Efforts to slow the spread of the coronavirus pandemic have resulted in the temporary shutdown of businesses around the world. This means an unprecedented loss of revenue for businesses, and for many individuals, the loss of their jobs and/or paychecks. The US government has passed legislation to provide stimulus packages that will help both individuals and businesses get through the COVID-19 quarantine.
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Who Gets the Coronavirus Stimulus Check?
Anyone who makes an AGI (adjusted gross income) under the income cap on their 2019 tax return (or 2018 if 2019 taxes have not yet been filed) will receive the full amount of $1,200. These income limits are:
- $75,000 for a single person filing taxes individually
- $112,000 for a head of household
- $150,000 for a married couple without children filing jointly
If you’re a family below this income cap, you will also receive an additional $500 for each child under the age of 16. If you’re a family above this income cap, it’s currently unclear whether you will receive the additional $500 per child.
If your income is above this threshold, you will receive $5 less for every $100 that your income is above the threshold. This means that anyone making less than these amounts will still receive a stimulus check:
- $99,000 for a single person filing taxes individually
- $146,000 for a head of household
- $198,000 for a married couple without children filing jointly
It is only over these thresholds that you would no longer qualify for any amount at all.
For more information on the coronavirus stimulus package terms, be sure to visit our last #MoneyMinute blog: What Is the Coronavirus Stimulus Package and How Does It Affect Me?
What Should I Do With My Stimulus Check?
If you qualify to receive the stimulus check, AllGen’s position is that what you do with it depends on where you are on your Path to Financial Freedom.
You may need that money today to survive. You may have lost your job or your income may have decreased. That money may be necessary to pay rent or other essential bills. If you need the money immediately to cover essentials necessary to survive, then, of course, you should use your stimulus money for that.
However, if you’re in a better financial position, if you still have income because your job allows you to work from home and can pay your monthly expenses, but perhaps you haven’t established an emergency reserve fund – now is a great time to do so.
Create an Emergency Fund
An emergency fund should be three to six months of living expenses unless you have consumer debt. If you haven’t already begun saving for one, the stimulus check can be a great way to kickstart that emergency fund. If you already have an emergency fund, you could instead look at what consumer debt you have.
Pay Down Consumer Debt
If you have debt, the stimulus check is a great way to start getting rid of that high interest consumer debt. Anything that is charging interest against you is not financially healthy for your financial portfolio. You could use the stimulus money to either eliminate the balance on a credit card or even just put a dent in the amount you owe in order to free up some cash flow.
If you can pay off debt, you won’t have that monthly payment to worry about anymore. That will free up some cash, which is a much healthier situation to be in.
Invest and Grow Your Net Worth
If you already have your monthly expenses covered, you have an emergency fund, and you don’t have consumer debt to worry about, you can start on the Formation stage of AllGen’s Path to Financial Freedom. This involves investing and growing your net worth and your wealth in general.
If you’ve started investing, this stimulus check is a great way to put additional money toward your investments. If you haven’t already started investing, you can use the money to jumpstart your investment portfolio and grow your wealth.
Donate to Someone in Need
Some people who are in a position to do so have used some of their stimulus money for themselves and then donated the rest to a family that needed it. At AllGen, we are always very supportive of being generous and helping out someone in need. But whatever you do with your money, it’s important to be prudent with it.
If you’re feeling unsure about what to do with your stimulus check, be sure to speak with your AllGen Advisor.
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