I’m John Enright and thank you for joining me on this brief commentary regarding some new updates that have come through Washington that you may have heard or read about.
In response to the COVID-19 outbreak the federal government has passed at $2.2 trillion stimulus package that is designed to flood the U.S. economy with money in an effort to stabilize households and businesses amid the outbreak.
Given the coverage this bill has received, we felt it might be helpful to breakdown the different aspects of the bill so that you can take advantage of all the benefits you may be entitled to. We understand that these are unparalleled times we are living in and based on your individual situation certain parts of the bill may be more valuable to you beyond just a check you may receive.
One condition included in this bill that has many Americans interest, is stimulus checks the government plans on sending. Under the plan, single Americans would receive $1,200, married couples would get $2,400, and parents would see $500 for each child under age 17.
However, there are some exclusions. First, the payments would start to phase out for individuals with adjusted gross incomes of more than $75,000, and for those making more than $99,000, they would not qualify at all.
If you are married, the thresholds are doubled. Also, as it stands right now it will most likely be May before checks begin to be sent out.
First, if you have experienced a total loss of income or a loss of your job due to the outbreak and you are having trouble making monthly payments to certain debts such as your mortgage, student loan, car or personal loans it may be beneficial to get in contact with the bank, credit card or loan company and see what your options are for a forbearance.
Forbearance is a way to temporarily stop or make reduced payments for a period during a financial hardship.
Generally, not all hardships qualify for forbearance but this new bill would include hardships related to the Coronavirus.
For those that have already received a reduction in income, this bill has extended the period on which you may claim unemployment by an extra 13 weeks. It has also increased the weekly benefit by $600 for up to 4 months for those who qualify.
The stimulus check along with the improved unemployment benefits are designed to provide most Americans with 100% of their income for the next few months. If you plan to file for unemployment, do so as soon as possible.
Some states are experiencing an increase in the number of new requests each day and you may have a specific day on which you can apply. Read the instructions carefully before beginning your claim process.
If you do experience a reduction in income, make sure your most important expenses are covered first. This would include costs like mortgage, rent, health insurance, medications, utilities, groceries, and any other necessities for you and your family.
The check could be used to supplement these important expenses. Now is a good time to create or review your budget and determine what areas you may be able to cut back.
For example, maybe consider buying store brand items versus the more expensive name brand items, review your mobile phone, cable and other bill to see where you can reduce even if just temporarily.
The Coronavirus has affected us all in one way or another and most companies are very understanding of this.
If you owe any taxes consider a delay in filing until July 15th. There is nothing additional you need to do to delay filing. Additionally, if you set up a payment plan your first payment may be delayed for several weeks after filing.
If you haven’t yet experienced a loss of pay but, there is a concern that you may in the future, use the check from the government and any extra cash on hand to build up your emergency savings.
We recommend having enough emergency savings to cover 3 to 6 months of expenses. Even if this concern is very minimal, it is still beneficial to always have an emergency savings, even if you don’t need it through this economic slowdown. You never know what curveballs life will throw at you.
If job security or loss of income is not a concern, there are still things you can do to improve your financial health.
Create that budget. Identify expenses that are necessary and those that are wants. Make sure those in the wants category account for less than 30% of your total budget.
Also, make sure that at least 20% of your expenses go towards savings or paying down high interest debt, such as credit cards or personal loans. This does not include any mortgage or auto payments.
Make an emergency plan. The best time to make a plan is before you need one. You should have a plan that covers loss of income for a variety of time periods. If you’re emergency savings will last 1 month, where will you draw from after that one month? Think about what government benefits for which you could apply. It may make sense to obtain short term disability insurance in the event you become sick.
Another consideration would be to delay certain expenses if possible. Some mortgage and credit card companies are allowing for payments to be delayed for situations related to the coronavirus.
You will have to make up these payments down the road so you will need adequate income in the future to cover these expenses. If you own your home you may be able to establish a line of credit against the equity you have in it. You will want to establish the line of credit while you still have income so it might make sense to apply for one now even if its not currently needed.
Mortgage rates are currently fluctuating but you might find they are lower than we’ve previously seen. Depending on your current mortgage rate, now may be a great time to consider refinancing to a lower rate or longer time period to reduce your payment or a shorter time period with a similar payment. This can potentially save you thousands of dollars over the course of the term.
Though ideally the measures in the stimulus package were intended so that this money would be spent now, you may be asking whether you can use the stimulus check to fund an IRA or other investment.
Though nothing specifically prohibits this, in these unknown times we always caution against putting short term money at risk in long term investments such as IRAs. Alternative uses might be to do things like investing in yourself through online courses or other education.
If you are charitably inclined, you could donate the money to a charity of your choosing and obtain a tax deduction up to $300, even if you don’t itemize your taxes.
We are experiencing an event that is unique to every one of us. If nothing else this situation has shown the resiliency of not only the American people but also of humanity in general.
If you and your loved ones are in a good position overall, consider using these funds to help those that are continuing to make sure that we have a place to go if we get sick, that our communities are safe, that our lights stay on or that we have access to food and groceries.
It is our duty as Americans to stick together in tough times like these.
Likewise we here at Custom Wealth Management feel it is our duty to assist you with any financial questions or concerns you may have.
So please reach out to Victoria.Clark@teamcwm.com with any questions that arise and we will work our hardest to get them answered.
PLEASE Stay healthy, STAY HOME AND STAY SMART!
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