This story was updated at 7 P.M. March 19th, after the release of Senate Republicans’ proposed bill.
What a year it’s been so far for the world as the novel coronavirus pandemic reshapes the way we live. Canceling travel plans and avoiding large public gatherings help reduce the spread – “flatten the curve.”
Many households are feeling the financial effects of novel coronavirus as employers temporarily close and stop paying a steady income. However, the monthly bills are not disappearing even if an entire nation goes under lockdown.
Perhaps you, a relative, or neighbor is already working reduced hours or on temporary leave.
We’ve seen some banks respond with emergency relief. Ally Bank, for example, has implemented new policies for the next 120 days. They’ve suspended fees like overdraft fees and excessive transactions. They’ve also deferred payments on auto and home loans for 120 days and finance charges will accrue but you won’t be charged any late fees.
Those are good first steps but the federal government is looking to do more.
The federal government is planning on sending out stimulus checks to American households. A lot of figures have been thrown around but nothing has been finalized yet.
This check can bring much-needed short-term financial relief as the economy slows down.
Here’s what you can expect if you get a stimulus check.
Stimulus Checks Are Not a New Idea
If you were working during the 2008 Great Recession or the 9/11 terrorist attacks, you might remember getting a check from Uncle Sam.
There are three times in recent memory when U.S. household received a one-time check:
This can give us hints as to how this will work.
How to Get a 2020 Stimulus Check
The proposed 2020 stimulus check is going to be larger than the 2001 or 2008 initiatives. Congress is working out the final details of who qualifies and how much the check will be. These checks are part of a larger $1.2 trillion stimulus package.
The most recent proposal is that each adult could get up to a $1,200 payment ($2,400 in the case of a joint return). Each qualifying child would add $500 to the amount.
With previous checks, you needed to file a tax return in the prior year. For example, you had to file a tax return for the 2007 tax return to get a stimulus check for the 2008 program.
In 2008, there were annual income limits that began to reduce the check amount for high-income households. The income phaseout was $75,000 for the 2008 checks.
The 2020 stimulus check will have a similar income limitation that starts at $75,000. The amount would be reduced by 5% of the amount of a taxpayers income that exceeds $75,000. For joint filers, the threshold would be $150,000.
If you haven’t already, file your federal tax return for the 2019 tax year if you can. This information may be how the government decides who qualifies for a stimulus check. It also gets you a refund if you’re due one.
How Soon Can You Expect Your Check?
Qualifying households can begin receiving their checks soon after the measure becomes law. The Trump administration’s goal is to start distributing checks within two weeks of signing the stimulus measure into law.
However, it may take several weeks longer before households begin receiving their check. For example, it took two months to start distributing the stimulus checks in 2008.
You will likely be able to receive your check by direct deposit or in the mail.
The quickest delivery method is receiving your stimulus funds by direct deposit. The IRS may likely use the same bank information you provided with your most recent tax refund.
As technology is more advanced in 2020 than during the Great Recession, the processing times could be faster.
Is This a One-Time Payment?
The current stimulus check proposal is currently a one-time lump sum payment.
However, households may receive a second check if economic conditions do not improve in the fall. Some of the current proposals include language for a potential follow-up stimulus check.
This is a case of wait and see.
Watch Out for Scammers
Since it’s not every day that so many people get a financial windfall, watch out for scams.
These are two sure signs a stranger may be scamming you:
- Require you to pay an upfront fee to receive your check.
- Ask for your Social Security number, bank details, or other personal details by phone.
The Federal Trade Commission is reporting some scammers are stating you can receive your money now. These checks are not yet official. Nobody has received funds yet as of this writing.
Once the stimulus checks start going out, the scams will really start to ramp up so remain vigilant. Also make a point to tell your friends, relatives, and anyone else you think would be susceptible to fraud.
As many of us are relying on the internet more than ever to connect with the world, also watch out for fraudulent internet links. If you’re going to request your stimulus check, make sure you only visit websites with a “.gov” domain.
How Should You Spend Your Stimulus Check?
Like the previous stimulus check programs, there won’t be spending restrictions on where you spend your check. You can spend the cash just like how you use your tax refund.
You might use your stimulus funds for these immediate purchases:
- Pay essential bills like rent or utilities
- Buy groceries and other supplies
- Support local business by purchasing gift cards to be used later
- Purchase takeout at restaurants that are still open
- Make monthly debt payments
Spending your funds now can boost your local economy while putting your money to good use.
Supporting local businesses can make it easier to for these small businesses to survive. Many small businesses don’t have the cash reserves to weather a multi-week slowdown like a major corporation. Maybe your friend or family is still working and your support helps keep the lights on.
If you don’t need the funds right away, consider stashing away the cash into a savings account as the economic slowdown may last several months. You may also consider investing your funds so you can build long-term wealth.
Simplify Your Finances
While a $1,000 stimulus check can help your finances, most household monthly expenses are still higher. You will need to come up with other innovative ways to manage your money during these uncertain times.
Simplifying your finances can help stretch your stimulus check further. Treating your check as a one-time windfall enables you to use it for your financial priorities.
Reduce Unnecessary Expenses
Cutting monthly expenses is an easy way to find ongoing financial relief. Focus on finding a balance between your necessary and unnecessary spending.
As you and your children are at home with more free time than usual, you may use streaming apps to pass the time. If you use multiple streaming apps, consider downgrading to a more affordable package or canceling a service altogether.
Don’t stop making payments for certain monthly expenses like term life insurance. These products can provide financial peace of mind if a financial emergency happens. With term life insurance, canceling and re-applying for a new policy can result in a more expensive premium.
Negotiate Essential Bills
Most households either have a monthly rent or home mortgage payment. Plus, there are other essential bills like electric and water utilities. While companies and governments are making provisions like waiving late payment fees, these bills are still due.
Your stimulus check can help pay these bills. But you may need to negotiate a payment plan to keep your account in good standing if you are having financial troubles due to the novel coronavirus.
Pay Off Debt
Using your stimulus check to pay off debt may not help the local economy but it can prevent personal bankruptcy. If you’re close to paying off a balance, having one less monthly bill can reduce your financial stress during this time.
Plan for Future Expenses
If you don’t need to spend your money now, you can save your cash for future expenses. Maybe you have enough money this month to make ends meet but not for one or two months from now.
Approximately 32% of recipients for the 2008 stimulus checks put their check in savings for future expenses.
Most households will be receiving a stimulus check soon to offset the adverse economic effects of the novel coronavirus. These funds are highly needed by many families adjusting to unique financial challenges. It’s not every day that you get a windfall, so use it for a good purpose to help yourself and your community.
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