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Stimulus…Check! Now What?

Depending on your financial situation, you can pay for immediate needs, support your local economy or bolster your emergency fund.

By Megan Ryan | March 30, 2020

Check from the U.S. Treasury

Congress just passed a historic $2 trillion stimulus package to aid in the country’s recovery from the coronavirus pandemic. Americans will soon receive direct payments from the government intended to help stimulate consumer spending and provide a much-needed jolt to local economies.

Unemployment numbers are soaring as businesses are closing their doors — permanently or temporarily — while we collectively do our part to fight COVID-19 through social distancing.

Millions of people who have lost their jobs are expected to use the stimulus checks to cover pressing day-to-day expenses. But if you’re still drawing a paycheck, how should you spend your stimulus funds?

Check amounts will be based on your reported income on 2019 or 2018 tax returns. Individuals will receive up to $1,200; married couples who file jointly will get $2,400, plus an additional $500 for each child under 17.

Those amounts apply to individuals making less than $75,000 and couples making less than $150,000. Stimulus check amounts will phase out for Americans with adjusted gross incomes up to $99,000 for singles and $198,000 for married couples.

If you’re still receiving a paycheck, you can use the stimulus to support your local economies: ordering take-out or delivery from local restaurants, generously tipping delivery people, or purchasing gift certificates for future use.

But you should also think long-term if possible, said Jim Shaw, director of BOK Financial Advisors.

“For individuals without pressing, unmet needs like rent, food or medicine, consider tackling ongoing financial headaches, like high-interest credit cards first,” Shaw said. “Employing these funds to reduce or pay off high-interest debt will be hugely beneficial in the long run.”

“The basic financial planning principles apply here,” Shaw explained. “This is an opportunity for some people to become better equipped and in control of their finances. Having a cushion on hand helps temper the fear that many are feeling during this time of uncertainty.”

Even Americans who feel secure in their employment should realize that the COVID-19 crisis is like no other and could change their situation at any time. Shaw agrees with the rule of thumb that people have three to six months of savings on hand for emergencies.

A recent survey found that more than one in four U.S. adults had an unplanned expense in the last year, and fewer than half of the people surveyed said they had enough in savings to cover an emergency.

Those who feel confident in their emergency fund might even take a long-term approach.

“If you have three to six months of savings on hand and don’t have high-interest debt to pay off, you might look at contributing to your long-term savings through a Roth or Traditional IRA,” Shaw said. “Right now, investors are able to ‘buy at a discount.’ The market will likely rebound in time, and any additional funds you can inject into that retirement fund will benefit you in the long run.”

Finally, if you find yourself in the enviable position of having stable and secure income, a fully-funded emergency fund, and are adequately funding your retirement accounts, this could prove an opportunity for generosity. In addition to small businesses struggling to stay afloat, communities are rallying to support service organizations and non-profits as they care for vulnerable people impacted by COVID-19.

“What you decide to do with this money is a personal decision, but if you’re in a good enough position and you can think of others during this time, this is a perfect situation to help those who are struggling,” Shaw said.

These stimulus considerations underscore the importance of having a financial plan with access to a trusted advisor who can help you set long-term goals. Feel more confident in your future and less fearful during financial turbulence by working with an accredited professional.

The opinions expressed herein reflect the judgment of the author(s) at this date, are subject to change without notice, and are not a complete analysis of any sector, industry, or security. The content provided herein does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. Recipients should not rely on this material in making any future investment decision. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, you are encouraged to consult with a qualified lawyer, accountant, or financial professional.

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