Stimulating YOUR Economy

So anyhow, if you qualified to receive one (and have filed your 2007 taxes in a timely fashion) you should have received your Economic Stimulus Check from the IRS. It's possible that some of you might not have received it yet, since they're being delivered through July, so if you don't have it yet you should have it soon. So - what should you do with the check? How can you impact YOUR economy in a positive fashion? Obviously, retailers would like for you to rush right out and spend the money on something - preferably just a down payment on something really big - and they are coming up with some very enticing offers to get you to do just that. Below are some alternative that you might consider, that will have a positive impact on your overall financial picture:

• Cash the check and use the money when and where you want. By doing so, you won't be locked into spending all the money in one place, and there are never any fees involved with using cash. This is suggested as an alternative to taking on some of the offers that retailers are promoting, with extra fees and time payment plans (that are never a good idea in the first place). Use the money to just augment your overall cash flow.
• Pay (or Pre-Pay) a bill. The lump sum provided by the stimulus check may be just what you need to pay your real estate taxes or car insurance. Or, you might start prepayment plans with you home heating contractor to lock in fixed fuel prices for the coming winter (if this is available to you). Another option might be to pre-pay a tuition bill or student loan.
• Start or add to your emergency fund. For those of you that have worked with me, you know that I advocate this as a way to ensure that you're not caught "off guard" when those inevitable surprises come up, like needing roof repairs or new tires on your car. By having an emergency fund available, you won't have to use costly personal credit (credit cards) or negatively impact your month-to-month cash flow in these emergencies. Put these funds in a savings account or money-market account, so that you'll earn some interest (even though it's paltry) on the balance.
• Pay off some or all of a high-interest rate debt. If you have outstanding credit card balances, you might want to give some thought to paying off some or all of those balances, starting with the balance that carries the highest rate of interest. $1200 applied toward a credit card balance with an annual percentage rate of 14.9% could same roughly $180 in interest charges in the course of one year!
• Invest in the future. Start (or add to) a Roth IRA, deductible IRA, Coverdell Education Savings Account, or a 529 College Savings plan. A single contribution of $600 to an education account can grow to over $1,700 (at a rate of 6%) in the eighteen years between now and your newborn's first day of college. Likewise, a similar contribution to an IRA, left alone for 30 years at a rate of 6%, would grow to nearly $3,500!
• Make a tax payment and adjust your withholding. Stay with me on this one - you could actually come out ahead if the circumstances fit for you. If you aren't taking full advantage of your employer-matching funds in your 401(k) plan, making a payment on your income tax obligation for the year and then adjusting your withholding to match will free up $100 a month in your take-home pay (using the $600 check as an example). If you then started or increased your contributions to your 401(k) plan and your employer matches fifty cents on the dollar, you'll actually come out ahead! You would have contributions in your 401(k) plan of $900, plus your take home pay would still be slightly more than before you started this plan, due to the pre-tax 401(k) contribution. Just remember to adjust your withholding back again in January, 2009, or make other adjustments to ensure that you don't come up short next year!
• Invest in yourself. Use the stimulus check for those books you wanted to buy about gardening, self-improvement, or investing education. Or, take a class at your local community college in a subject that stimulates YOU! You might also use the funds to buy a gadget or gizmo you'd been wanting that will make your life easier or more enjoyable.
• Invest in your community. Consider making a donation with your stimulus money. There are many deserving charities (I'm sure you can come up with a list of several without much difficulty) that would LOVE to have a donation of $600 or $1,200. And you can take a deduction on your tax return for the donation (assuming that you itemize your deductions).

The Bottom Line

The point of these suggestions are to give you some food for thought. Congress started this program to help stimulate the economy (whether it will have an impact is debatable, I think the economy will stimulate itself) so why not figure out how you can use these funds to stimulate YOUR economy? Too often when "found money" makes its way into our checking accounts, it just flows through and nothing meaningful happens with that specific sum. With these ideas, I challenge you to come up with a use for the funds that has a lasting, meaningful impact - on your life, on your financial condition, or on the life of someone else. As I've often said, putting this kind of thought into the use of these funds has little chance to be something you'll regret. "Gee, I wish I hadn't paid down that debt. Now I'm all debt free. I don't know what do do with myself." Yeah, that's not a likely conversation you'll have with yourself!