On Wednesday morning, the personal finance expert and bestselling author shared with TODAY's Al Roker how to get your check, part of Congress's $2 trillion bill to bolster the economy during the pandemic, faster. She also offered tips to make the funds — up to $1,200 for individuals, $2,400 for couples and $500 for children — last as long as possible.
To start, Orman explained that people who filed their 2018 and 2019 taxes will receive the money first, and in order to get yours in a timely fashion, the IRS must have your direct deposit information.
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"If they don't have that, then they're going to have to mail you a check, and that could easily take up to five months," she said.
Orman's solution: Go to IRS.gov and enter your bank information. The site can also update you on the status of your check.
Next, she clarified that the relief payments aren't taxable income but any unemployment insurance you've received "on the federal level ... will absolutely be taxable."
She then shared tips for spending the money wisely. "You should seriously save every penny you can," she said. "Do not go taking that stimulus check and using it all to pay off all your credit card debt, if that's all the cash that you have."
Instead, she advised that viewers do the following:
- Pay minimum payments due on your credit cards
- Divide bills from essential to nonessential, and only pay essential bills
- Pay the smallest amount possible on bills
Another common problem many Americans are facing right now is the possibility of having to make a lump-sum mortgage payment in a few months' time. Many banks will require this, Orman said, but many won't.
"Credit unions ... are being very lenient with their customers, but many banks really are saying, 'You can go for three months, not pay, but at the end of three months, we want all $6,000 ... whatever it is in one lump sum,'" she clarified. "For most people, that's going to be impossible, so please don't let your let your banks make that part of the condition."
Last, she addressed what, for many Americans, seems like an easy way to get cash: tapping into retirement accounts. After stressing that money in your 401(k) is protected from creditors should you need to declare bankruptcy, Orman said that it's "all right" to take out some money if you have "a lot" in the account and need the cash.
But, she continued, "If all you have to your name is what's in a retirement account and you're going to use that money up in this next month or so, and then you're going to end up possibly claiming bankruptcy if this goes on, do not do that."
She emphasized, "It will be one of the biggest mistakes you've ever made."
Over the weekend, the IRS informed the public via Twitter that it had deposited the first of the Economic Impact Payments into taxpayers' accounts and would continue doing so as quickly as possible.
Americans who made less than $75,000 in 2019 will be eligible to receive $1,200. Couples who filed jointly and made less than $150,000 will get $2,400. An individual who filed as "head of household" and earned $112,500 or less gets $1,200. For every child, an extra $500 will be paid.
For people who earned more than $75,000, payments will be reduced by $5 for every $100 of income that exceeds the limit. The payment decreases to zero for individuals making $99,000 or more and a couple making $198,000 or more.