After months of back and forth, Congress finally issued a second round of Economic Impact Payments— otherwise known as coronavirus stimulus checks—in January to aid those struggling financially from the economic effects of the COVID-19 pandemic.
The Biden administration is expected to issue a third direct payment as part of a new coronavirus relief bill, which could be finalized by early to mid-March. As of now, the bill calls for $1,400 payments to individuals making up to $75,000 in annual adjusted gross income. Qualified married couples (heads of household up to $112,500 and married couples filing jointly up to $150,000) would receive $2,800. Payments would include $1,400 for child and adult dependents. If you’re a gainfully employed 30-year-old who raids your mom’s fridge, you’re not a dependent. Though she might disagree.
Many need these payments to meet basic needs, like paying rent, getting groceries, and keeping utilities on. (Yes, this money can be lifechanging for people, Dave Ramsey.) If you’re fortunate enough to be able to use these checks beyond those expenses, here are several mistakes you should mindfully avoid making.
Don’t throw it away
No, this isn’t a joke about wasting your money—we mean literally don’t toss your stimulus payment with the rest of your junk mail.
While some people are receiving direct deposits or paper checks in the mail, others are receiving plastic debit cards. The IRS said the cards were an effort to speed up the process, but some have assumed the cards were a scam because of the lack of a U.S. Treasury or IRS return address. The IRS has since issued alerts that these are in fact legitimate payments.
Don’t put it all toward debt repayment
You may be tempted to get yourself closer to being debt-free with this added income, but if you haven’t established an emergency fund, you may want to focus on that first, or at least split your efforts toward repaying debt and building up emergency savings.
Many lenders are deferring payments to provide financial relief in light of coronavirus. The Department of Education, for example, has extended the COVID emergency relief flexibilities on federal student loans through Sept. 30. So, if you have federal student loans, temporary relief includes the suspension of loan payments and 0% interest rate on those loans.
If you want to chip away at your debt, it helps to be organized. Use a debt payoff calculator to see if there are opportunities to pay off your debt faster or save money on interest.
Don’t invest before you have an emergency savings
Investing and saving for retirement are important for building wealth, but much like paying off debt, they shouldn’t take priority over establishing emergency savings. You don’t want to blow your $1,400 on the next GameStop stonk when you could stash at least some of it away for an unexpected car repair or medical bill—instead of having to rely on credit in those situations.
Experts recommend putting three to six months’ worth of expenses into an emergency fund. If that seems unreachable, a $1,000 goal is a good place to start. This is one tip actually worth taking from Dave Ramsey, not just hogwash. Consider automatically transferring a certain amount to a savings account each month so you don’t even miss the money.
Casey is a reformed sports journalist tackling a new game of financial services writing. Previous bylines include Newsday and Philly.com. Mike Francesa once called her a “great girl.”