How to Spend Your Economic Stimulus Rescue Check
By CHM on Feb 16, 2008 in Featured, Financial Planning, Retirement, and Now!
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George W Bush recently signed off on the 168 billion dollar economic stimulus rescue package.
What does this mean for the average person?
It means that 128 million American households will begin receiving economic stimulus checks from the federal government starting in May. I’m not going to go into all the details but here’s the gist of it: If you’re single and make less than $75,000 you will be receiving a check for $600. And if you’re married (making less than $150,000) you will be getting $1200, plus an additional $300 for each child you have.
Americans are incredible consumers
The purpose of this whole economic stimulus package is to give people some cold hard cash to pump back into our drooping economy, giving it a nice shot in the arm. The government thinks, since it’s likely we’re headed for a recession, this would be a good way to get things going back in the right direction.
I’d say they are also acutely aware that once American consumers get their hands on these mighty (or not so might these days) greenbacks they will feed the addiction ‘to spend, spend, spend and spend some more.’
Why not just spend it?
You might think, especially after reading that last sentence, that spending this check is the last thing I’d recommend. Well, this might shock some people and I may take some criticism for this stance, but I think that’s exactly what you should think about doing with this ‘found money.’
Now I’ve been reading a lot of blogs and many of them recommend applying your checks to reducing debt, building up emergency funds, investing in IRA’s, etc. Take a look at this poll Patrick ran over on Cash Money Life. Last time I checked, a little over 6% of those polled were going to ‘spend it!‘ or ‘have spent it.‘
Keep in mind, the decision to reduce debt or invest in an IRA may be right for some, but that doesn’t make it right for you. I’m going to tell you why I think ‘spending‘ the rescue check should definitely be a very real option for you and then I’m going to list three things I’d spend it on.
Mild Disclaimer
First, I’m not against applying it to the list of things I mentioned above. This is a very personal decision for each person or family involved, and if you want to reduce your debt and view this as a form of snowflaking, then by all means go right ahead.
And to be clear, I advocate 100% doing all of these things in your everyday life, heck, my blog is all about planning for your future. But a one time check is not going to solve your problems and create the kind of habits that are needed to achieve.
Commitment to change
You will achieve your goals (reducing debt, planning for the future) by adopting the right mindset and incorporating healthy routines into your life each and every day. You need to commit yourself to planning a bright future by walking the walk and talking the talk.
So again, I think this check is just that - a check, a wonderful gift from Uncle Sam.
Now, before you come and rip me for writing these blasphemous words, know this - I’m not necessarily saying - go out and buy a cool flat screen TV or a brand new Stereo system. I think you can make this check more meaningful (and memorable) in a whole different way.
Here are three things I might do if I was getting a rescue check:
Call up my closest friends (or even friends I hadn’t seen in a while) to re-connect and invite them out for a wonderful evening on the town. (Since I live in NY) Maybe excellent Broadway tickets to see Wicked, followed by a sensational dinner at a top New York restaurant, with breathtaking views of the city. (something we’ve all dreamed of doing with those we care about but never had the chance)
I will tell you there would be such great energy and goodwill amongst everyone, it would probably make for an unforgettable evening that you may remember for the rest of your lives. And 25 years from now it won’t be hard to recall what you did with your 2008 economic stimulus check!
Spend the money to try and overcome a fear you have. For me, I have many, one of which is heights. I’d think about traveling to some exotic location (within the confines of your check amount) and bungee jumping. If you have a significant other (or children) then share the experience with them and think about planning a vacation around the event.
Go Green baby! Use the check to start transitioning over to an environmentally friendly existence. I tried to find posts on ‘using your stimulus check to Go Green‘ but had little luck. (If you know of any please let me know in the comments below.)
You can start with this article and even head over to David’s other site The Good Human to learn more. In fact, you might want to start your Green spending spree with this new Patagonia Fleece made from recycled plastic bottles.
(btw, for the purposes of fairness, if you think this check is the opportunity to start the transition into changing your debt habits or planning your financial future, then I’m 100% behind you using it as a launching pad for getting started on that road.)
In conclusion
I guess what I’m trying to say, in the long run, this check will mean very little unless it’s part of a bigger commitment to prioritizing certain things in your life (such as the elimination of debt, actively contributing, investing and planning for the future).
In the end, you will do what you want with this money, but I wouldn’t blindly apply it to reducing debt just for the sake of doing so. Maybe when you get your check you can stop and reflect on where you are in your life, what you’d like to improve upon, and then make a decision.
But I wouldn’t feel obligated or have a sense of guilt about spending this check for a worthwhile personal cause. Be honest with yourself and if this money is not going to be the catalyst for meaningful change in one way or another, well then spend it and think about implementing one of my suggestions; create a wonderful memory and bring about a ‘different kind of meaningful.’
Feel free to let me know what you plan on doing with your rescue check?
Tags: economic stimulus check, economic stimulus package
Ron@TheWisdomJournal | Feb 16, 2008 | Reply
Mine is going to debt reduction.
For me, that would be the wisest use right now, though I’m fully on board with the idea that this isn’t a “one size fits all” decision.
Our 3 children’s private school tuition is having a double digit increase next year and I need some breathing room!
Sending kids to private school is like buying a new car every year, but never getting to drive it. Though I do have very well funded 529’s for each of them, I look at private schooling as pre-paying for college in the hopes of academic scholarships.
CHM | Feb 16, 2008 | Reply
Hey Ron,
That makes sense. Every little bit towards paying off those kind of educational expenses helps.
I’m not so sure I got the points across that I was trying to here.
Because it’s not a lot of money, I don’t think there’s anything wrong with using it for something other than what I’ve been reading on some blogs.
More importantly, people up to their eyeballs in debt or doing nothing to prepare for the future needn’t fool themselves by paying down a credit card with this check, they really need to focus on addressing the root of the problem.
I hope deciding where to apply this check, in fact, acts as a catalyst for these people to see the real issues that they need to deal with. Something along those lines…
David | Feb 16, 2008 | Reply
Thanks for the mention! But we will have to pay this back one way or the other next year, so we are just putting it in the bank until then!
Patrick | Feb 16, 2008 | Reply
It’s true that most people who answered my poll elected to either reduce debt, or save it… But I would hardly call my poll scientific! Most of my readers are either trying to reduce debt or save money, so I guess I know pretty much what most people would answer!
Thanks for the mention!
FFB | Feb 16, 2008 | Reply
I’m not saying this is what I’ll do with the money (probably savings)but how about using it to start an online company?
CHM | Feb 16, 2008 | Reply
Hey Patrick… thanks for dropping by and SU review.
Yeah I think your visitors are far more educated on money habits and a more proactive segment of the population… so not a fair sample, but representative of the people that come to many of our blogs… in the end, the target demographic of my post. Hope that makes a little bit o sense:)
CHM | Feb 16, 2008 | Reply
One of the points I was trying to make is people that already have good habits when it comes to money (or have good habits now, after learning from past mistakes) can apply the rescue money to whatever they want (like savings), because its part of a bigger ongoing process. And FFB if you’ve got it together, then by all means apply it to starting an online company or whatever you want;)
clambelly | Feb 17, 2008 | Reply
this is just a heads-up to those with elderly parents, relatives, or friends:
To receive a payment, individuals must file a tax return for 2007. There are approximately 20 million Social Security beneficiaries who would not normally file a tax return for 2007, but will need to file a tax return for 2007 to receive a “stimulus” payment.
The 20 million number is a projection from the Social Security Administration. The govt expects many of those people will not file and thus not receive any “stimulus” payment.
So even though I am very much against this bogus “stimulus” package, those who qualify should receive their due. I doubt the govt will be sending reminders to your grandparents or posting signs in nursing homes. So make sure the elderly people in your life don’t forget to file a 2007 return (even if they owe nothing)!
Disclaimer - I am not a tax professional and you should obviously check with a professional b/f making any tax-related decisions.
clambelly | Feb 17, 2008 | Reply
I also have a suggestion on how to use your government handout or temporary loan (since we will all be paying this back). If you are not going to pay down existing debt (which I think will account for more than 50% of all payments -and of that, a good portion will really be paying capitalized interest resulting from usurious credit card interest rates) then you should really consider spreading some wealth to those in the world less fortunate.
Personally, I am a big fan of KIVA (www.kiva.org). This non-profit allows you to make business micro loans to individuals in third world countries. The work they are doing is really amazing. You can make loans as small as $25 US that will completely change someones life in Nicaragua, Tonga, Bolivia - etc. I am a proud lender and encourage everyone to at least look at what they are doing.
I have to note the irony of investing your stimulus payment in microloans. You would be converting a political stimulus sham plan into a proven method of stimulating and generating sustainable local economies.
Getting involved helps me keep perspective on my life, and my perceived “difficulties,” here in the USA, where most of us want for no necessities, just better pleasures and comforts. Just like your retirement portfolio, your heart can never be big enough, and you should not forget to plan for its growth as well! Sorry for being preachy - I guess this is my Sunday morning sermon. You now what, on second thought, just blow your stimulus payment and have some fun.
Danyak | Feb 17, 2008 | Reply
While paying down credit card debt is EXACTLY what everyone should do, I believe most will spend it. Polls are nice, but often people like to believe they’ll do the right thing, but won’t. Its called denial. With interest rates upwards of 20%, that check would do wonders in saving people hundreds, if not thousands of dollars in interest they’d be paying, but for that check.
If paying down debt is not a concern, then, and only then, would I advocate doing something like CHM’s 3 pts. Wicked…LOL!
Like clambelly, I believe this “stimilus” package is a joke. Just more overspending by a not-so-conservative administration.
CHM | Feb 18, 2008 | Reply
Clambelly, wow, really good point about the need for SS recipients to file a tax return in order to get their checks. Since the US Govt. is unlikely to remind those people to file you should set up a site that does just that. Maybe incent site visitors to do so, working out a deal where 10% (or more) of the proceeds for those you help goes to KIVA.org… sounds like a good idea to me.
Thanks for your comments, good stuff.
danyak - I think paying down debt is fine but the check will be meaningless in the bigger scheme of things if you are still ‘in denial’ and racking up debt like many American do.
#1- I say use the check for reducing debt if it’s the first step or catalyst for changing bad habits. In the least, the indecision on how to spend it should create a moment of reflection for those spiraling downward in debt, sending a signal to these people to think about turning things around.
#2 - Some of the options I gave are just alternatives that I think people should think about. In your case, maybe Wicked is not your style (I didn’t think it was mine either), but it was a great show. Maybe something like Knicks tickets is more your speed…
Danyak | Feb 20, 2008 | Reply
Correct me if I’m wrong, but I thought I read somewhere that this check that most expect to get is actually just a loan, one that has to get paid back in next year’s tax returns. In other words, whatever you get this year from the stimulus package will be deducted from what you would normally get next year. If true, its just another way of feeding America’s debt addiction. Horrible.
kentuckyliz | Feb 26, 2008 | Reply
No, it’s a prepaid 2008 tax credit. We don’t have to pay it back. It’s our own money anyway (unless you’re low income enough not to pay taxes or receive EITC…in which case you’re getting someone else’s tax money who is a high earner who was frozen out of the prebates…thank a high income person today!). LOL
Right now, my $600 is going into the steaming hot pile of cash. Yep, savings! The same economic nervousness seizing the federal gummint is also seizing state governments. There’s talk of budget crisis and cutbacks in my state…and I work for a state supported organization. So I am nervous about my personal economy! I’ve btdt on the layoffs bit, and had a 14 month stretch of unemployment and underemployment before getting the next professional job. It was more than what severance and unemployment and cashflow low wages could support. So I know I need a big stinkin’ pile of savings in case the worst happens. $600 is rent and utilities for a month.
So many people are nervous about the economy, and consumer confidence and spending are down, so I bet most people save or pay down debt with it (and don’t stimulate the economy with spending). Polls show that a low % of people actually plan to spend it.
Of course your clients are way beyond being worried about debt or having enough savings outside of retirement, which leads to your perception that people SHOULD spend the check. Well, no. Just no. It’s my money, not a gift from the government, and I will use it in the way that’s best for me, not how the government wants me to.
CHM | Feb 26, 2008 | Reply
Hey Liz… thanks for your remarks. I think you’r e doing the right thing with your refund, but you’re already of the right mindset. In the article I say if you’re already committed to doing things the right way then by all means.
The ’spending tips’ suggestions are for those that can a) afford to do it b)are fooling themselves about their bigger problems, using it as a band aid to hide bigger issues.
Danyak | Feb 26, 2008 | Reply
Liz,
Please correct me if I’m wrong, but a “pre-paid 2008 tax credit” is exactly what i thought it is, namely, the gov’t will now give you money that you may expect to otherwise receive in the future, and just take it out of next year’s return. In otherwords, people who aren’t responsible will take that $600, spend it on something they wouldn’t have but for the $, and then have their 2008 expected tax refund decreased by that amount. IT PERPETUATES THE SAME BAD BEHAVIOR THAT GETS PEOPLE IN DEBT.
clambelly | Feb 28, 2008 | Reply
I was wrong. IRS will be doing some outreach to remind people to file returns in order to receive their share of “stimulus” pork. See attached AP report:
WASHINGTON (AP) — Don’t be alarmed. More than 130 million households will get letters from the Internal Revenue Service beginning next week and it’s good news, not bad.
The letters are part of an extensive outreach effort to make sure people don’t miss out if they are eligible to receive a tax rebate check under the recently passed $168 billion economic stimulus plan.
The IRS letters will remind people to file a 2007 tax return so they will receive the stimulus payment.
Treasury Secretary Henry Paulson said Treasury and the IRS would work hard to get the word out. “For the majority of Americans, all they will need to do is file a tax return,” Paulson said in a statement.
He said that the IRS would also be working with the Department of Veterans Affairs, the Social Security Administration and private groups such as AARP to “reach those who do not normally file a return and ensure they know how to get their stimulus payment this year.”
The IRS mailing will be titled “Economic Stimulus Payment Notice” and it will alert people that they may be eligible for a one-time stimulus payment of up to $600 for individuals or $1,200 for a married couple filing jointly.
The stimulus package that Congress passed earlier this month in an effort to give the weak economy a jump-start also includes a $300 per child payment for qualifying children younger than 17.
The IRS notices are informational and do not seek any financial information. The mailings will go to taxpayers who filed a tax return last year.
The notice states that to receive a stimulus payment this year, individuals do not have to do anything more than file a 2007 tax return.
“The IRS will figure eligibility, figure the amount and send the payment,” the IRS letter states. “This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government.”
The IRS letter says that 2007 refunds will be made separately from the one-time stimulus payments.
latanya | Mar 31, 2008 | Reply
There is alot of talk about this bill but some still have questions.Such as if I owe the goverment for things such as child support,student loans or owe for taxes will those people still get the money? There is no mention of this as far as I can tell.Can you shed any light on this?
karen | Apr 1, 2008 | Reply
Yeah, I concur with latanya, what if I owe the goverment for these kinds of things. Will I still receive my money? And if not then why even offer the money in the first place? I mean sure I could use the money to pay off debts, or I could just blow it on stuff that I really don’t need or save it. I won’t hold my breath for money that I “might get”.
CHM | Apr 1, 2008 | Reply
@latanya and Karen,
my understanding is you will be receiving two separate notices from the IRS. The first is a general notice that most Americans will receive. The second notice will be a notice more specific to your unique situation.
If you owe money to the IRS - from previous years - this will be addressed in the more personalized notice from the IRS. I think your rebate check will be reduced by any monies owed.
Robin Jernigan | Apr 11, 2008 | Reply
If I owe student loans and have a payment plan with them, will I still receive my stimulas money? Or will all of it be applied to my loan? The people with my loan said I should still get it, but the irs tells me a different story. Please help!
Thank you!
CHM | Apr 13, 2008 | Reply
@Robin - It seems to me the IRS would have the final word. If the IRS told you the check would be used to reduce your student loan then that’s how it will play out.
I went to the IRS website myself and saw the section that you are alluding to. They will be sending you a notice letting you know how your stimulus check was applied, if in fact it goes towards your student loans, which it seems it will.
Tom Huchko | Apr 28, 2008 | Reply
Everyone should spend at lease a small portion in his town or neighborhood. - Our 20 year old washing machine will be replaced without going to a big box. There is a great hometown dealer who has a completive price and great service. This will keep some of the money in the community to help us all out. I bet you can find one in your town, too.
Kaci | Apr 29, 2008 | Reply
I don’t think the “stimulus package” will live up to it’s name, nor will it work the way the Fed intends it. In a way, I hope it doesn’t work. Because, if it works, it says some things about my fellow contrymen that I am not ready to believe just yet. If it works, it means that most US Citizens are beyond stupid, and worse - are disgustingly materialistic and shallow. (Let me get this straight - everyone is in debt, yet they are going to spend instead of pay down their debt?)
I hope that the stimulus package doesn’t work, and that we, as a nation, face the fate that we have spent decades building for ourselves, and that we settle up with that fate.
Now that I got that off of my chest . . . I am going to spend the entire $600 through KIVA (www.kiva.org), giving microloan(s). I’d rather help people in a developing nation try to succeed, than continue to fuel my own nation’s greed.
C.T. Weathers | May 23, 2008 | Reply
There is very confusing information going around how much each adult will recieve. On this website it states that adults will recieve $600.00. I realize each persoon’s situation is different. But I also know some people who have already gotten their checks and did not have any outstanding reason like child support or outstanding student loans or any reason that they should have not recieved the full amount of $600.00 Instead they only got $300.00 for one adult. As far as I am concerned I will be paying debts with mine.I would just like to know when I am going to recieve mine.I have not yet & have no idea when.
Felecia Hughes | May 28, 2008 | Reply
My husband and I received $400 less than we were suppose to on our stimilus check, we make far less than $150,000 a year and did not get our $1200, when, when will we recieve the balance of our money?
Thank you,
Felecia Hughes