No emergency fund? 7 ways to play financial defense

Third stimulus check and more: 7 ways to get money from the Biden COVID law

No emergency fund? 7 ways to play financial defense
Third stimulus check and more: 7 ways to get money from the Biden COVID law

Mere days after President Joe Biden signed his $1.9 trillion COVID relief package into law, money is already flowing to Americans who've been struggling through the pandemic for more than a year.

The legislation includes the long-awaited third stimulus checks, the direct payments for most adults and children in the U.S. But there's much more aid to go around — so much, in fact, that the Urban Institute says the various provisions will result in 16 million fewer people living in poverty.

If you need help to stay current on your basic bills, or to pay down debt you've run up during the financial crisis of the last year, you have multiple ways of getting it.

Here are seven ways you can get financial relief from the new law.

1. The stimulus checks

William Sawalich / Shutterstock

The stimulus checks this time are worth up to $1,400 and are being distributed in batches, according to Biden administration officials. The IRS started processing payments on Friday, and people began receiving the money via direct deposit over the weekend.

Americans who earn up to $75,000 (or $150,000 for couples) qualify for the full amount; eligibility is your adjusted gross income, which is your taxable income before subtracting the standard deduction or itemized deductions.

Families who qualify get $1,400 for every member of the household, including young children, teenagers, dependents in college and eldery or disabled dependents.

Individuals making between $75,000 and $80,000 (and couples earning between $150,000 and $160,000) get partial payments. Those with higher incomes receive no stimulus check this time.

If you're in that group and were counting on getting some cash to reduce costly credit card debt, a lower-interest debt consolidation loan can help you rein in your balances — and pay them off more quickly.

2. Cash for families

The bill beefs up the child tax credit to provide a kind of monthly stimulus check for families with children, available under the same income limits as the regular relief money.

If you've got kids, you can expect to receive payments of $250 per month during the second half of 2021 for each child between ages 6 and 17. For children younger than 6, you’ll get $300 a month.

That brings the tax credit for 2021 up to $3,000 or $3,600, depending on age, with the second half of the credit fully refundable on your 2021 taxes.

The rescue bill not only increases the amount families will receive by up to $1,600 per child, from its original $2,000 maximum, but it also makes the entire credit refundable.

If you don’t need the money to cover immediate expenses, this can be a good opportunity to teach your children about managing money. You could deposit some (or all) of their funds in a debit card designed for kids and monitor every purchase through a safe, secure app.

3. Extra unemployment benefits

Federal unemployment benefits were set to expire March 14, which provided some urgency for Congress to pass the relief bill by mid-March.

The legislation has extended those bonus benefits, so if you lost your job in the pandemic you can now expect to continue to receive $300 a week from the federal government until Sept. 6.

Plus, the Senate added an amendment that makes the first $10,200 of jobless benefits tax-exempt for households making less than $150,000. You'll notice the savings when you fire up your tax software.

The bill also offers freelancers, gig workers and those with side hustles additional support through the Pandemic Unemployment Assistance program.

While those workers don’t usually qualify for unemployment, the assistance program has provided them with up to 79 weeks of benefits throughout the pandemic.

4. Emergency assistance for housing expenses

Also tucked into the bill is help for Americans struggling to pay their housing costs, whether that be rent or a mortgage.

For renters, the bill offers nearly $22 billion in rental and utility assistance for those at risk of being evicted.

Households have to meet several conditions to qualify for the financial assistance. Priority will be given to lower-income families with members who have been unemployed for three or more months.

For homeowners whose struggles can’t be resolved by refinancing to a lower mortgage rate, the bill provides billions to help them with their monthly loan payments, utility bills and other housing costs, homeowners insurance.

And, there’s a chunk of money to pay for housing counseling for both renters and homeowners, to help more people stay in their houses.

5. More generous health insurance discounts

Leonardo da / Shutterstock

Another provision in the relief package not only lowers the cost of health insurance — at least temporarily — but also is expected to extend coverage to 1.3 million Americans.

The new law expands the subsidies, or discounts, on Obamacare health plans to people earning more than four times the federal poverty rate, which is approximately $51,520 for single people and $106,000 for a family of four. And, it caps the premiums at 8.5% of a person's income for the next two years.

Here's an example of what that means: A 64-year-old woman with a $58,000 income will see her premiums reduced from $12,900 to $4,950, according to the nonpartisan Congressional Budget Office (CBO). That's a 61% savings.

You can compare plans and shop for health insurance during the current Obamacare special enrollment period, which runs until mid-May.

Finally, the law offers relief if you received a premium subsidy last year in excess of what you were entitled to. Usually, you'd have to pay back the difference to the IRS. But this year — and this year only — you won’t.

If you work for the federal government, the legislation provides some paid-leave benefits.

You can take up to 600 paid hours (capped at $1,400 a week) if you are:

  • Showing symptoms of COVID-19.
  • Caring for a family member sick with the virus.
  • Taking time off to get vaccinated, or suffering some side effects of the vaccine.
  • Caring for children who are in virtual learning, or facing school or child care center closures.

For employers with fewer than 500 employees, the package offers resources to provide as much as $1,400 a week in paid leave. But the bill doesn’t mandate that companies offer paid leave — it just gives reimbursement if they choose to do so.

7. Tax savings if your student loan debt is canceled

For the 44.7 million Americans with student loan debt, the package contains a significant provision.

Previously, any canceled federal student loan debt would have been considered taxable income. But the legislation now makes student loan forgiveness tax-free, which could mean major tax savings.

It means if $50,000 of your federal student loan debt is eventually canceled — which some members of the Democratic party are pushing hard for — you could avoid receiving a tax bill of up to $10,000.

Even just $10,000 worth of cancellation would save you at least $2,000 when you file your return.

If your student loans are through a private lender and debt cancellation isn’t in the cards for you, you could still save hundreds of dollars a month by refinancing your loan at a better rate. Rates on private student loans have dropped to all-time lows.

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Why You Can’t Save Money: 10 Money-Sucking Reasons

No emergency fund? 7 ways to play financial defense

Have you ever felt no matter how hard you try, you just can’t save money? Do you feel , every time you try to take a step forward in your financial life, you get hit with an unexpected expense that sets you two steps back?

I’ve been there. In fact, most people I know have been there at one point or another. So, at least you’re not the only one. But that doesn’t mean you should just accept it.

Rather, if you want to finally reach a point where you are consistently depositing money into savings, you need to grab your financial life by the horns and wrestle it to the ground.

If you’re ready to do that, you have come to the right place.

For the rest of this article, I am going to identify ten of the most common reasons you can’t save money, and how you can conquer them.

1. You Lack A Good Understanding Of Personal Finance

Handling your finances properly — so that you can save money — is not a natural skill. In other words, you aren’t just going to wake up one day and suddenly start making great financial decisions. If you want to be good with your money, you need to learn how to be good with your money.

That means you need to invest time and energy into researching and educating yourself on personal finance. So, crack a book, follow some personal finance blogs (preferably this one), or take a personal finance class. Whatever you choose, just make it your business to learn the ins and outs of handling your money.

If you don’t know where to start, I highly recommend you read The Total Money Makeover by Dave Ramsey. This is the book that turned my financial situation around, and it is a great starter’s guide to getting debt, saving money, and building wealth.

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2. You’re Unprepared For Emergencies And Unexpected Expenses

Unexpected expenses can be one of the most defeating aspects of saving money. I said at the beginning of this article, it’s getting knocked back two-steps after taking one step forward.

But truthfully, the term ‘unexpected expenses’ is a bit of a cop-out in my opinion. Why? Because unexpected expenses (i.e. medical bills, car repairs, home repairs, etc.) are a fact of life, and you should EXPECT them to pop up now and again. Moreover, you should prepare for them by saving an emergency fund.

If you never took the time to prepare for emergency expenses, you probably ended up taking on some sort of debt to pay for them. This is a reactive way to operate your finances, and paying debt for emergency expenses ties up your income and keeps you from saving money.

3. You Don’t Live On A Budget

If you can’t seem to save any money, and you aren’t living on a budget, then now is the time to start. Budgeting is an absolute necessity if you want to start, or increase the amount of money you save each month.

Budgeting is the best way to plan your financial life and track your progress. If you aren’t doing that, then how do you expect to save money?

If saving money is a priority, then go create a budget right now, and start actively managing your money.

4. You Have Credit Card Debt

Credit card debt is one of the worst things you can allow into your financial life. Between the ease of spending beyond your means, and the high interest rates that suck money from your life, credit card debt makes saving money a much more difficult task.

Additionally, credit card debt has a way of lingering in your life for a very long time. What starts out as a small, seemingly innocent, balance starts to add up, and before you know it, your minimum payments, alone, are costing you hundreds of dollars per month.

Every dollar you pay to a credit card company is a dollar that you can’t put toward savings. So, if you want to save money, stop using your credit cards and put an end to this vicious cycle.

5. You Owe Money On Your Car

Did you know that the average car payment in America is over $500 per month? And the worst part is, loan terms are getting longer and longer. credit card debt, if you are making monthly car payments, you are heavily restricting the amount of money you can save.

Think about it, if you are paying $500 per month on a car payment, you are sacrificing $6,000 per year in savings. That’s a significant amount of money.

You could go on two or three really nice vacations every year for that amount of cash. Or, you could throw that money into an emergency fund, and finally get ahead of some of those unexpected expenses. You could even contribute that money to your retirement, and watch it grow for the next couple decades.

Cars payments make saving money difficult. So, if you want to save money, you should pay off your car, or even consider selling it. A nice set of wheels isn’t worth sacrificing your financial security.

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6. You Are “House Poor”

Most people don’t to admit that they bought more house than they can afford. But if you are putting more than 25% of your monthly income toward a mortgage, and you can’t seem to save any money, then truthfully, your house is the main culprit.

This is often referred to as being ‘house poor’. And it is a major hindrance on your savings.

Throw a car payment and some credit card debt on top of it, and your opportunity to save money walks out the door.

Now, just to be clear, I am not telling you to sell your house. That is a very unique and personal decision. I’m just saying that if you are wondering why you can’t save any money, you should take an honest assessment of your mortgage, and determine if it is restricting your ability to save money.

7. You Confuse Wants With Needs

Wants and needs are very different things. And if you can’t seem to save any money, then you might be confusing the two. And honestly, at times, the difference can be subtle.

For example, when I was fresh college, I built and sold custom furniture as a side business. And in order to build furniture, you need to own a few key tools. However, I blurred the line between want and need, and used my side business as an excuse to buy just about any tool I wanted — even when I had all the necessary equipment to build furniture.

I would convince myself that I needed each new tool, because it would help me make and save more money. Yet, every dollar I earned just went toward the next tool.

What I NEEDED was to get a clue and stop spending all my money.

8. You Have Student Loan Debt

According to the Federal Reserve, the typical student loan payment is between $200 and $299 per month. (source)

And, for some people, it is much higher than that.

In other words, student loan debt is a crushing blow to your ability to save money. Similar to a car payment, it can consume a massive portion of your monthly income. And the longer you let that debt stick around, the longer you will struggle to save money.

Student loans could be restricting your ability to save by upwards of $3,600 per year.

9. You Are Paying Too Much Rent

I can attest that the cost of rent is pretty ridiculous right now. And it just keeps getting worse. paying too much for a mortgage, it can seriously hinder your ability to save money.

As a general rule of thumb, you should only be spending 25% to 30% of your take home income on rent each month. So, if your rent is higher than that, and you can’t afford to save money, then you might want to consider finding a new place to rent.

This is also where the concept of confusing wants and needs comes into play. For example, you don’t need granite countertops in your apartment if it is going to cost you $100 extra per month.

You don’t need a garage if it increases your rent by $125.

There are many upgrades and amenities that are nice to have when you are renting, but if they come at the cost of your savings account, they aren’t worth it.

10. You Are Dining Out Too Often

If you are wondering where your money is going each month, and why you can’t save any of it, then you might be dining out too often.

For example, when my wife and I are really diligent about grocery shopping and meal-planning, we will spend a total of about $500 per month on food. Whereas, if we were to get lazy, and dine out more than we should, we wouldn’t have any problem blowing our monthly food budget.

Dining out is tasty, fun and easy, but if you aren’t careful, it can be a major blow to your savings.

How To Start Saving Money

Ok, at this point, we have identified a bunch of different reasons why you might be struggling to save money. Now, let’s talk about how to turn things around.

In this next section, I am going to cover a few tips to help you fix your financial struggles, and finally start saving money.

I’ll warn you though, when it comes to personal finance, there is no such thing as an easy fix. Conquering your inability to save money takes work, sacrifice, perseverance, and discipline. If anybody else tells you differently, they are lying to you.

That said, if you are willing to do the work and fight to improve your financial life, the rewards are worth the effort.

Stop Playing Financial Defense

If I’m being honest with you, I tend to be a little impatient when it comes to personal finance. When my wife and I set a financial goal, I would rather work twice as hard in order to achieve it in half the time, than stick to a slow timeline. In other words, I hate playing financial defense. I to attack.

And, if you want to turn your financial situation around, you need to adopt an offensive — attack-style — mindset.

That means committing and sticking to your financial responsibilities budgeting, paying bills, earning an income, and paying off debt. It means charging full-speed ahead, and taking daily steps to improve your financial situation. And above all, it means persevering through difficulty.

When you decide to attack your financial goals, you will be amazed at the results you can achieve.

Get Your Spending Under Control

Hopefully this goes without saying, but if you can’t save money, you need to get your spending under control. It doesn’t do you any good to go through life complaining about how you can’t save money, if you aren’t willing to change your financial habits.

At the bare minimum, in order to get your spending under control, you need to get on a budget, track your spending every single day, and cut your expenses to the bone.

And I’m not talking about dropping a couple small subscriptions and turning off lights more often so that you can lower your electric bill.

I’m talking about cutting every unnecessary expense from your budget until you are debt and prepared with a six-month emergency fund.

Destroy Your Debt (For Good)

If you have any kind of debt, pay it off as quickly as you can. Every dollar that goes toward debt is just another missed opportunity to save money and better your financial situation.

And if you aren’t able to save any money, then you need to do whatever it takes to add a little financial margin in your life. I’m talking shock and awe.

If you are drowning in credit card debt, shred those money-sucking pieces of plastic and get to work paying them off.

If you can’t save any money because you are spending hundreds of dollars on a car loan, then sell the car and buy a cheap, used car instead. You don’t need a navigation system and a backup camera. What you need is an emergency fund, and a growing net worth.

Get aggressive with your budget, and pay off your student loans. Your college education was supposed to increase your earning potential, not bury you in monthly payments for a decade of your life.

Any debt you have is hurting your financial future, so get rid of it as fast as possible.

Save Money First

If you want to save money, then make it the highest priority on your financial list. In other words, the moment you get a paycheck, decide how much of it you want to save, and move the money into your savings account. Then, live off of the remaining money.

Don’t let the amount of money you save each month be determined by how much you spent. Rather, let your savings determine how much you are able to spend.

Make More Money (Seriously)

Sometimes the best solution when you can’t seem to save any money, is to make more money.

This is especially helpful if you need to pay off debt, but don’t have any room in your budget to pay extra.

If you want to make extra money, you basically have two options. You can either go get a second job, or start a side hustle of your own. The first option might not seem very glamorous, but a second job can add upwards of $1,000 to your monthly income, which can help you pay off debt pretty darn quick.

Starting a side business is less of a sure thing, but in many situations it can turn into a thriving full-time gig. So, if you have something you are passionate about, and you can make money doing it, don’t put it off any longer.

Just be sure you don’t start a side business that costs you a bunch of money to get going. The whole purpose is to make more money so that you can finally save money. Once your are in a better financial situation, you can entertain the idea of a business that requires some upfront costs.

Final Thoughts

There are all sorts of things that can keep you from saving money. But, if you take the time to identify why you can’t save money, and figure out how to conquer those obstacles, you will be well on your way to a better financial situation.

I hope this article will help you do just that!


Which Comes First: Paying Off Debt or Saving?

No emergency fund? 7 ways to play financial defense

You might be asking yourself, “Should I keep going with my aggressive debt payoff or should I stockpile more cash in an emergency fund?”

If you’re debating between paying off debt or saving more cash, your emergency fund should come first! You heard that right, debt—we’ll deal with you later (soon, but later).

See, they’re both good options, but there is a gooder, er, better option. Whenever you’re dealing with multiple financial goals, they all elbow for your attention (and your dollars). But there is a method to this madness, and that’s what I’d to talk about today. 

Before we can talk about saving for emergencies or crushing your debt to smithereens, there’s the matter of your basic needs:

1. Cover Your Basic Needs 

First things first, you have to cover your essentials with the dollar you currently have. These are things that:

  1. Are a need
  2. Are guaranteed to happen
  3. Repeat every month

Typically, they’re expenses related to survival:

  • Groceries
  • Utilities
  • Rent
  • Minimum payments on debt

And how far out are they covered? Just next month? If you’re faced with uncertainty around income, you might want to stop at this step and use your cash to cover these essentials a few months out. Once you’ve got those covered, you move on to…

2. Cover Your Non-Monthly (But Necessary) Expenses 

These expenses are the purchases that you know are coming, but they don’t happen every month.

These might be things :

  • Auto maintenance
  • Trash service
  • Car insurance

When you’re looking at the total cost of a month of your life, you want to include these one-off expenses. You can think of this as preventing future debt. By breaking these larger costs down into monthly chunks, it’s not a huge blow when the multi-hundred dollar bill comes due. You’ll have the money already set aside and it won’t need to go on the credit card.

Why the Basics Matter So Much

It’s easy to see why paying our monthly bills is the top priority. You need a roof over your head, and food to keep you alive. But what about those irregular expenses? It’s harder to put aside dollars for car repairs when your car seems totally fine—especially when you’re wrestling with debt!

The thing is, if you don’t fund your car repair category now, it could (easily) lead to new debt. I’m not a sports guy, but a sportsing analogy is perfect here: Imagine a football team that’s really good at playing offense. I mean they’re killing it! But when it comes to their defense, the coach shrugs and says, “Meh, let’s just not put any players on the field.”

Well, they’re going to lose, right!? And that’s just the truth. The same is true with our money. You gotta play some defense (read: avoid new debt) before you’re ready to go on offense (read: pay off debt).

3. Build Your Emergency Fund

If you think about it, your emergency fund is just another one of those larger, less frequent expenses—except you don’t know what it’s for. Murphy’s Law correctly reminds us that things will happen (we just don’t know when or how much they’ll cost).

Maybe your new-ish car’s battery will bite the dust. Maybe your crazy dog will impale herself with a stick (true story, my dog’s ok, thank you). Or, an unexpected global pandemic directly impacts your income (we definitely didn’t see that one coming).


So should you pay off debt or save more cash? Well, here comes the drumroll…

Your emergency fund should come first! You heard that right, debt—we’ll deal with you later.

So, if you’re paying attention, you budget in this order:

  1. Basic needs ( rent or minimum debt payments)
  2. Non-monthly but necessary expenses ( car repairs or health savings)
  3. Emergency fund (you decide the right size, your current circumstances)

So How Big Should My Emergency Fund Be?

Some gurus say an emergency fund should be $1,000 to start, some recommend a more sizable 3-6 months of living expenses. Your emergency fund might just be whatever cash you have on hand right now. 

4. When Income is Uncertain, Up Your Cash Cushion

In the midst of uncertainty around income, it’s worth considering hanging on to cash—even more than you would normally. It might be more important right now to know you’re covered for a few months of essential expenses than knocking back your debt balance.  

  • If you were planning a big debt paydown but your future income is uncertain, consider hanging onto that money to build a bigger emergency fund instead. 
  • If you’re in the middle of debt paydown, consider backing off if you don’t have a few month’s worth of living expenses in the bank.

Having more cash buys more time. If you’re facing reduced income, more cash gives you more time to calmly decide what to do. This usually results in better decision making.

Right now, you might be feeling a loss of control. You can’t control whether or not you’re going to lose your job, be furloughed, or see a pay cut, but having cash creates more options that give you some of that control back. This isn’t just powerful financially, but emotionally too.

That’s because money in the bank is a concrete certainty, and this can be comforting. You can stretch your cash, but you can’t stretch cash you don’t have.

If you’ve got a healthy cash cushion already and your income seems stable, there’s nothing wrong with continuing your debt payoff as planned. Just know it’s OK to cut back and increase your cash cushion should anything change. 

5. Things Change? Change Your Mind

The beauty of this approach is that by prioritizing cash, you’re not making a permanent decision. If you decide to hold off on paying debt to build a bigger cushion in uncertain times, you can always change your mind later and put that money towards debt when things get more stable. But you can’t change your mind if you put all that money on debt now. That is a more permanent decision.

Got Questions?

If you want to learn about debt, check out our free Debt video course with short, bite-sized lessons so you can get debt (and stay out!).


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