As the United States marks a year since the coronavirus closed the economy, families are receiving a new infusion of financial hope as the IRS begins to distribute more than 100 million stimulus checks this week. However, Americans who continue to struggle financially fear that the extra money may only keep them for a month or two.
The IRS will send a total of $ 422 billion in stimulus checks in the coming weeks, part of President Joe Biden’s budget US $ 1.9 trillion US bailout plan signed earlier this month. This is at a time when the American economic recovery diverges between high-income families that have largely survived the crisis intact because of their ability to work safely from home and low-income families that are more likely to still be struggling. against unemployment or reduced income in service jobs that compel them to work directly with the public.
Some middle and upper income families who received the checks are likely to put the money into savings, investments or splurge on a new item, such as a video console or a bicycle. But adults who have been hit by the pandemic told CBS MoneyWatch that they plan to use the money immediately for basic expenses, such as mortgage, car payment and utilities.
“That will be the only thing that will save my home,” said Jamie Pontia, 44, who was fired from her job as a hotel bar manager in Pittsburgh last year, about stimulus checking. “I appreciate the $ 1,400 – without them I would be drowning. It will only help me to keep my head above water for a month.”
She added, “Not everyone is going out and buying TVs.”
Pontia is among 4 out of 10 Americans who continue to experience a loss of income compared to pre-pandemic times, according to a survey by financial services firm TransUnion. While this is an improvement over a year ago, when almost 6 out of 10 adults saw a loss of income, it is still stubbornly high, said Charlie Wise, head of global research and consulting at TransUnion.
Families that have resisted the pandemic in better financial shape should consider a “thirds” approach to their $ 1,400 checks, said Brittney Castro, Mint’s certified financial planner, a personal finance and budget application.
“One third goes to immediate accounts or high interest debts, one third goes to savings and the remaining third goes to investments,” said Castro. “The aim of this is to help individuals to contribute these funds to various aspects of their financial profile.”
To be 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 directed $ 600 to each eligible adult, and which was cited as the main reason for GameStop stock mania saga. In fact, about 17% of people surveyed recently said they put part of their $ 1,400 stimulus check on the stock market, according to a new survey by Self Financial.
Still, saving money or investing it in the record Dow index is not high on the list of priorities for most Americans, Self Financial found. The highest priority was to pay debts, with about a third of respondents allocating the money for this purpose, followed by payment for housing, utilities and food. In other words, for many families, the $ 1,400 will simply help them stay afloat.
“Ultimately, during this troubled period, we need to do everything we can to ensure that our needs are met,” added Castro do Mint.
About 1 in 5 adults is “in limbo”, which TransUnion defines as people who have lost income and are not sure how their finances will recover, if at all.
“We think there are a lot of people in that group who say, ‘I really need stimulus checks or I need some kind of ongoing support,'” added Wise. “We saw that low-income workers were hit harder. Many of them tend to work in service sectors that have had the strongest impact.”
He applied for 225 jobs and nothing
This is the case with Pontia, the manager of a Pittsburgh bar, who said her finances are in turmoil, both because of job loss and because of a gap in unemployment benefits. In mid-March, the Pennsylvania unemployment office told her that her systems would be updated and that she would not be able to file an unemployment insurance claim until the end of March.
This interruption in payments means that she will need to use her stimulus check to cover her $ 850 mortgage and $ 360 monthly car payment – and she doesn’t expect to be able to save anything.
Pontia said she would like to get another job, but worries about the risks of contracting COVID-19, especially when helping her 67-year-old mother, who she says has not been able to get a vaccination appointment. From Pontia’s point of view, it hasn’t changed much in a year.
“It’s not getting 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 a year ago as an executive administrative assistant at Cary Medical Center, when business fell due to the pandemic. She received extra $ 600 a week pandemic unemployment benefit, but later found a temporary job that allowed her to work remotely – a benefit, since her 10-year-old son is in a remote school once a week.
But when the job was over, she found she was no longer eligible for the pandemic-related extra unemployment pay. “My unemployment is no longer linked to COVID because I accepted that temporary job,” said Voisine. “I’m kicking myself because I missed the extra COVID payments.”
She estimates that the stimulus payment will continue until mid-May and hopes to find a job before that. In the meantime, Voisine spent his savings and cashed in his 401 (k). She doesn’t see how she can put money aside to rebuild her savings without finding another job. Since the beginning of March, she has applied for 225 vacancies, but nothing has yet appeared.
Continuous stimulus?
Clyde Bittner, 62, of Greensburg, Pennsylvania, in January was fired from his job at a government supply factory. Bittner, who is legally blind, said that stimulus checks will help him and his wife pay the bills for at least two months. His wife suffered a stroke after he lost his job and he is concerned about finding work due to his disability.
He and his wife contacted state lawmakers to advocate for more stimulus for families in distress through a nonprofit organization called WorkMoney, which has more than 1.5 million members belonging to various political parties. Bittner said he was hopeful that the Biden government could continue with more direct stimulus.
“Once you start something, it’s like you have to continue – it’s a process until the job is done,” he said. “They’ll probably do this a few more times.”