Stimulus checks have rewired the way some Americans view money

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For Denise Diaz, the benefits of pandemic-era stimulus checks went beyond everyday dollars and cents. They changed his way of thinking about money.

Diaz, a mother of three who lives outside of Orlando, Florida, received more than $10,000 from three rounds of “economic impact payments”.

They were part of the 472 million payments Posted by the federal government, totaling approximately $803 billion. The effort amounted to an unprecedented experiment in supporting households as Covid-19 cratered the US economy.

Checks (and other federal funds) are at the epicenter of a debate over whether and how much financial aid has helped fuel inflation, which is at its highest in about 40 years.

But they undoubtedly offered a lifeline to millions of people during the worst unemployment spell since the Great Depression. Recipients contacted by CNBC used the money in a variety of ways — to cover basic household needs, make debt repayments and create rainy-day funds, for example.

Diaz, who co-directs a local nonprofit, Central Florida Jobs With Justice, used the funds to pay off a credit card and car loan. His credit rating has improved. She built up a – previously non-existent – emergency fund that the household could fall back on when Diaz’s partner lost his job earlier this year.

As a result, Diaz, 41, feels more financially stable than during any other period of his adulthood.

The financial buffer and associated peace of mind also changed his psychology. It automated bill payments (for utilities, a second family car, and credit cards, for example) for the first time.

“We didn’t do that. [before]”, Diaz said. “Because you never knew what might happen [financially]so I never trusted him.”

These days, Diaz thinks more about budgeting. Home ownership seems within reach after years of renting.

“The stimulus has changed the way I think about what’s possible, my personal spending habits, and the way I manage my money,” she said.

“Hard to make a dent”

The stimulus checks were the result of legislation – the CARES Act, the Consolidated Appropriations Act and the US Bailout Act – passed by Congress in 2020 and 2021 to manage the fallout from Covid-19.

Households received payments of up to $1,200, $600 and $1,400 per person, respectively. Qualifications such as income limits and payment amounts for dependents changed during these three funding rounds.

Census Bureau survey data shows that most households used the funds to purchase food and household items, and to make utility, rent, vehicle, mortgage and other debt payments. To a lesser extent, households used them for clothing, savings and investments, and recreational goods.

Salaam Bhatti and Hina Latif, a married couple living in Richmond, Va., used some of their funds to reduce credit card debt, which has proven difficult in recent years, especially after having children. (They have a 3-year-old and a 3-month-old.)

Bhatti and Latif have paid off several thousand dollars in debt during the pandemic and have about $30,000 left, they said.

“It was difficult to make a dent,” said Bhatti, 36. “Sometimes you just feel like you’re not making progress.”

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The couple had a gross income of around $75,000 during the pandemic. Bhatti was the public benefits attorney at the Virginia Poverty Law Center (he is now its deputy director) and Latif teaches online at the College of DuPage in Illinois.

Before securing the stimulus payments, the duo used a “debt reshuffling” approach to stay afloat, Bhatti said. That included taking advantage of several balance transfer offers that had interest-free periods, he said.

They also used stimulus funds to help cover higher household costs for groceries and other items like diapers.

The stimulus changed my way of thinking about what’s possible, my personal spending habits, and the way I manage my money.

Denise Diaz

Florida stimulus check recipient

Bhatti and Latif, like Diaz, also received monthly Enhanced Child Tax Credit payments — up to $250 or $300 per child, depending on age — which ran for six months starting in July 2021.

“Costs have gone up with our new baby, so it often feels like we’re drawing water from a leaky boat,” Bhatti said. “We don’t live on extravagance by any means, but because most of our income [is] going into debt, we pretty much live paycheck for paycheck.”

“Every dollar really counts”

Nestor Moto Jr., 27, has used his stimulus payments heavily to reduce student loans. The Long Beach, Calif. resident received about $4,000 in federal and state payments.

He used about half for loans and 10% for savings. The rest helped Moto, an office manager for an accounting firm, pay bills (phone and car insurance, for example) when his employer cut his full-time schedule to about 10 hours a week earlier in the pandemic.

“They really helped me catch up on my student loans,” said Moto, a California State University Long Beach graduate with a bachelor’s degree in political science. He still owes about $10,000 out of an original balance of $18,000.

Moto wanted to reduce its debt even though the federal government has suspended payments and interest for the past two years. He doesn’t expect the Biden administration clear his outstanding debt.

Sometimes you just feel like you’re not progressing.

Salam Bhatti

Virginia stimulus check recipient

“I saved money,” added Moto. “[The stimulus] really helped put into perspective how much money I make per month and per week and how much I spend.

“It showed me how much every dollar really matters.”

Although grateful for the financial help, Bhatti feels slight disappointment after touching financial freedom. The U.S. economy has rebounded significantly since early 2021, when lawmakers passed the last sweeping pandemic relief package for individuals; another does not seem likely despite continued financial pressures for some households.

“It feels like such a tease,” Bhatti said of the stimulus payments. “It was like you were hanging a carrot in front of you, with the government saying, ‘We know we can help you.’ And then ultimately choosing not to.”

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