In March 2021, President Joe Biden signed the American Rescue Plan into law as a way to help individuals and businesses impacted by COVID-19. This $1.9 trillion aid package included payments directly to American households to help stimulate the economy and cover essential expenses. Approximately 90 million economic impact payments were disbursed from the American Rescue Plan.
As with any unplanned extra income – whether a tax refund, bonus from your employer or winning the lottery – it’s important to think strategically about how best to spend it.
First, evaluate your finances. Take a look at what you need to make it through the next few months, prioritize your expenses, and create a plan to cover them. If you’ve recently lost your job, it might be best to apply your economic relief payment to essentials like food, utilities, rent, mortgage, or transportation. If it’s possible you could lose your job in the near future and unemployment benefits coupled with cash savings wouldn’t cover essential expenses, hold off on spending your stimulus check for now. Save it for that likely-to-come rainy day.
Next, pay off debt. Once you’re confident essential expenses can be covered for several months, consider using your check to pay off high-interest debt such as credit cards. Although this is less fun than a shopping spree, it sets you up for stability and more flexible spending in the future. With so much uncertainty in our world today, it’s wise to take action now to put your family in the best possible situation for the future.
Help someone who needs it. COVID-19 has impacted nearly every family and business in America in some way, but some have fared better than others. If you are among the fortunate group – who’ve kept their jobs and good health – now might be a good time to pay it forward. Donate to your local food bank or homeless shelter. Give blood through the American Red Cross. There’s nothing like a global pandemic to make you feel grateful for what you have. So, be generous to those who haven’t been as lucky.
Shop local. If your job is secure, high-interest debt managed, and you’re able to invest that cash back into the economy, do it! Support local businesses first, if possible, and prioritize the hardest hit industries like restaurants and venues.
If you want to talk in more specific terms about your financial situation or the best way to spend your economic impact payment, schedule a complimentary consultation with one of our advisors.
Blog by Steven Jumper, Financial Advisor.