How to Use Your Stimulus Check Wisely

In an effort to help relieve some of the financial damage caused by COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (or “CARES Act”) was signed into law in March 2020. Now, a year later the American Rescue Plan Act was passed to extend the aid provided by the CARES act. Not only does it cover sectors such as small business, education and health care, but it covers individuals and their dependents. Part of that support comes in the form of another stimulus check, the third since the pandemic began.

How much is this stimulus check and what’s the best way to use it? We’ll explore that and more below.


Who is eligible?

U.S. citizens or permanent residents qualify for the full amount of this stimulus check if they have a work eligible Social Security number with adjusted gross income up to:

  • $75,000 for individuals (including single tax filers or married person filing separately)
  • $112,500 for head of household filers
  • $150,000 for married couples filing joint returns, or those filing as qualifying widow or widower

Taxpayers will receive a reduced payment if their annual gross income is under the following amounts:

  • $80,000 if their filing status was single or married filing separately
  • $120,000 for head of household
  • $160,000 if their filing status was married filing jointly, or those filing as qualifying widow or widower

The amount of the reduced payment will be based upon the taxpayers specific adjusted gross income earned over $75,000 for individuals, $112,500 for heads of households, or $150,000 for joint filers until it hits the limits above.

Eligible retirees and recipients of Social Security, Railroad Retirement, disability or veterans’ benefits as well as individuals who do not make enough money to normally have to file a tax return will receive a payment. This also includes those who have no income, as well as those whose income comes entirely from certain benefit programs, such as Supplemental Security Income benefits.

Retirees who receive either Social Security retirement or Railroad Retirement benefits will also receive payments automatically.1


How much will I receive?

Eligible individuals with adjusted gross income up to $75,000 for single filers, $112,500 for head of household filers and $150,000 for married filing jointly are eligible for the full $1,400 for individuals and $2,800 married filing jointly. In addition, they are eligible for up to an additional $1,400 per qualifying dependent (the IRS calculates the specific amount issued). This is an expansion from the CARES act where dependents were defined as children 17 and under.

How do they determine my adjusted gross income (AGI)?

AGI is the amount you make minus specific deductions like health savings account contributions (HSA), educator expenses, 401(k) contributions, etc. It also happens to be the starting point for how your taxes are calculated. In other words, the IRS knows your AGI because you filed your 2019 (or 2020) taxes.

If you haven’t filed your 2020 tax return yet, the IRS will take your AGI from your 2019 tax return. If you didn’t file a tax return for 2019 or 2020 but registered for the first stimulus check using the special non-filers portal last year, you’ll also be eligible.

If none of the above applies to you, you may still qualify (if you meet eligibility requirements) through the Recovery Rebate Credit. You’ll need to claim the credit while filing your 2020 taxes.


If you are one of the individuals who will be receiving stimulus money, you’ll want to be sure to use it wisely. As the economy has become very unstable in the past several weeks, it’s important to not be frivolous with these funds. Follow these 4 tips to put them to good use!

1. Take the Time to Budget

Have you been budgeting? That’s great if so and you should be able to fairly easily see the areas that require most of your attention. If you haven’t been, now would be the perfect time to start. Before you spend any of your stimulus money, review and log your spending from the past few months into categories so you don’t fall into poor habits with the new money. See what expenses can be cut down the most. You can use our budget calculator to get started.


2. Prioritize Your Bills

Once you’ve identified your necessary expenses and areas to minimize spending, it’s time to prioritize what you have left. Take a look at your immediate expenses like your mortgage or rent. You want to make sure these bills are covered first so they don’t fall through the cracks. Keep in mind, if money is tight, your landlord may offer rent relief for the time being. Your credit card companies or personal loan providers may also allow you to defer payments at this time. While those may be worth exploring if necessary, don’t use them as opportunities to put off money that you will eventually owe unless you really need to.


3. Create an Emergency Fund

If you don’t have a savings account or emergency fund set up yet, this money would be a great way to start one. Talk to a representative of your bank about savings account options or look into a high-yield savings account like Simple. An online savings account may allow you to earn more interest than a traditional checking account. If you have any funds available that don’t need to go to debt repayment, think of your stimulus check as a blanket of security for a rainy day.


4. Pay Down Debt 

Debt can be the biggest obstacle in your path toward financial security. This influx of money could be a great opportunity to put a chunk in any outstanding debt you may have. While it may be tempting to put all of your stimulus check toward debt, keep in mind that we don’t know how long our economic instability will last. Therefore you should start by putting away some money for savings so you don’t find yourself continuing to rely on credit in the immediate future and coming months.



1IRS. (2020). Economic Impact Payment Information Center.

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