How To Maximize Your Hazard Payment

(From the Financial Literacy Blog) – To show appreciation to those who continued to work throughout the height of the pandemic, the state of Maine will be sending out one-time disaster relief payments. These relief funds, also known as hazard payments, will be sent to anyone who lived in Maine full-time and earned wages in the 2020 tax year as long as the person is a single filer making less than $75,000/year or joint filers making less than $150,000/year. While you may not have been expecting extra funds from the state this November, it’s important to be strategic with the money in order to maximize its financial impact.

How Much Is the Payment?

The state is expecting payments to be around $275, but the final amount is still being determined. The funding comes from a bipartisan budget deal, with the cumulative amount totaling nearly $150 million. The final payment amount will be determined by taking the $150 million and dividing by the number of eligible Mainers. Due to the October 31 tax-filing extension deadline, the number is still being finalized. For now, people can prepare for the estimated amount of $275.

How Will You Receive the Payment?

The payments will be issued starting November 1, with about 100,000 physical checks being mailed out to eligible Mainers each week over a five to six week period. Your check could arrive in the mail during the first week of November, but you could also be waiting until the last week of December.

How Do You Maximize the Payment?

  • Fund everyday expenses: If you’re struggling to pay for your everyday expenses, you should use the hazard payment to pay for your regular necessities, such as rent or mortgage, food, or utilities. Using the hazard payment to fund these expenses could help you avoid charging more on credit cards or turning to other loans to make ends meet––which could potentially have high interest rates.
  • Build your emergency fund: If you can afford to pay for your necessities and everyday expenses, you should consider saving your hazard payment in your emergency fund. If you don’t already have one, now is the perfect time start one. If you don’t need the money right away, having it readily available if it’s needed later can provide some peace of mind. As a general rule of thumb, people should aim to save away three to six months’ worth of living expenses in the event of an emergency––such as a job loss, injury, or accident. If you can’t afford to save away that much, save whatever you can. Every little bit adds up and $275 can help kickstart an emergency fund.
  • Pay down high-interest deb: If you’re able to comfortably pay for regular expenses and you’ve got an established emergency fund, you should consider using the hazard payment to pay off high-interest debt. While it may be tempting to simply treat yourself and spend the $275 on a want instead of need, applying $275 toward high-interest debt now can save you more than $275 in the long-term. Take a look at any loans and credit card balances you may have and pay down on whatever has the highest interest rate.
  • Contribute to a 529 college savings plan: For parents, if you have an established emergency fund, have no issues paying for everyday expenses, and you don’t have any outstanding high-interest debts, consider contributing the hazard payment to a 529 college savings plan. This type of account will grow tax-free and withdrawals aren’t taxed if the money is used to pay for qualified expenses, such as college tuition or room and board. Additionally, Mainers who open a NextGen 529 account before December 31, 2021 will receive a $100 Initial Matching Grant! Instead of having $275 in the account, the newly-opened account would have $375.

If you have further questions on how to maximize your hazard payment, contact your local credit union for help.