How to Make the Most of Your Coronavirus Stimulus Check If You Don’t Need the Money

How to Make the Most of Your Coronavirus Stimulus Check If You Don’t Need the Money

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First things first: When will I get my stimulus check?

  • If you filed taxes for 2018 or 2019 and provided direct deposit information: You should have received your check in mid-April.
  • If you filed taxes for 2018 or 2019 but did not provide direct deposit information: You could receive your check as early as May or as late as mid-September.
  • If you haven’t received your check but think you should have: The IRS recommends that you check its website for updates rather than call.

How much is my stimulus check?

As part of the stimulus package, the US government is expected to send out checks of up to $1,200 to many Americans:

  • Individuals with adjusted gross incomes of up to $75,000 per year are expected to each get a $1,200 check. The payment phases out in size and then ends altogether if your income is more than $99,000.
  • Married couples earning up to $150,000 would get $2,400, and families with children could get up to $500 per child, too (an amount that also phases out based on income).

The income figure used will likely be based on either your 2018 taxes if you haven’t filed for 2019 yet, or your 2019 taxes if you’ve already filed. Jack Smalligan, senior policy fellow at the Urban Institute, said that people who don’t normally file a tax return—like retirees whose only source of income is Social Security, or others who receive Social Security disability benefits—will also still get checks.

As the coronavirus shutdown continues to affect large sections of the economy, the number of Americans applying for unemployment benefits continues to surge, leaving unemployment offices themselves understaffed and underprepared. Experts expect that the number of jobless claims will only continue to grow. Stimulus checks could be a lifeline for many people, and covering those needs is the best thing you can do for yourself and the economy at large.

But if your income is stable and you don’t need the money for immediate relief, how do you use it? Donate it to charity? Save it? Spend it? And if you spend it, can your dollars work harder in one place versus another?

Maybe you can do one of these things, or—more likely—a combination of a few. Here’s a top-down look at how you can spend this money to help yourself and others:

  • If you have a steady income stream but could still be on more solid financial footing: Build up your emergency fund
  • If you have a steady income stream but also have high-interest debt: Pay it down
  • If you’re financially secure and want to help the economy: Spend it at local businesses you don’t want to see close
  • If you’re financially secure and want to help others: Donate it

Build up your emergency fund

Even if your job is safe for now, no one knows what the future may hold. The St. Louis Federal Reserve president estimates that as many as 46 million people could be left jobless in the short term in the United States.

If you don’t currently have an emergency fund, the proposed stimulus checks may be enough to generate a decently sized one to kick-start your financial backup.

Most experts agree that having three to six months’ worth of expenses in cash is a good rule of thumb. But if you can save even more in cash, you’re in an even better position. The pandemic doesn’t yet have an end date, so if you can, err on the side closer to six months for now.

Pay down high-interest debt

If you have a revolving credit card balance at a high APR or a high-interest loan with an interest rate above 5% or 6%, it might make sense to use part of your stimulus-check money to pay that down, while using another part to save for your emergency fund.

It’s tough to say whether amassing emergency funds is more important than paying down debt. Tackling debt and building up an emergency fund are in many ways equally valuable.

  • Paying off debt now has a clear long-term return. The more you pay off now means the more you save in interest that you’d otherwise have paid to your bank.
  • Padding your savings account now might give you the cushion you need when things get unpredictable.

Assuming you are happy with your current emergency fund (and that’s a personal decision), use what’s left to knock out as much debt as you can.

If you’re carrying a balance on multiple credit cards, gather them all together. Make sure you’re always making minimum payments across all your cards. But with your remaining money, you have a few options:

  • The avalanche method: Order your cards from the highest to the lowest APR. Typically, you can save the most money by getting rid of the debt with the highest interest rate first. Pay off that card, and once the debt is gone, move the excess money from those payments toward paying down the card with the next-highest interest rate.
  • The snowball method: Order your cards based on how much money you owe on them. It can be psychologically gratifying to knock out debt entirely on a credit card, even if it’s not the card with the most debt. Behavioral psychologists believe that such positive feelings might be encouragement to keep paying other cards down too. It’s a similar approach to how many people tackle a real life to-do list: Do the short, easy tasks first before buckling down on a big project.

The same goes for any higher-interest loans you may have, such as personal loans, which tend to have higher APRs than, say, a mortgage.

And although the lower-than-ever federal prime rate likely means you’re paying less in interest on your debt than you were a few months ago (that’s good news for consumers), high-interest credit card debt still can accumulate quickly.

Spend it at local businesses you don’t want to see close

You’ve padded your emergency fund, paid off debt, and invested in your future self.

Now it’s time to help others.

Some companies will weather these mandated temporary closures. Others—often small businesses—fear they will shut down completely. And millions of Americans are already out of work as a result of the pandemic. Here’s how to put your money to good use.

Buy gift cards if your favorite businesses are closed: Instagram co-founder Mike Krieger and his wife, Kaitlyn, built a website called SaveOurFaves that directs people on how to buy gift cards from local San Francisco businesses, many of which are closed right now. They say that buying gift cards helps by essentially giving restaurants a mini loan to cover fixed costs such as rent, labor, or loan repayments.

Find ways to shop even if the business is “closed”: See if you can order takeout. In states such as New York, restaurants and bars are allowed to sell to-go food and drinks for takeout and delivery in order to prevent large gatherings while continuing to stimulate the economy. Although you should act with caution when going out, ordering from your local faves can help keep them in business. (And don’t forget to tip well—delivery drivers, servers, and cooks are risking additional exposure to the coronavirus to continue to serve their businesses and customers.) To help their employees, many restaurants are also creating coronavirus relief funds that you can donate to.

See if you can order merchandise from your favorite small businesses online. New Yorker food writer Helen Rosner highlights merchandise from small businesses across the nation—from breweries to bakeries—on her Instagram feed, with many entries submitted by her followers. And USA Today created a website dedicated to supporting local businesses across the nation.

If you can, continue paying your house cleaner, nanny, personal trainer, hairdresser, pet sitter, or whomever you pay on a regular basis under normal circumstances. They’ve likely otherwise lost their income stream, with no one paying for their services.

Shift your shopping from big-box stores to local merchants: Many grocery stores and wholesale clubs are seeing a huge increase in business, partially because people are switching their spending from restaurants to groceries. Buy bread from your local bakery rather than a supermarket, and consider buying soap or other beauty items online from local merchants or Etsy shops.

Keep your memberships to small businesses, even if you can’t currently patronize them: A trove of data (PDF) suggests that, while small businesses are central to job creation and future recovery, they’re also hit hardest in recessions.

If you currently pay a monthly or annual membership for a locally owned business such as a museum, gym, or theater company, consider keeping your membership active, even if the dance company can’t currently perform shows or the science center is closed.

Eileen Heisman, CEO of National Philanthropic Trust, said there’s no one best charity to support. “Ask yourself, ‘What is most important to you? Where do you want your donation to have the most impact?’ Philanthropy is highly personal and there is no right answer,” she said.

Take stock of what matters most to you, whether it’s an organization that has always needed help—say, to address hunger, housing, the arts, or the environment—or if it’s a cause experiencing a newfound need. Charity Navigator has aggregated a list of nonprofits specifically responding to the COVID-19 crisis. The New York Times (parent company of Wirecutter) also compiled a list of charities and nongovernmental organizations on the front lines of the outbreak.

Tons of organizations need help right now, including nonprofits that support seniors and medical nonprofits that provide services for low-income communities. Others are less tied to the pandemic specifically but are taking a financial hit from lost income related to the coronavirus-induced economic shutdown, such as performing-arts groups and animal-protection charities.

With a crisis like the coronavirus pandemic, there may be immediate needs such as providing lunch to low-income kids during school closures or aid at senior centers. But there will also be different needs long after the virus peaks, such as providing money or job-interview support for people who have been unemployed for an extended period of time. And as the plight continues, some people fear that fundraising may lessen, so your money will continue to be needed.

What’s the best way to make a donation? If you are making a charitable contribution, Heisman said it’s generally more impactful to concentrate your money in a larger amount to a couple of charities rather than making a bunch of small donations to many charities (to cut down on administrative costs such as processing your check and writing thank you notes), as well as to check to see if your company does a matching donation. Heisman suggested that $1,200 could best serve three to four charities max.

And don’t accidentally give your money to grifters. Heisman recommends researching the charity. You can use rating systems or review websites such as ImpactMatters and GiveWell to make sense of whether a charity is using money wisely.

Ultimately, whichever charity you choose will be the right one. Plenty of people are pooling their time and resources to help those most in need, and anything that you can spare can make a difference.

It’s okay to share about your kind act on social media. Doing so is not a humblebrag but rather a help, Heisman said. “Tell your social circle about your donation,” she said. “Your endorsement means something to others and has the potential to double or triple what the charity receives.”

When will I get my stimulus check?

If you filed taxes for 2018 or 2019 and provided direct deposit information: You should have received your check in mid-April.

The Treasury Department and the IRS on March 30 confirmed that checks would start being sent in the next three weeks (roughly mid-April).

The IRS is sending payments as an electronic deposit into the same bank account you listed on your most recent tax return. While you don’t have to file your 2019 taxes until July 15, 2020, some tax experts suggest filing now if you want that stimulus money as soon as possible, as it may help reduce delays.

As of April 17, roughly 88 million payments—totaling about $158 billion—had been made via direct deposit.

If you filed taxes for 2018 or 2019 but did not provide direct deposit information: You could receive your check as early as May or as late as mid-September.

The IRS is set to begin issuing paper checks the week of May 4 to taxpayers who didn’t provide direct deposit info on their latest tax return. Checks will be sent to the taxpayer’s address on file at a rate of about 5 million per week. That may seem like a lot, but it means it could take up to 20 weeks—or until mid-September—for all of the paper checks to be mailed.

“The big limiting factor for the IRS’s check processing is they can only process about 5 million checks per week,” said Garrett Watson, senior policy analyst at the Tax Foundation. “This is enough to process tax refunds in a timely manner during tax season, but [it] creates delays when the IRS must process a large number of rebates all at once.”

The more money you make, the longer you could be waiting for that paper check to arrive.

“The IRS will prioritize getting checks to low-income recipients first, starting with incomes below $10,000,” Watson said.

If you aren’t required to file a tax return: You might receive your check in mid-April, but you could potentially be waiting through the end of 2020.

If you aren’t typically required to file a tax return (say, you’re a senior citizen or Social Security recipient), you don’t need to file a return to get your stimulus money. The IRS will use information from your SSA-1099 or RRB-1099 form to generate your payment. If the IRS has your direct deposit information on file, you should expect to get your money faster.

If you aren’t typically required to submit a tax return but neither the IRS nor the Social Security Administration has your info on file (which could be the case for Veterans Affairs beneficiaries or some people with low incomes), it gets trickier. You may need to submit a simple tax return.

The Treasury Department and the IRS launched a new Web tool to let you register for payment. But doing so could be challenging if you don’t have Internet access, especially since most nonprofits and libraries that typically offer public Internet access remain closed. While you won’t get your check now, here’s a sliver of good news: You have until the end of the year to provide your information so that the IRS can verify your eligibility and payment amount.

If you haven’t received your check but think you should have: The IRS recommends that you check its website for updates rather than call.

Additionally, the IRS will send a letter to your last known address within 15 days of when the check is mailed or the funds are deposited into your bank account. If you got the notice but have yet to receive the money, the IRS said the letter will also contain next steps for reporting your missed payment.

Watch out for scams. The IRS has already warned that fraudsters are posing as employees of the agency, trying to convince people to share personal info that could be used to steal their stimulus money. If you’re unsure whether the letter you received is real, visit the IRS’s scam page, which offers tips on the telltale signs of fraud as well as info on reporting it.

The IRS will never call, text, email, or contact you on social media to ask for personal or bank account information. And be cautious about opening emails with attachments or links claiming to have information about your check. It’s likely a scam.

Source: NY Times – Wirecutter
Keyword: How to Make the Most of Your Coronavirus Stimulus Check If You Don’t Need the Money

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