COVID-19 has impacted us all differently. Some hardly notice a difference, some are trying to set-up makeshift home offices and keep the kids quiet during videoconferences, and others are out of work, running out of money, and have a serious case of cabin fever. Whichever group you’re in, we all miss our friends and extended families and are impacted by a frozen economy and crashing markets. In an effort to stimulate what’s left of the economy and help us stay afloat, Congress passed a $2.2 trillion support bill, the CARES Act, which includes an Economic Impact Payment of $1,200 per adult, and $500 per child. These stimulus checks do include income limits, based on your 2019 taxes, above which the payment amount drops progressively. These limits are $75,000 for Single Filers, $150,000 for Married Couples who Filed Jointly, and $112,500 for Head of Household. The IRS is beginning to direct deposit checks this week, so you may soon wake up to extra money in your account. The question is, what should you do with it?
1. The Four Walls
Just like your home itself and the four walls necessary to keep everything together, a top priority in any budget are the things that keep your family safe and fed. These are food, utilities, shelter, and transportation. Keeping your family fed and the lights on should be a no brainer. You also need to make sure you can get to the store, or work if you work in an essential industry. Step one is to keep the pantry full, and to get and stay current on utilities and vehicles. Although no one can currently be evicted in Pennsylvania, do your best to stay current on your rent or mortgage. Failing to stay current won’t save you that money but instead just make it due later, likely with interest, and adversely impact those relying on those payments upstream.
2. Emergency Fund
It’s funny, when you have a fully funded emergency fund, you rarely have emergencies; if you don’t have one, everything is an emergency. I’m a big fan of Dave Ramsey and his Baby Steps, which start with a simple $1,000 emergency fund. He then recommends using Gazelle Intensity to get out of debt before fully funding an emergency fund of 3-6 months of expenses. While I agree, and highly recommend you go read anything he writes and follow it, if you have a legitimate need for this stimulus check you’re likely in a position where he’d recommend pausing getting out of debt. Although we know that there will be an end to this storm, we need to weather it until then. Having a little money in your account to make sure you can continue to provide those Four Walls until the world gets back to normal, can be a huge relief. If you’re already debt free, make sure your emergency fund is fully funded and then even the biggest storms seem just like passing sprinkles.
3. Funding the Basics
If you’re in a position where you don’t have to worry about the Four Walls, it’s time to think about all those things we should all have as grownups. Do you have anyone that relies on you and your income? You should have life insurance. You’re a stay at home mom? Your spouse NEEDS you to have life insurance! Do you know who is going to make the decisions if something happens to you, for your health or money? Get a Living Will and Power of Attorney. Do you have a Will? You need one; they’re not just for the elderly. Go see why you really do need a Will HERE. When you’re ready to work on that estate plan, all consultations with the Law Office of Mackenzie A. Kline, LLCcome with a free Living Will and are completely virtual.
4. Debt
Remember that the Four Walls are first, but unless you have a good reason not to get out of debt, like you’re currently unemployed or you KNOW unemployment is coming, get out of debt. Throw everything you have at your debts, they’re holding you back! Your most productive wealth building tool is your income, and debt payments steal that from you. You can pretend to be sophisticated by arguing interest rates and returns, but the simple fact is that debt and the interest on it is a liability, a negative, on your personal balance sheet. Get rid of the debt, save and build wealth.
5. Saving
When it comes to the stock market, your number one goal is to buy low and sell high. Right now, the market is LOW. However, while watching the stock market, and your retirement account balance, drop like the Steel Phantom, you have to remember that the only way you get hurt on a roller coaster is to jump off. Selling low simply locks in your losses. According to a March 2020 report from Fidelity Investments, in the years after the bottom of a bear market since 1929, the S&P 500 has gained an average of 47%. You are going to retire someday, make sure you have the savings in place to be able to do so responsibly. Always consult with your financial professional before taking any action.
6. Giving
If you’re blessed to be in a position where you don’t need this stimulus check, or are otherwise driven or called to give it, there are many right now who are in need. Churches, food banks, and shelters are all great places to give. Beyond helping others and feeling good about it, depending on where you decide to give, you may be able to use it as a tax deduction for next year. Before making your contribution, make sure to talk to your tax preparer or CPA.
Now that you know some of the things you can do with your stimulus check, keep an eye out for it and be intentional with your money. No matter how hard this storm gets for you, know that there are sunny days ahead.
Disclaimer
www.AttorneyKline.com and associated Blog is made available by the Law Office of Mackenzie A. Kline, LLC for educational purposes only. It provides general information related to the law, but does not provide specific legal advice. The Law Office of Mackenzie A. Kline, LLC does not offer tax, investment, or other financial advice and nothing contained herein constitutes a solicitation, recommendation, endorsement, or offer by the Law Office of Mackenzie A. Kline, LLC, or any third party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. There is no attorney-client relationship between you and the Law Office of Mackenzie A. Kline, LLC resulting from the use this site or inquiries made through the site or contact email. www.AttorneyKline.com and associated Blog should not be used as a substitute for legal advice from a licensed attorney in your jurisdiction.
