As the US has shut down the economy a year since the coronavirus, households are receiving a new infusion of financial hope as the IRS more than 100 million stimulus checks this week. Yet Americans who continue to struggle financially are afraid that the extra cash may only overwhelm them in 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 $ 1.9 billion US rescue plan signed into law earlier this month. This comes as the U.S. economic recovery differs between higher-income households that have survived the crisis largely intact because of their ability to work safely away from home and low-income families who are likely to still struggle with unemployment or a reduced income in service work. which requires them to work directly with the public.
Some middle- and higher-income households that received the checks are likely to save money, invest, or save on a new item, such as a video console or a bicycle. But adults affected by the pandemic told CBS MoneyWatch that they plan to use the money immediately for basic expenses, such as mortgage, car payments and utilities.
“It’s going to be the lifeline that’s the only thing that will save my house,” said Jamie Pontia, 44, who was fired from her job as hotel bar manager in Pittsburgh last year over the stimulus test. “I appreciate the $ 1400 – without it I would drown. It will only help me keep my head above water for a month.”
She added: “Not everyone is going to buy TVs.”
Pontia is one of four in ten Americans still experiencing a loss of revenue compared to the time before the pandemic, according to research from financial services firm TransUnion. Although it was an improvement from a year ago, when almost 6 out of ten adults had a loss of income, it is still stubbornly high, said Charlie Wise, head of global research and advice at TransUnion.
Households that have endured the pandemic in a better financial condition should approach a “third party” in respect of their $ 1,400 checks, said Brittney Castro, a certified financial planner from Mint, an app for budgeting and personal finance, said.
“One third goes to immediate accounts or higher interest debt, one third goes to savings, and the remaining third goes to investments,” Castro said. “The purpose of this is to help individuals contribute these funds to various aspects of their financial profile.”
Some people plan to use the money to invest in stocks – a pattern that took place anecdotally with the second stimulus test at the end of December, which targeted $ 600 at each adult, and which is a major reason for GameStop stock mania saga. About 17% of people recently surveyed said they would place some of their $ 1,400 stimulus check in the stock market, according to a new Self Financial survey.
Even socking money away or investing it in the record-breaking Dow is not at the top of the priority list for most Americans. The top priority was debt repayment, with about one-third of respondents earning the money for it, followed by housing, utilities and food. For many households, in other words, the $ 1400 will simply help them stay afloat.
“Ultimately, through this difficult time, we must do everything in our power to ensure that our needs are met,” Mint’s Castro added.
About 1 in 5 adults is “in limbo”, which TransUnion defines as people who have lost their income and are not sure how their finances will recover, if it is not at all.
“We think there are a lot of people in the group who say, ‘I really need the stimulus tests or some kind of ongoing support,'” Wise added. “We’ve seen lower-income workers hit harder. A lot of them tend to work in service industries that have been hit harder.”
Applied for 225 posts, and nothing
This is the case with Pontia, the bar manager of Pittsburgh, who said that her finances are in a mess because she lost her job and suffered from a gap in unemployment benefits. In mid-March, Pennsylvania’s unemployment office told her that its systems would emerge and that it would not be able to file an unemployment claim until the end of March.
The payment interruption means she will have to use her stimulus check to cover her $ 850 mortgage loan and her $ 360 monthly car payment – and does not expect to be able to save anything.
Pontia said she would like to get another job, but is concerned about the risks of getting COVID-19, especially since she is helping her 67-year-old mother, who she said could not get a vaccination appointment. According to Pontia, not much has changed in a year.
“It’s not getting any easier,” she said.
Unemployment benefits were also a point of frustration for Ginger Voisine, 39, of Fort Fairfield, Maine. She lost her job as an administrative assistant at Cary Medical Center a year ago when things went awry due to the pandemic. She received the extra $ 600 a week pandemic unemployment benefit, but then got a temporary job that allowed her to work remotely – an advantage since her ten-year-old son was in a remote school once a week is.
But when the job ends, she discovers that she is no longer eligible for the extra pandemic unemployment benefits. “My unemployment is no longer linked to COVID because I took that temporary job,” Voisine said. “I’m kicking myself because I lost the extra COVID payments.”
She estimates that the stimulus payment will last until mid-May, and she hopes to get a job before then. Meanwhile, Voisine spent her savings and paid in her 401 (k). She does not see how she can set aside money to rebuild her nest egg without getting another job. Since the beginning of March, she has applied for 225 jobs, but nothing has arrived yet.
Constant stimulus?
Clyde Bittner, a 62-year-old from Greensburg, Pennsylvania, was fired in January from his job at a factory that makes government supplies. Bittner, who is legally blind, said the stimulus checks would help him and his wife pay the bills for at least two months. His wife had a stroke after losing his job, and he is worried that he will find work due to his disability.
He and his wife asked their lawmakers to advocate for more stimulus assistance to struggling families through a nonprofit organization called WorkMoney, which has more than 1.5 million members belonging to various political parties. Bittner said he was hopeful the Biden government could continue with more direct stimulus aid.
“Once you start something, it’s like you have to keep going. It’s a process until the job is done, ‘he said. “They will probably do it a few more times.”