5 must-know tips before spending your stimulus check

While the $1,200 stimulus check will not be enough to sustain families for a long time, experts say that it can be a chance to prioritize.
HerMoney.com founder and Know Your Value personal finance contributor Jean Chatzky.
HerMoney.com founder and Know Your Value personal finance contributor Jean Chatzky.Anthony Scutro

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By Halley Bondy

With the economy tanking in the wake of COVID-19 pandemic, a boost from a government stimulus check could mean a lot to many families.

But when exactly will the money arrive and what’s the best way to spend it?

Sharon Epperson, CNBC’s senior personal finance correspondent, explained to Know Your Value that some direct deposits have already been made, while some paper checks may not arrive until August. Some of the payments, which are part of the CARES Act, will be as high as $1,200 for individuals and $2,400 for couples, depending on their reported 2018 or 2019 household income.

Sharon Epperson, senior personal finance correspondent for CNBC, at a Know Your Value event in Philadelphia on Nov. 19, 2019.Anthony Scutro

“… People are desperate for this money,” said Epperson, who has been answering viewer questions about stimulus checks. “This is someone who is a consultant, entrepreneur, or just got laid off from a corporation...It’s really highlighting how little people have been paying attention to their finances.”

According to the personal finance website Bankrate, most people do not have $1,000 saved for an emergency. The Federal Reserve found that 40 percent of Americans don’t have $400 saved for an emergency. That could spell trouble for the 10 million Americans who applied for unemployment benefits in March. The job loss is only expected to increase.

U.S. citizens will receive the full, tax-free $1,200 if they made $75,000 or less as a single person, or $150,000 or less as a married couple filing jointly. For higher incomes, families will receive less money. If they made $99,000 or more as a single person or $198,000 or more as a married couple filing jointly, they won’t receive a check at all.

Bridget Tate, director of national programs for the nonprofit advisory organization The Financial Clinic.Courtesy of Bridget Tate

While the check will not be enough to sustain families for a long time, experts say that it can be a chance to prioritize.

“I don’t know that there’s a cookie cutter plan for everyone,” said Bridget Tate, director of national programs for the nonprofit advisory organization The Financial Clinic. “I live in North Carolina where $1,200 can pay two months rent. I’ve managed through the housing crisis where people who make over $250,000 a year are trying to figure out their new normal, while for others, we are saying ‘how long can you stretch $1,200 if you're homeless and in a deficit?’”

NBC Know Your Value spoke with Tate, Epperson and HerMoney founder and financial advisor Jean Chatzky about the smartest ways Americans can spend their stimulus checks.

Financial journalist and CEO of Her Money Media Jean Chatzky. Miller Hawkins

1. Start with the bare necessities.

For families that are in a true financial emergency, Chatzky outlined the bare necessities.

“We prioritize the things that we need, right? Food on the table, medicine if you need it, keeping the lights on and overall health,” Chatzky said. “Pay the things you have to pay. Don’t pay off long-term debt. It’s more important to preserve some capital. If you have credit card bills for example and you’re worried you’re going to run out of cash, make a minimum payment.”

2. Work with financial institutions.

Instead of spending your stimulus check on outstanding debts, Americans might be able to get some forgiveness from financial institutions right now. Institutions defer credit card payments, mortgage and student loans, for example. Kinder landlords may be willing to forgo rent payments while some cities have put a moratorium on evictions.

“We’re seeing a lot of understanding from financial institutions who are willing to work with their customers whether, or not they are mandated to do so,” Chatzky said.

RELATED: MSNBC's Stephanie Ruhle: Are you on Social Security? Don't forget to do this if you want the $1,200 stimulus check

Epperson, who said she has some credit card debt, called all of her banking institutions at the beginning of the crisis.

“I called every credit card company that I have and said ‘listen, is there any leeway here?’ Some of them deferred interest and waived late fees last month,” said Epperson. said Epperson. “They may say ‘no.’ But go through every credit card company, and find out what kind of provisions they are making...You’re not alone here. Almost every American is suffering.”

3. Save or get out of debt if possible.

There is one silver lining to staying home: most people aren’t spending a lot of money going out, buying gas or traveling. For some families with necessities covered, the check might be an opportunity to save or pay things off.

“Twelve-hundred dollars is not going to save the day, but for many middle-class people, this money can go to debt,” Tate said. “It’s an opportunity for many of us in middle America to readjust and move forward. It’s a couple of car payments.”

RELATED: MSNBC's Stephanie Ruhle: What to do if you can't pay rent as a result of the coronavirus pandemic

For Epperson, saving for health payments should be the number one priority. Epperson, who had ongoing health problems until 2017, warned of medical bills that might sneak up on you.

“Focusing on your health in terms of your physical and your mental health is absolutely paramount. [The check] should be put in savings for if you get sick, because there’s a good chance you can get sick,” Epperson said. “It’s wiring money to family members who get sick and don’t have the resources. That’s what people should be thinking about. There are reports of complications occurring that aren’t covered by insurance, if you even have insurance.”

Epperson recommends saving at least 10 percent of the stimulus check for health care.

“It’s not a lot of money, but it’s about starting that discipline,” Epperson said.

4. Don’t bury your head in the sand.

Many people have to rethink their finances in order to spend their stimulus check wisely. Chatzky advised people not to look away from their finances, but instead to deal with them head-on.

RELATED: 7 personal finance concerns in these uncertain times — and a plan of action for each

“Don’t put your head in the sand,” said Chatzky. “Don’t hide from your lenders. Call them and talk. Many are willing to deal with you...People don’t have money in their emergency funds. This is a problem, and now we know why it’s a problem.”

The economic downturn has caused a lot of ennui, which may lead some people to think their finances don’t matter in the short or long-term. This is an unhealthy way to think, according to Epperson.

“I don’t think any of this is forever,” said Epperson. “Don’t kid yourself into thinking the government will be caring for you forever and will save you from this terrible crisis. Your debts will still be there.”

5. If you can, give.

For those who are fortunate enough to be able to give away their stimulus check, they can give it to a good cause.

“I’ve been hearing questions from a lot of people about whether it’s better to give to a charity or better to step up and help pay the rent of a friend who can’t pay theirs this month,” said Chatzky “Both are the right impulses right now. This is a time when we get to see how generous our friends and neighbors are, people we know and people we don’t. That’s one of the nice things that happens in a crisis. You get to see the best of people.”