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Wednesday, April 9, 2008

The tax rebate dilemma . . . .

According to an article at MSNBC, Americans may not be spending the upcoming tax rebate in the way politicians and economists would like us to. The idea behind the rebates is to strengthen our weakened economy by bringing more money to the market; Americans are expected to spend their 'windfall' on items such as TV's, clothing, vacation travel, and other goods.

However, it appears that at least some of us may be planning to use the money to pay down debt or increase savings. With the shaky state of the economy, families are wondering if it might be better to have that $1200 or $600 in the bank rather than frittering it away on a new, fancy BBQ or car stereo. In fact, much of the money might already be earmared for increased fuel costs, which according to the MSNBC article, won't do much to help the economy since most of that money goes to our overseas oil suppliers.

Despite the hints that the rebate money might not enter the economy for quite some time, some economists are counting on Americans' inability to live frugally. For example, David Wyss, a chief economist at Standard and Poor's, says this: "Americans have an amazing ability for self-deception, and I have full confidence that they’re going to end up spending the money regardless of what they say they’re going to do with it.”

I feel a bit insulted by this comment! Mr. Wyss is saying that no matter how smart we think we are, our instinctual drive to consume will trump our intelligence. For my part, the rebate check will be going directly to debt payment. This will (if all goes to plan) more than double my monthly payment to the credit card company, and will result in my credit card debt disappearing a full month sooner than expected! Now THAT is smart, and no amount of advertising or consumption lust will convince me to spend that money on items I don't need, which were probably produced overseas, anyway.

If you haven't decided how to spend that rebate check, here are some ideas to consider:

How about buying yourself some freedom? Freedom from debt, that is. Do you carry a credit card balance? Have you been ignoring it, paying the minimums month after month? Why not pay it down (or off)? Consider the satisfaction you'll feel as you watch your balance shrink, along with your minimum monthly payment.

Split the rebate. Are you a family of four? Are you receiving $1200? How about dividing that by the number of family members and allocating the money this way: $300 to debt repayment; $300 to retirement savings or emergency fund; $300 to the upcoming camping trip; and $300 toward that new TV or other purchase.

If you purchase, buy American! If you decide the use the rebate check to buy something fun (or necessary), make sure you're purchasing something that was made in America! I know, I know, this is almost impossible these days, especially in the case of electronics or appliances. However, the only way the rebate will serve its true purpose (to improve the American economy) is to buy items made by Americans. An alternative to buying a thing would be to travel domestically---this also benefits Americans.

So, I'd like to know: what are YOU going to do with your rebate check?

1 comment:

Becky@FamilyandFinances said...

I'm also insulted by that guy's comment. I hope Americans prove him wrong!

Our tax rebate will go to savings for home improvements. So, it will get spent eventually, but not on a depreciating asset :)

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