Monday, May 5, 2008


Shameless plug – a business reporter from the “Concord Monitor” recently called. The question they asked was simple – how should one spend their “stimulus package” rebate check. Thirty minutes later, the answer was completed.

The point? First, despite what the Bush administration hopes, most consumers should not be spending their rebate checks on disposable consumer items (and thus, the so-called stimulus package won’t do too much stimulating. The other part of the stimulus package – mostly overlooked by the media – are some of the tax breaks it gives to industry, which could have a small stimulus effect. But that’s another story.)

So, second, what should you do with your stimulus package check (which, really, is simply a tax rebate.) As with virtually all money related matters, it depends on your specific situation. However, following are three possible options that likely are good ideas for a large portion of the population:

· Pay down high interest debt. If you’ve got credit card or other consumer debt with very high interest rates (10% or more), pay down the debt.

· Fund an Emergency Fund. If you don’t have, or have a very small emergency fund (see the “Emergency Fund” blog or the Emergency Fund section of the BestMoneyinfo website for an explanation of Emergency Funds), start one or add to your current Emergency Fund with your rebate check.

· Fund a Roth IRA. If you max out your 401K, 403B, or other tax-deductible retirement plan, and if you qualify, fund a Roth IRA either for 2008, or – if you’ve filed an extension, but haven’t filed your final 2007 tax return – you can still fund a Roth IRA for 2007.

Of course, as President Bush himself recently admitted (more than likely, reluctantly), consumers can use their rebate checks to offset the rising costs of necessary consumer goods, such as gas (and fuel in general) and food. Such use of rebate checks will not have the originally desired effect of stimulating the economy (but, indeed, the Bush Administration and Congress’s stated hope that this tax rebate would make a serious dent in and greatly stimulate the current lagging economy was always a pipe dream.) However, if, as suggested here that most consumers end up using their rebate check for (if they can afford to) one of the three options listed above, or (if they can’t afford any of those options) use the check simply to help make ends meet, than, unlike so many things that the current administration and Congress do that is bad, this piece of legislation can be counted as a good thing.