How to prep for and spend your government relief check

The coronavirus pandemic has upended the lives and finances of millions. A federal relief package aiming to provide payments to distressed consumers passed Friday — but that money is not likely to land for a number of weeks.

While you’ll have to wait for whatever money you might be eligible for, now is the time to prep your finances and plan. The best use of this money depends on your individual circumstances.

The size of the check (or direct deposit) depends on how much you make, according to ABC News:

“If you made less than $75,000 in 2019, you will be eligible for the full payment of $1,200. Couples who filed jointly and made less than $150,000 will get $2,400. An individual who filed as “head of household” and earned $112,500 or less gets $1,200. For every child in the household, you will receive an additional $500.

If you made more than $75,000, your payment will be reduced by $5 for every $100 of income that exceeds the limits. So if you made $80,000 in 2019, you will receive $950. The payment decreases to zero for an individual making $99,000 or more or a couple making $198,000 or more. If you’re a family of four, you’ll be eligible for a maximum of $3,400.”

Here’s how to think it through, before the check’s in hand:

DO THIS PREP WORK, REGARDLESS OF YOUR SITUATION

This is the time to examine your money situation and build savings, if possible. The fallout from the pandemic may continue for some time. Taking even small steps can help you feel empowered and less stressed.

First, take stock of your regular expenses, such as housing costs, car loans and credit card or other debt payments. A budgeting worksheet can help account for everything and show what’s going to needs, wants and savings and debt. Once you see the big picture, consider trimming where you can because of the current uncertainty.

“We’re all operating on a limited cognitive load right now,” says Kristen Holt, CEO of the nonprofit credit counseling agency GreenPath Financial Wellness. “Writing everything down and thinking it through first before you spend any of the money out the door would be a good idea.”

IF YOU’VE LOST YOUR JOB, DON’T WAIT TO ACT

Those who’ve lost jobs might feel like the floor has fallen out from under them. Money from the government will provide a much-needed boost, but it might be weeks or even months before you get it. And you’ll likely need to supplement and stretch it.

“The amount of these checks is not going to go very far for paying people’s regular bills,” says Carol Fabbri, principal at Fair Advisors, a Colorado-based financial planning firm. “They need to reduce their bills as much as they possibly can, then think about Maslow’s hierarchy of needs — you need to eat, you need shelter — and focus your spending there.”

With that in mind:

TAKE ADVANTAGE OF ALL SOURCES OF HELP: Pick up the phone and call your creditors. Explain your situation and work out a way to either delay payments for a few months or work out new minimum payments. Given the unprecedented nature of this moment, many creditors are offering ways to make payments more manageable for consumers. For homeowners, there are mortgage assistance programs you can tap if you can’t pay your mortgage.

Explore resources to help manage and minimize expenses. File for unemployment if you’re eligible and use any resources your former employer may offer. Calling 211 will connect you with local health and social services organizations.

MAKE A PLAN FOR THE MONEY YOU GET: Focus on necessities, like housing and food, to ensure your basic needs are met.

If you have anything left over, you might be tempted to throw this money at debts. But saving should take priority right now, says Diane Pearson, a financial adviser at Pearson Financial Planning in Pennsylvania.

“We don’t know how long this situation might last and there might be a need for this money down the road,” Pearson says.

IF IT’S STILL NOT ENOUGH: For many people, this money won’t cover all of their expenses, even after all governmental and nonprofit resources are tapped. In that event, accruing debt to cover expenses may be a last-resort option but can be done strategically. Many of the “rules” about using credit cards don’t apply right now.

“If you’re going to get further in debt, do it with a plan and make sure you’re utilizing the best available options for you,” Holt says. “Don’t assume there aren’t options.” She suggests exploring loan options from local credit unions, for example, and steering clear of high-interest loans like payday loans.

IF YOU STILL HAVE YOUR JOB, BUILD SAVINGS

For those who still have a regular income but not much in the bank, a government payment is a chance to build financial resilience.

BUILD SAVINGS: If you don’t have an emergency fund or you’ve exhausted it already, starting one with this government money would be a good idea.

“An emergency fund is more essential right now than it has been in all of our lifetimes,” Fabbri says. “We’re all vulnerable in this economic situation.”

Fabbri suggests putting your money in a high-yield account, like an online savings account, so you can earn more interest than you would in a traditional checking account.

Designate your emergency fund for exactly that — a cash crunch. The economic impact of the pandemic is likely to last, so conserve cash as a safeguard for whatever headwinds you encounter.

IF YOU’RE FINANCIALLY SOUND, CONSIDER HELPING

If you’re still employed and have some emergency funds, consider yourself fortunate. If you qualify for a government payment, think about using it as stimulus, not relief. Consider donations to charities — avoid scams by navigating directly to known and trusted organizations — or patronize small businesses that are hurting.

“If you’re in the lucky place where you have protected yourself already, then it’s a wonderful time to give,” Fabbri says. “Get a gift certificate for a nail salon or restaurant that you typically go to. If you can afford to do that, it’s a great way to support your community.”

This article originally appeared on the personal finance website NerdWallet. Sean Pyles is a writer at NerdWallet. Email: [email protected]. Twitter: @seanpyles.