Your employees are financially stressed due to the heightened economic changes and impact due to coronavirus. The federal government is likely to finalize the largest economic stimulus bill in history. Here's a brief guide to help your employees navigate their stress and think through how to use their stimulus funds.
On Wednesday, March 25th, the Senate unanimously voted to approve a $2 trillion measure to bolster the economy as the coronavirus continues to batter the financial health of individuals, businesses, and the stock market. This is the largest stimulus package ever proposed, and is unique because part of the stimulus funds will be sent to individuals as a direct payment. That is, Americans are getting cold, hard cash. While the stimulus package has to be approved by the House and then signed into law by President Trump, it’s likely that this deal will happen soon, potentially as early as Friday, March 27.
As part of this legislation, millions of Americans who make less than $75,000 per year will receive a $1,200 check. Those making between $75,000 and $99,000 will receive a reduced amount on a sliding scale. According to estimates, money is projected to arrive in three weeks. Looking at the calendar, that’s roughly April 17, but let’s assume the government takes a little extra time to deliver on its promise and money is received around April 20.
Here is a breakdown of several options to consider for this cash infusion. A couple of notes before we dive in:
- Let’s be honest, $1,200 isn’t going to let anyone retire early, but hey, it’s a lot more than $0. Let’s figure out how to use it the best we can.
- There are tons of ways to use $1,200 and we are offering our unbiased thoughts, knowing that there isn’t one perfect answer for everyone.
Here’s what you can do once your money arrives:
1. Open it and….drum roll….cash it!
Seriously though, if you receive a check in the mail, deposit it in a bank account. If possible, use mobile deposit to avoid going to a physical bank. Many others will receive a direct deposit to their bank account if their banking information was used when filing taxes. Most of all, avoid using a check casher because they take out a large portion of your money in fees (usually 3-7%), which could add up to $50 - $100 in fees.
2. Take care of immediate health needs.
If you or your family is sick because of the coronavirus or any other illnesses, prioritize using your stimulus check for health. There’s no point in having $1,200 in your bank account if you don’t use it to fix your immediate needs.
3. Boost emergency savings.
At Holberg Financial, we always encourage people, pandemic or not, to have at least $1,000 in emergency savings that is set aside to help with unexpected costs. See our Coronavirus FAQ for more on how much emergency savings you should aim to have. If you can’t save all of this $1,200 money, that’s OK. Try saving $250 or even $500 right away and boost your savings.
4. Pay highest priority bills.
If you are behind on any bills or if any high priority bills will be due very soon, use some of your stimulus money to pay those expenses. Many states and cities have committed to not turning off water, gas, and electric utilities during, so if your financial situation gets worse, you can deprioritize those utilities for a couple of months. There may be some payment plan options to consider.
Additionally, as part of the stimulus legislation, federal student loan holders have the option to pause payments through September 30th, 2020 and during that time, student loan interest will also be waived on federal student loans (see more below). On the other hand, credit card bills, auto loans, mortgages, private student loans, cell phone bills, and even day care costs are less forgiving, so make these payments to protect and build your credit score. Everyone has their own unique budget priorities, and rearranging them from highest to lowest priority can be tough, especially when balancing those bills with life’s other expenses.
5. Fund your IRA or other retirement/investment account.
If you are feeling pretty stable in terms of emergency savings, job security, and managing your budget, then investing your stimulus funds in an IRA or other investment account can be a great option. The US stock market has continued to decline, and you can learn more about how to supplement and boost your retirement accounts in a swinging market.
People are struggling across the world, and if you are in the position to donate, consider gifting some or all of your stimulus money to a local non-profit, food depository, or reach out to local health care and hospital facilities to see if you can purchase supplies for them. There are masks, gowns, sanitizer shortages, and many facilities could benefit from your generosity.
This list isn’t exhaustive, and everyone has a unique situation and set of needs. If you are feeling unsure about what to do, know that millions of others are facing similar challenges. Don’t be afraid to talk to each other (from at least 6 feet away, of course) and share different ideas and strategies that you’re considering. Talking it out and getting a gut check from a friend or family member can be really empowering during times like these.
Based on Forbes reporting, on top of the stimulus funds, for the 45 million Americans who hold federal student loans, the stimulus legislation will not require payments and interest will be waived until Sept 30, 2020 for those that wish to pause their student loan payments. This is in addition to the forbearance option that federal student loan borrowers have now and during normal times. If you are working towards public service loan forgiveness (PSLF), pausing your federal payments will still count towards your 120 consecutive payments and taking advantage of this pausing option will not negatively affect your progress. Learn more about federal loan forgiveness programs.
Having the ability to pause your student loan payments can provide more cushion in your budget for those that need it. If you’re comfortable continuing to make your student loan payments, take advantage of this period as payments will go directly to your loan principal. Take note that if you have private loans, you will still have to make regular on-time payments.
Lastly, Holberg Financial is providing free access to our Financial Wellness Resources platform for 30 days to any company who wants to provide Holberg Financial to their employees. Our platform has 50+ financial education videos, a budgeting tool, a goal and account tracking system and also includes our detailed 3 Step Financial Health Guide to Helping Employees Navigate Coronavirus. Share this article and help your team get free access to our financial wellness resources.
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