Spending Wisely

What to Do With Your Coronavirus Stimulus Check

Keep an eye on your bank account because you could be getting a check from the government in the next few weeks.

It's no secret that the government is doing everything it can to support the economy. Last month, President Donald Trump signed a historic $2 trillion stimulus bill to try and contain the economic devastation caused by COVID-19.

But many lawmakers think $2 trillion may not be enough. There's talk of a new assistance package that House Speaker Nancy Pelosi said could "easily" cost more than $1 trillion dollars. In the end, we think total spending could be much more than $3 trillion...

It's clear that the federal government is willing to spend whatever it takes to keep this from becoming a depression.

Now, we could debate the government's actions for days...

Many will say the government should have been better prepared for a pandemic. And that it should have reacted quicker. (I tend to agree with those points.)

Many will say it's being irresponsible with its spending by dumping billions of dollars into the stock market in an effort to stabilize it. And that brings up the question of how big a role the government should play in the stock market and the economy.

But these are topics for another day... And I imagine countless books and shows on Netflix will cover these in the years to come.

Today, I want to talk about your personal finances.

Because despite all of the government's actions, many households are struggling.

With at least a quarter of the U.S. economy idle during this shutdown, nearly 10 million people have filed for unemployment in the last two weeks.

Yesterday, news broke that mortgage forbearance requests skyrocketed nearly 2,000%. And according to a recent survey by market research company YouGov, 11% of U.S. adults said they couldn't pay their rent or mortgage for April. Seven percent said they were unsure if they could.

Think about how many folks won't be able to afford their May payments.

Thankfully, there is some relief on the way. (I emphasize some because out of the $2 trillion, $500 billion goes straight to big corporations.)

According to Larry Kudlow, director of the U.S. National Economic Council, an estimated 175 million Americans will get stimulus checks with the first payments going out this week or next.

The check amounts will vary depending on your income, but they are worth up to $1,200 plus an additional $500 per child. So a household of four could receive a check of $3,400.

To see if you qualify for an economic impact payment, and to find other helpful information regarding the checks, visit this IRS page: Economic impact payments: What you need to know.

I also mentioned earlier that lawmakers are currently in talks for another stimulus bill... which could mean another round of checks to taxpayers. So you may receive more than $1,200 over the coming months.

The goal of these checks is for folks to get back out and start spending again... but that doesn't mean you need to spend yours right away.

I want to give some advice about what to do with these checks. And it really depends on your situation...

1. If you are out of work or have reduced hours.

First, and most obviously, cut as many expenses as you can. Stay away from surfing on Amazon for new things to buy... Don't order delivery often, cook at home regularly... Just be smart with the money you do have.

Use your stimulus checks to help cover your essential expenses over the next couple months. Try to avoid tapping into your savings or taking out additional loans if you can.

Also if you lost your job or were furloughed because of the coronavirus, you will likely qualify for unemployment payments. but the payout varies by state.

Try and use the money from the stimulus checks and from unemployment insurance to cover your expenses. And if you can't cover all of your monthly payments, look into deferring loan payments. You can defer payments on federal student loans and some lenders are flexible about payments on mortgages, car loans, and other debts that you may have. Check with your lender and see what your options are.

But the main thing is to be smart with the money you do have. Many news outlets are telling you that this hardship will last one more month, maybe two... But I want you to be prepared in the event that it lasts multiple months. Cutting expenses and setting money aside for an emergency is the best thing you can do right now.

2. If you are still working.

First, if you are still working, make sure to have at least three months' worth of expenses saved. Ever since I've been writing for Stansberry Research, I've been an advocate of having three months' worth of expenses saved for a possible emergency.

If you're like 40% of Americans who can't even cover an unexpected $400 expense, you don't have much saved. So my advice is to put the money you receive from the stimulus checks into a savings account or money market fund. Build up your emergency fund.

While it's tempting to use that check to buy a new couch or new TV, we don't know how long the shutdown will last. You may be employed now, but who knows what other businesses will be forced to cut their work staff in the coming months. Save your money and make sure you're prepared to cover your family's expenses if things take a turn for the worse.

Even if you followed my advice and do have a fully stocked emergency fund, it won't hurt to stash another month's worth of expenses away.

Again, it's anyone's guess how long this crisis will last. And we don't know if COVID-19 will return in the fall or next year. It's always better to be overprepared.

Now, if you do have a big emergency fund, now is a good time to start getting ahead on your debts. Consider using your stimulus checks to make an additional payment to your mortgage or toward your credit-card debt. You could also sock away that money for your child or your grandchild's college fund.

In short, just because the stimulus checks are meant to get folks spending again, it doesn't mean you need to be pressured into buying new things.

Take care of your financial well-being first. Make sure you are prepared to survive this economic shutdown and put yourself in a position to handle whatever crisis may come next.

We'll keep you updated on the best ways to maintain your wealth – and your health – as we navigate this crisis together. So make sure you don't miss an issue. Sign up to receive Health & Wealth Bulletin for free right here. 

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Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
April 8, 2020