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What to do with the extra cash

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Why Americans can't stop living paycheck to paycheck

If you are a W-2 employee and get paid biweekly, there are two months out of the year when you will receive three paychecks instead of the usual two.

August may be one of those months.

This is a great opportunity to give your financial standing a boost, experts say.

“Receiving three paychecks in August can seem like a welcome surprise, but it also affords us a great way to plan ahead — and potentially get ahead,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, and a member of the CNBC Financial Advisor Council.

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The months in which you get three checks depend on your pay schedule.

If you received your first paycheck this year on Jan. 5, your three-paycheck months will be March and August.

If you received your first paycheck on Jan. 12, 2024, your three-paycheck months will be May and November.

How to make the most of a three-paycheck month

“It may feel like ‘extra’ income but it’s not, it’s just spread out this way, so treat it as carefully as a typical paycheck and don’t blow it on something you’ll regret later on,” Sun said.

Consider this a chance to financially “level up.”

To that end, start by putting the money to good use by paying down high-interest debt, such as a revolving credit card balance.

“Mathematically, paying off short-term debt is always going to have the most impact,” said Derik Farrar, head of consumer deposits at US Bank.

Typically, credit cards are one of the most expensive ways to borrow money. The average credit card charges an interest rate of more than 20%, according to Bankrate.

“If you’re fortunate enough to be debt-free, then add to your emergency fund,” Sun advised.

Most financial experts recommend having at least three to six months’ worth of expenses set aside, or more if you are the sole breadwinner in your family or in business for yourself. Many households have far less saved these days.

“As we get further away from the pandemic and those cash cushions, it’s probably a good idea to look at how to start to rebuild that again,” Farrar said.

After that, an extra paycheck should go toward future plans, according to Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York.

“Assuming they’re all topped off on cash, this money can be invested for long-term goals,” said Boneparth, who is also a member of CNBC’s FA Council.

Sun recommends putting some funds in a 529 college savings plan or a Roth individual retirement account, which has the added advantage of allowing account holders to withdraw their contributions at any time without taxes or penalties.

Contributions to a traditional workplace 401(k) plan generally cannot be withdrawn without penalty but could come with the added benefit of an employer match, which is essentially free money toward your retirement savings goals.

However, “it doesn’t have to be all serious with no fun,” Sun said, whether that means spending a portion of this paycheck on getting together with friends or family or even just a night out.

“Don’t waste the opportunity and go celebrate carefully too,’ Sun said.

Correction: If you received your first paycheck on Jan. 12, 2024, your three-paycheck months will be May and November. An earlier version misstated a month.

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Trump plan to freeze funding stymies Biden-era energy rebates for consumers

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Some states have stopped disbursing funds to consumers via Biden-era rebate programs tied to home energy efficiency, due to a Trump administration freeze on federal funding enacted in January.

The Inflation Reduction Act, passed in 2022, had earmarked $8.8 billion of federal funds for consumers through two home energy rebate programs, to be administered by states, territories and the District of Columbia.

Arizona, Colorado, Georgia and Rhode Island — which are in various phases of rollout — have paused or delayed their fledgling programs, citing Trump administration policy.

The White House on Jan. 27 put a freeze on the disbursement of federal funds that conflict with President Trump’s agenda — including initiatives related to green energy and climate change — as a reason for halting the disbursement of rebate funds to consumers.

That fate of that freeze is still up in the air. A federal judge issued an order Tuesday that continued to block the policy, for example. However, it appears agencies had been withholding funding in some cases in defiance of earlier court rulings, according to ProPublica reporting.

In any event, the freeze — or the threat of it — appears to be impacting state rebate programs.

“Coloradans who would receive the Home Energy Rebate savings are still locked out by the Trump administration in the dead of winter,” Ari Rosenblum, a spokesperson for the Colorado Energy Office, said in an e-mailed statement.

The U.S. Department of Energy and the White House didn’t return a request for comment from CNBC on the funding freeze.

In some states, rebates are ‘currently unavailable’

Consumers are eligible for up to $8,000 of Home Efficiency Rebates and up to $14,000 of Home Electrification and Appliance Rebates, per federal law.

The rebates defray the cost of retrofitting homes and upgrading appliances to be more energy efficient. Such tweaks aim to cut consumers’ utility bills while also reducing planet-warming carbon emissions.

California, the District of Columbia, Maine, Michigan, New Mexico, New York, North Carolina and Wisconsin had also launched phases of their rebate programs in recent months, according to data on an archived federal website.

All states and territories (except for South Dakota) had applied for the federal rebate funding and the U.S. Department of Energy had approved funding for each of them.

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The Arizona Governor’s Office of Resiliency said its Home Energy Rebates programs would be paused until federal funds are freed up.

“Due to the current federal Executive Orders, memorandums from the White House Office of Management and Budget, and communications from the U.S. Department of Energy, funding for all Efficiency Arizona programs is currently unavailable,” it said in an announcement Friday.

Rhode Island paused new applications as of Jan. 27 due to “current uncertainty” with Inflation Reduction Act funding and executive orders, according to its Office of Energy Resources.

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The Georgia Environmental Finance Authority launched a pilot program for the rebates in fall 2024. That program is ongoing, a spokesperson confirmed Monday.

However, the timeline for a full program launch initially planned for 2025 “is delayed until we receive more information from the U.S. Department of Energy,” the Georgia spokesperson explained in an e-mail.

However, not all states have pressed the pause button: It appears Maine is still moving forward, for example.

“The program remains open to those who are eligible,” Afton Vigue, a spokesperson for the Maine Governor’s Energy Office, said in an e-mail.

The status of rebates in the eight other states and districts to have launched their programs is unclear. Their respective energy departments or governor’s offices didn’t return requests for comment.

‘Signs of an interest’

While the Trump administration on Jan. 29 rescinded its memo ordering a freeze on federal grants and loans — two days after its initial release — the White House said the freeze nonetheless remained in full force.

Democratic attorneys general in 22 states and the District of Columbia filed a lawsuit against the Trump administration, claiming the freeze is unlawful. The White House has claimed it is necessary to ensure spending aligns with Trump’s presidential agenda.

David Terry, president of the National Association of State Energy Officials, said he is optimistic the rebate funding will be released to states soon.

“For these two particular programs, I do not think [the freeze] will stymie the programs,” Terry said. “I see signs of an interest in moving them forward and working with the states to implement them.”

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Social Security Fairness Act benefit increases to arrive this spring

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Lump sum payments to begin arriving in February

In a new update released on Tuesday, the SSA said it will begin issuing retroactive payments in February. Most people will receive the one-time payment by the end of March, according to the agency.

The SSA plans to process the increase to monthly benefits starting in April.

The new timeline “supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” Social Security acting commissioner Lee Dudek said in a statement.

“The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation,” Dudek said. “The American people deserve to get their due benefits as quickly as possible.”

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Among those affected include some teachers, firefighters and police officers in certain states; federal employees who are covered by the Civil Service Retirement System and people who worked under foreign social security systems, according to the Social Security Administration.

What affected beneficiaries should know

Retroactive payments, which most people should receive by the end of March, will be deposited directly into bank accounts on file with the Social Security Administration.

All affected beneficiaries should receive a notice by mail from the Social Security Administration with details about their retroactive payment and new benefit amount. Those notices should come two to three weeks after the retroactive payments, according to the agency.

If your direct deposit information or current mailing address are up to date with the agency, no action is needed, according to the agency. If you want to double check the information the agency has on file, you may sign into your personal online account or call the agency.

If you want to ask about the status of your retroactive payment, the Social Security Administration urges you to hold off until April.

Beneficiaries should also wait until after they have received their April monthly check before contacting the agency to ask about their new benefit amount.

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The average IRS tax refund is 32.4% lower this season. Here’s why

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The average tax refund is 10.4% lower than last year according to the latest Internal Revenue Service data, and inflation is taking more of those dollars.

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The average tax refund this year is down 32.4% compared to last year, according to early filing data from the IRS. 

Tax season opened on Jan. 27, and the average refund amount was $2,169 as of Feb. 14, down from $3,207 about one year prior, the IRS reported on Friday. That figure reflects current-year refunds only.

However, the Feb. 14 filing data doesn’t include refunds receiving the earned income tax credit or additional child tax credit, which aren’t issued before mid-February, the IRS noted. The previous year’s filing data included tax returns claiming these credits. The value of these tax breaks can be substantial, even resulting in five-figure refunds, in some cases.

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Typically, you can expect a refund when you overpay taxes throughout the year via paycheck withholdings or quarterly estimated payments. By comparison, there’s generally a tax bill when you haven’t paid enough.

Filing season numbers will ‘even out’

‘Don’t call the IRS’ for refund updates

The latest filing statistics come amid mass layoffs for the agency as Elon Musk’s so-called Department of Government Efficiency, or DOGE, continues to cull the federal workforce

It’s unclear exactly how the staffing reduction could impact future taxpayer service. But experts recommend double-checking returns for accuracy to avoid extra touch points with the agency.

“Don’t call the IRS looking for your refund,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals. 

You can check the status of your refund via the agency’s “Where’s My Refund?” tool or the IRS2Go app, which is “available 24 hours a day,” O’Saben said.

Typically, the agency issues refunds within 21 days of a return’s receipt. But some returns require “additional review,” which can extend the timeline, according to the IRS.

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