be quite a few other local options available to help you, as well. With a bit of research and time, you may find the exact help you need as well as learn about other services in the area that may help friends and family.SaveIf your job is secure (at least for the time being), it’s time to turn your focus to your emergency fund. We suggest having enough money set aside to cover at least 3 months worth of expenses. While that may seem excessive in “normal” times to some people, it sounds a heck of a lot more reasonable today. In fact, I’ve seen a number of conversations on social media debating if 6 months worth of expenses is enough of a buffer or if they should save even more! If your emergency fund isn’t where you want it to be, and especially if you don’t have one established yet, put this money aside to give you a shield for when life takes a swing at you. If this check represents the first deposit into your new emergency fund, don’t be ashamed. This reserve of money will come in handy and you’ll be so glad you’ve got it when you need it. Your challenge will be to continue adding to it each month until it is fully funded. Make growing your new emergency fund a priority over the next 12 months if possible.SpendIf you have a stable income and have done a good job preparing for emergencies by building a healthy reserve, it’s very reasonable to consider spending some of this money. How should you spend it? Ideally, you’ll find ways to spend locally so the impact of your purchase has a chance to benefit your greater community. Millions of small businesses across the country find themselves in a dire situation. Owners are being forced to make incredibly tough decisions regarding employees, their own incomes, and potentially the continuation of their businesses. Yes, there may be opportunities for the small businesses to get government assistance through some provisions created in the CARES act. However, supporting local businesses with your dollars and encouragement can be especially motivating during difficult times not only for the owner, but the employees, too. Our local and national economy desperately need transactions to continue during the next few months. Restaurants, independent car mechanics, HVAC/plumbing companies, landscapers, painters, housekeepers, and on and on will need help from the local community to keep their businesses viable. If you have the ability to spend locally, I urge you to do so.Your stimulus check could represent a number of things to you. A bridge to another month. The beginning of a certain level of “safety”. Maybe it will be a tool to use in your community for the benefit of others. While I don’t know how you’ll most benefit from the money, I do know it’s an important part of our individual and collective futures. Whatever purpose the money serves for you and your family, stabilize, save, or spend, it’s a worthy use and there’s no shame in that.