As the US marks a year since the coronavirus shuts down the economy, households are getting a new dose of financial hope as the IRS is over 100 million stimulus controls this weekStill, Americans who continue to struggle financially worry that the extra cash could only give them up for a month or two
The IRS will send a total of $ 422 billion in stimulus checks over the next few weeks, part of President Joe Biden’s $ 1.9 Trillion US Rescue Plan signed into law earlier this month. It’s because the U.S. economic recovery is diverging between higher-income households who have survived the crisis largely intact due to their ability to work safely from home and lower-income households who are likely still struggling with unemployment or lower income in service jobs. for which they must work directly with the public.
Some middle and higher income households who have received the checks are likely to put the money into savings, investments, or spend on a new item, such as a video console or a bicycle. But adults ravaged by the pandemic told CBS MoneyWatch that they plan to immediately use the money for basic expenses, such as covering the mortgage, car payments, and utilities.
“This is going to be the lifeline that will be the only thing that will save my home,” Jamie Pontia, 44, who was fired last year as manager of a Pittsburgh hotel bar, said of the incentive check. “I appreciate the $ 1,400 – I would drown without it. It will just help me keep my head above water for a month.”
She added, “Not everyone goes out to buy TVs.”
According to research from financial services provider TransUnion, Pontia is one of the 4 in 10 Americans who are still losing income from the pre-pandemic. While that’s an improvement from a year ago, when nearly 6 in 10 adults saw an income loss, it’s still stubbornly high, said Charlie Wise, head of global research and advice at TransUnion.
Households that survived the pandemic in better financial condition should consider a “ third party ” approach to their $ 1,400 checks, said Brittney Castro, a certified financial planner for Mint, a budgeting and personal finance app.
“One-third goes to high-interest accounts or debt, one-third goes to savings and the remaining third goes to investment,” said Castro. “The purpose of this is to help individuals contribute these funds to various aspects of their financial profile.”
Sure, some people plan to use the money to invest in stocks – a pattern that occurred anecdotally with the second stimulus check in late December, which led $ 600 to each eligible adult, and which was cited as a major reason for the GameStop stock mania sagaAccording to a new survey from Self Financial, about 17% of people recently surveyed said they put a portion of their $ 1,400 incentive check in the stock market.
But tucking money away or investing in the record-high Dow isn’t top of the list of priorities for most Americans, Self Financial found. The main priority was paying off debt, with about a third of respondents using the money to do so, followed by paying for housing, utilities and food. In other words, for many households, the $ 1,400 just helps them survive.
“Ultimately, during this difficult time, we need to do everything we can to make sure our needs are met,” added Mint’s Castro.
About 1 in 5 adults is “in limbo,” which TransUnion defines as people who have lost income and are unsure of how their finances will recover, if at all.
“We think there are a lot of people in that group who say, ‘I really need the incentive checks or need some kind of ongoing support,’” added Wise. “We’ve seen lower-income workers hit harder. Many of them tend to work in service sectors that have been more affected.”
Applied for 225 jobs, and nothing
Such is the case with Pontia, the Pittsburgh bar manager, who said her finances are in turmoil, both because she is losing her job and suffering from a shortage of unemployment benefits. In mid-March, she was told by the Pennsylvania unemployment office that the systems would be updated and that she would not be able to file an unemployment claim until the end of March.
That payment break means she has to use her stimulus check to cover her $ 850 mortgage and her $ 360 monthly car payment – and don’t expect to be able to save anything.
Pontia said she would like a different job, but is concerned about the risks of getting COVID-19, especially as she’s helping her 67-year-old mother, who she says has been unable to get a vaccination appointment. From Pontia’s point of view, not much has changed in a year.
“It doesn’t get any easier,” she said.
Unemployment benefits have also been a point of frustration for Ginger Voisine, 39, of Fort Fairfield, Maine. She lost her job as an executive administrative assistant at Cary Medical Center a year ago when things came to an end due to the pandemic. She got the additional $ 600 a week pandemic unemployment support, but then found a temporary job that allowed her to work remotely – a benefit, given that her 10-year-old son attends a remote school once a week.
But when that job ended, she found she was no longer eligible for the additional pandemic-related unemployment benefit. “My unemployment is no longer linked to COVID because I took that temporary job,” said Voisine. “I’m kicking myself for losing the extra COVID payments.”
She estimates the stimulus payment will last until mid-May, and she hopes to find a job before then. In the meantime, Voisine has spent her savings and cashed her 401 (k). She doesn’t see how she can set aside money to rebuild her nest egg without finding another job. Since the beginning of March, she has applied for 225 jobs, but nothing has been published yet.
Constant incentive?
Clyde Bittner, a 62-year-old from Greensburg, Pennsylvania, was fired from his job in a factory that makes government supplies in January. Bittner, who is legally blind, said the incentive checks will help him and his wife pay the bills for at least two months. His wife suffered a stroke after losing his job, and he is concerned about finding work given his disability.
He and his wife have reached out to their state lawmakers to call for more stimulus assistance to struggling families through a nonprofit called WorkMoney, which has more than 1.5 million members belonging to various political parties. Bittner said he is hopeful that the Biden government will continue with more direct stimulus assistance.
“Once you start something, it’s like you have to keep going – it’s a process until the job is done,” he said. “They’ll probably do it a few more times.”