Advisor Insight

Here’s how financial advisors say Americans should use those $600 stimulus checks

Key Points
  • Congress reached a $900 billion Covid relief deal on Sunday that would pay $600 stimulus checks to adults and a $300 weekly enhancement to unemployment benefits.
  • Here's how financial advisors recommend Americans use the funds.
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Millions of Americans may soon get a second round of stimulus checks and a weekly enhancement to unemployment benefits, as part of a $900 billion Covid relief deal Congress reached Sunday.

The legislation offers a $600 stimulus check per adult and $600 per child. Those checks may arrive as soon as next week, Treasury Secretary Steven Mnuchin said Monday. The bill also provides a $300-a-week boost to all recipients of jobless aid.

Lawmakers may vote on the package as soon as Monday.

How $600 stimulus checks and boosted unemployment benefits help the economy

Financial advisors recommend various uses for this extra cash, depending on individual and family circumstances.

Unemployed workers may need the money for basic living expenses. Some who have fallen behind on bills such as rent, utilities or mortgage payments should consider paying down some or all those arrears, advisors said.

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Those in a better financial position, such as individuals who have kept their jobs, should pay down high-interest debt and save or invest the money, advisors said.

"I think it varies from case to case," said Lee Baker, a certified financial planner and owner of Apex Financial Services, based in Atlanta.

Oliver Contreras/Bloomberg via Getty Images

How to use stimulus checks, unemployment benefits

The cash infusions would be the first for Americans since the $2.2 trillion CARES Act was passed in the spring.

This new round would offer one-time $600 checks to individuals making up to $75,000 a year and $1,200 to couples who make up to $150,000 annually — the same income thresholds as the CARES Act. It would also give an extra $600 for each dependent child. (A family of four could get up to $2,400 in direct payments, for example.)

I'm not encouraging people to dodge anything, just trying to be realistic. These are people who've fallen on hard times.
Lee Baker
owner of Apex Financial Services

Unemployed workers would get an extra $300 in weekly benefits through mid-March.

Americans with stable employment should first pay down high-interest debt, like credit-card balances, according to Louis Barajas, CFP, a business and wealth manager based in Irvine, California. They should then build up a cash cushion for emergencies like a layoff, he said.

"It might get uglier before it gets better," Barajas, who works with both low-income and wealthy clients, said of the pandemic's impact on the U.S. economy.

Americans should generally have an emergency fund that covers six months of expenses, according to prevailing wisdom among financial advisors.

Those with adequate savings and stable employment should consider investing their financial windfall in diversified, low-cost mutual funds like an S&P 500 index fund, Baker said.

Different calculus for unemployed workers

Unemployed workers likely find themselves in a much different situation, however.

Nearly 8 million people have fallen into poverty since June. Around 37% of jobless workers have been unemployed for longer than six months.

Many who have fallen behind on bills or owe money to family members or friends should divert their stimulus checks or extra unemployment to these areas, advisors said.

"At some point, the moratorium on evictions is going to expire, and water bills that have been delayed [will come due]," Baker said. "Take a close look at your circumstances and see if there's anything those dollars can go to that may come due in a few months."

The relief package would extend an eviction moratorium for renters by a month, through Jan. 31.

However, some people may be too far behind to reasonably expect to catch up, Baker said.

Individuals behind six to seven months of rent who had been working for $10 an hour prior to the Covid recession would take years to pay back that debt, for example, he said. Such people may be better served by keeping their windfall handy, perhaps to afford a new apartment if they're ultimately evicted, said Baker, who is a landlord.

Here's what's in the $900 billion Covid relief deal

"I'm not encouraging people to dodge anything, just trying to be realistic," Baker said. "These are people who've fallen on hard times."

"Six hundred dollars or $1,200 isn't a lot, but maybe it helps make the new start, if you will," he added.

Invest in yourself

Consumers can also use the money to help boost prospects for finding a new job.

Barajas has had to pass over a few job candidates who didn't have the capability to work from home. Individuals who don't have a laptop, computer camera for virtual meetings or printer can invest in themselves by using funds for this technology, he said.

Funds could also help for anyone who's delayed a doctor visit or medical procedure, Barajas said.