The first wave of direct deposit stimulus payments of up to $1,200 began hitting bank accounts last week, according to an announcement by the Internal Revenue Service.

The payments – which amount for about $250 billion in the over $2 trillion economic relief package signed into law by President Donald Trump on March 27 – go straight to individual Americans in an effort to help the country weather the economic impact of the coronavirus pandemic.

Individuals with an adjusted gross income of $75,000 or less are qualify for the one-time payment of up to $1,200. Couples who file taxes jointly and make under $150,000 will receive up to $2,400, and families with children under 17 will receive $500 for each child.

Payments fall for every $100 made over the individual and couple income thresholds. Taxpayers making over $99,000 as single filers or $198,000 as joint filers won’t qualify.

The IRS announced earlier this week that by mid-April filers will be able to check the status of their payment, select whether they receive a check or direct deposit and update their deposit information or their mailing address.

The payments are technically non-taxable tax credits for 2020’s tax returns, paid in advance to taxpayers this year instead of in 2021. Structuring the payments this way allows the government to use the IRS’s preexisting system to distribute funds to Americans. The checks won’t reduce the amount people were already eligible to receive.

While there are gaps in the program – a gap that includes many college students, some elderly people and immigrants without Social Security numbers – the majority of Americans will see some amount of money from the federal government.

Once the money makes its ways to taxpayers mailbox or bank accounts, the question becomes what to do with it.

How to use your stimulus checkCover your debts

As a certified financial planner, Paul Hofslien has helped usher his Prior Lake clients through the financial crises of 9/11, the dot-com bubble and the crash of 2008. Now he’s fielding questions from clients about to get through the coronavirus.

His first piece of advice for people once their immediate needs are met: Be mindful of your debt.

“I think the first thing a person needs to do is to use it to pay bills if they’re unemployed,” Hofslien said. “One thing from a bill-paying standpoint is to protect your credit rating, because I have not heard if credit agencies are going to be lenient at this time for missing payments.”

A 2019 study by the Harris Poll and Northwestern Mutual found that the average American has $29,800 in non-mortgage debt. Participants in the survey said that mortgage and credit cards were their main source of debt.

Save for emergencies

Hofslien said now is an important time to start the financial habits that can help get through the next few months or next big financial event. For many that means starting or substantially contributing to an emergency fund.

“I think what this has taught us is really the benefit of trying to have some sort of reserve,” Hofslien said.

Prior to the coronavirus outbreak, data from Northwestern Mutual showed that about a third of Americans were three missed paychecks away from having to borrow money or skip bill payments. Millions of people have filed unemployment claims across the country in the past two weeks, according to the U.S. Department of Labor.

Hofslien said a good rule is to have about six months income in reserve. He added that while many Americans are getting immediate help through additional unemployment payments from state and federal governments during the outbreak, that money will only last so long.

Invest in yourself

In general, “if you’re not investing right now, I think you have bigger concerns and bigger things on your plate,” Hofslien said.

But one group who may benefit from dipping their toes in the stock market. Students over 17 who may have filed for taxes last year because they worked a summer job should consider looking into conservative investment opportunities through a Roth IRA.

“Put it into either a good quality mutual fund or index fund, and you’ve got years ahead of you,” he said.

Spend local

If Minnesotans find themselves prepared with savings and an emergency fund during the pandemic, Hofslien recommends using the stimulus check to help the local economy. That could mean increasing take-out orders from a neighborhood restaurant or buying gift cards for future use from nearby boutique or business.

Now more than ever businesses are looking to their neighbors and longtime customers to keep things running. Many businesses are participating in live directory lists of which restaurants are open and which businesses have moved online.

“I think people will get the money. The other side of that equation is going to be where are they going to spend it,” Hofslien said. “In order to make an economy, you’ve got to have both the money to spend and a place to spend it.”