Stimulus checks are on the way — 3 smart ways to use yours, according to financial advisors

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Good news for millions of Americans who are out of work or otherwise hurting for cash due to the coronavirus: Stimulus checks are on the way. The IRS has already begun issuing payments to some people via direct deposit, and paper checks are expected to start going out in the mail at the beginning of May.

The IRS has also launched a tool called Get My Payment to help taxpayers track their payment status and enter their banking information for direct deposit. 

The stimulus checks, or what the government is officially calling "economic impact payments," are worth up to $1,200 ($2,400 for couples) and $500 per child per household. The size of your stimulus check is based on the adjusted gross income, or your income minus certain deductions, that you reported on your most recent taxes, either for 2018 or 2019.

Most Americans are planning on spending their stimulus checks on essentials like groceries, and to pay bills including their rent or mortgage, according to a survey of 1,038 Americans from MagnifyMoney. Another survey, from personal finance site Money Done Right, found that 43% of respondents planned to pay down debt with their stimulus money.

How to decide on the best way to use your stimulus money

Experts say the best use of your stimulus money will depend on a number of things, including your employment situation and your debts. The advice boils down to: Spend your stimulus check if you need to, and save it if you can.

Here are three questions to ask yourself:

1. Are my essential expenses covered?

Financial advisor Skip Johnson, a partner at Minnesota-based Great Waters Financial, says that the first thing to consider when you receive your stimulus money is whether you need it to pay for essential expenses like rent and groceries. "You need somewhere to live, you need food to eat, and you need medicine," says Johnson. "I would pay for those before I pay for other things."

2. Can I cover my April bills?

If your basics are covered, experts say you should sit down and prioritize which bills to pay next. While many people won't receive enough of a stimulus payment to cover all their monthly bills, especially if they've lost their job, you can make a list of which ones are most important. 

"It's a very difficult situation, and you're going to need to prioritize," certified financial planner Jedidiah Collins, who runs the company Rookie to Veteran in Seattle, recently told Grow.

How to spend a stimulus check if you're unemployed

Video by Jason Armesto

In its "Surviving Debt" guide, the National Consumer Law Center recommends putting utilities and car payments toward the top of your priority list. This way the power stays on — though some utility providers have said they currently won't shut off service for nonpayment — and you have a mode of transportation.

For all your bills, including credit card debt, get in touch with your lender or creditor. Most companies are willing to work with people who are struggling financially due to the outbreak. So, if you can't make a payment, you need to get in touch as soon as possible to let your lender or creditor know. 

"These are tough times," says Johnson. "People are working with us."

3. Do I have enough in savings?

It's a good idea to save at least some of your stimulus payment, if you can, Johnson says. Even if you're financially secure now, an emergency fund, or rainy day fund, is a financial backstop if you later lose your job or experience other financial hardship as a result of the pandemic. 

Emergency savings can help you cover bills and avoid going into debt, Johnson says, "so that when the storm happens, [you] can get through it."

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