Many Americans are in a worse financial place now than they were before the coronavirus pandemic started. Millions are out of work. Even for those still working, it can be hard to make ends meet. The government sent direct checks of $600 as part of the most recent stimulus bill, but the help will be short-lived. Half of adults in a new poll say that money won't even last a month.
Bankrate surveyed more than 1,200 people in early January to get a sense of where their finances stand and what they're planning to do with the second stimulus. Overwhelmingly, the respondents say $600 isn't enough. More than half, 53%, say the money won't sustain their financial well-being for a month. Another 16% don't think it will cover them past three months.
In addition, about 18% of the poll-takers say the funds won't help their expenses at all.
A free $600 isn't nothing, but it's half of what Americans got in April as part of the Coronavirus Aid, Relief, and Economic Security Act. And the second stimulus checks are also coming at a time when people need more help, after enduring the often disastrous financial effects of the pandemic for nearly a year.
More than half of Americans, 54%, said they missed at least one bill payment in 2020, according to a recent survey by Clever. Since the start of the pandemic, an estimated 46 million U.S. adults have wiped out their emergency savings. As of November last year, the average American had fallen $7,512 deeper into debt.
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Plus, in the months that passed between the CARES Act and the second relief bill, several key relief programs, including the initial $600 weekly federal boost to unemployment, expired. Out-of-work Americans are currently receiving $300 in weekly federal benefits under the latest stimulus.
"This takes us to the primary issue of financial security, which begins with having emergency funds set aside," says Erika Safran, a certified financial planner and principal at Safran Wealth Advisors. "Now that emergency funds have been exhausted, and many are unemployed, the extra $600 [stimulus check] is not going to be the entire solution."
Even $600 is still significant, however. Almost half, 44%, of those receiving stimulus funds say the money is "very important" to their near-term financial situation, Bankrate found, while another 27% say it's "somewhat important." It's especially key for women, low earners, and people of color, most of whom have been disproportionately affected by the pandemic.
The way Americans intend to spend their stimulus further underlines the importance of the funds: Most, 42%, will use the money on bills such as their rent, mortgage, or utilities. About a third, 32%, will use it to buy day-to-day essentials, and 25% will focus on paying down debt with the funds. Just 8% said they would use the money for discretionary purchases.
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Those stats are similar to numbers reported in November, which showed that American's top priorities with the first round of stimulus checks were replenishing their savings, tackling lingering debt like credit and student loans, and covering the cost of necessities such as housing.
"This underscores that the financial need is widespread and that many are close to the financial edge," says Greg McBride, chief financial analyst at Bankrate. But "the top intended uses cited by those receiving stimulus payments — monthly bills, day-to-day essentials, adding to savings, paying down debt — are the right place to start."
The U.S. Treasury Department has already sent out the $600 payments to eligible adults. If you were eligible to receive stimulus money but didn't get it or didn't get the full amount, you may be able to claim the Recovery Rebate Credit when you file your tax return — meaning you could see that stimulus money in the form of a bigger refund.
There's also a chance that President Joe Biden could push out additional stimulus funding in his first 100 days. Under his administration's proposed $1.9 trillion American Rescue Plan, eligible Americans would receive another direct cash payment of $1,400, bringing total relief to $2,000 when including the recently distributed payments of $600.
A larger payout isn't certain, however, so experts suggest you use the money you have now wisely. Even if $600 can seem insufficient, put it away if you can in case you need it for an emergency, or, experts suggest, put it towards your key "health and safety" expenses.
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