As the US marks a year since the coronavirus blocked the economy, households are receiving a new infusion of financial hope as the IRS begins to distribute more than 100 million incentive checks this week. However, Americans who continue to struggle financially fear that the extra money may only confuse them 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 US $ 1.9 trillion rescue plan signed in law earlier this month. It is happening as the US economic recovery differs between high-income households that have largely endured the crisis intact due to their ability to work safely at home and lower-income families who are more likely to still face unemployment or with low income in the workplace. which require them to work directly with the public.
Some middle- and upper-income households that have received checks are likely to put money into savings, investments, or waste on a new item, such as a video game console or bicycle. But adults affected by the pandemic told CBS MoneyWatch that they intend to use the money immediately for basic expenses, such as mortgage coverage, car payments and utilities.
“This will be the lifeline that’s the only thing that will save my house,” said Jamie Pontia, 44, who was fired from her job as a hotel bar manager in Pittsburgh last year. stimulus. “I appreciate the $ 1,400 – without that I would drown. It will only help me keep my head above water for a month.”
She added: “Not everyone goes out and buys TVs.”
Pontia is among the 4 out of 10 Americans who continue to record a loss of income compared to pre-pandemic periods, according to research conducted by financial services company TransUnion. Although this is an improvement over a year ago, when nearly 6 in 10 adults saw a loss of income, it is still stubborn, said Charlie Wise, head of global research and consulting at TransUnion.
Households that have endured the pandemic in better financial shape should consider a “third-party” approach to $ 1,400 checks, said Brittney Castro, a certified financial planner for Mint, a budget app and personal finance.
“One-third goes to immediate bills or high-interest debt, one-third goes to savings, and the remaining third goes to investment,” Castro said. “The purpose of this is to help people contribute these funds to different aspects of their financial profile.”
To be sure, some people plan to use the money to invest in stocks – a model that took place anecdotally at the second stimulus check in late December, which targeted $ 600 to each eligible adult and was cited as a major reason for GameStop Stock Mania Saga. Indeed, about 17% of those surveyed recently said they would put part of the $ 1,400 stimulus check on the stock market, according to a new Self Financial survey.
However, putting the money or investing in the Dow, a record, is not at the top of the list of priorities for most Americans, found Self Financial. The highest priority was to pay off debts, with about a third of respondents allocating money for this purpose, followed by payment for housing, utilities and food. For many households, in other words, the $ 1,400 will simply help them stay afloat.
“Finally, at this troubling time, we must do everything we can to ensure that our needs are met,” Castro Mint added.
About 1 in 5 adults are “in the language”, which TransUnion defines as people who have lost their income and are not sure how they will recover their finances, if not.
“We think there are a lot of people in that group who say, ‘I really need stimulation checks or I need some kind of ongoing support,'” Wise added. “We have seen that lower-income workers have been more severely affected. Many of them tend to work in the service industries that have been most affected.”
Applied for 225 jobs and nothing
This is the case with Pontia, the manager of the Pittsburgh bar, who said that his finances are in turmoil, both due to the loss of his job and the suffering of an unemployment benefit threshold. In mid-March, the Pennsylvania unemployment office told him that his systems would be upgraded and that he would not be able to apply for unemployment until the end of March.
This interruption of payments means he’ll have to use his incentive check to cover his $ 850 mortgage and $ 360 monthly car payment – and he doesn’t expect to be able to save anything.
Pontia said she would like to get another job, but worries about the risks of getting COVID-19, especially since she is helping her 67-year-old mother, whom she says she did not have. could get a vaccination appointment. From Pontia’s point of view, not much has changed in one year.
“It doesn’t get any easier,” she said.
Unemployment benefits were also a point of frustration for Ginger Voisine, 39, of Fort Fairfield, Maine. He lost his job a year ago as an executive assistant at Cary Medical Center when the business resigned due to the pandemic. She received additional unemployment benefits of $ 600 a week, but then found a temporary job that allowed her to work remotely – a benefit, given that her 10-year-old son is away from school once a year. week.
But when that job ended, she found that she was no longer eligible for the pandemic-related overpayment. “My unemployment is no longer related to COVID because I took that job temporarily,” Voisine said. “I hit myself because I lost the extra payments for COVID.”
She estimates that the stimulus payment will run until mid-May and hopes to find a job sooner. Meanwhile, Voisine spent his savings and earned 401 (k). He doesn’t see how he can put money aside to rebuild his nest egg without finding another job. Since the beginning of March, she has applied for 225 jobs, but nothing has appeared yet.
Continuous stimulus?
Clyde Bittner, 62, of Greensburg, Pennsylvania, was fired in January from a job at a factory that supplies government supplies. Bittner, who is legally blind, said the incentive checks would help him and his wife pay the bills for at least two months. His wife suffered a stroke after losing her job and is worried about finding a job due to her disability.
He and his wife have called on their state lawmakers to advocate for more incentive aid for families in need through a non-profit organization called WorkMoney, which has more than 1.5 million members from various political parties. Bittner said he hoped the Biden administration could continue with more direct stimulus.
“Once you start something, it’s like you should continue it – it’s a process until the job is done,” he said. “They will probably do it a few more times.”