Starting in May of 2008, most of you will be receiving a check from the IRS ranging from a few hundred to a few thousand depending upon your filing status and the number of dependants you claim. The checks will be issued based on the last two digits of your social security number and whether or not you received a refund or paid electronically.

 

This is an attempt by the government to stimulate the economy by providing people with “free” money to spend on anything and everything from groceries to big screen televisions. WalMart and Target both have been waiting with baited breath for these checks to start hitting mailboxes because they are expecting the recipients to spend this money in their stores. There are three things that will happen to this money:

 


Put in a Savings Account or Use it to Pay Down Existing Debt:

 

Both the government and the retailers don’t want this to happen, but believe it or not, there still is a fiscally conservative portion of the population that will use these funds to either pay down existing debt or put it in a rainy day fund.

 

As my Mom always says, “Just because you have it, doesn’t mean you have to spend it”. She is a great saver and never has a problem with money because of it. This option is probably the right one for most of you but how many of you will take this route?

 

SPEND IT!

A portion of our population already has this money spent; they are just waiting to cash the check. If you are in financially stable position where you have no credit card debt, the equivalent of three month’s or your salary in savings, and no big expenses like college, or a new car, approaching quickly, go ahead and spend.

 

The real question becomes how many of us are in that situation? I know I am not, and I know most of my friends are not either. If you found something you want to buy, wait 48 hours to think on it, and then decide. Impulse buys are usually the ones we regret the most.

 

Used to get further in debt…

 

I know it will happen to some people. The $600 check comes in the mail, and it is used to buy a $1,500 television with the balance being put on a credit card! UGGHH!!

 

The majority of us have already overspent; contributing to our current financial dilemma, there is no reason to continue overspending. This is by far the worst outcome for these rebate checks and for your financial stability. Rarely is adding more debt going to help anyone. 

 

Instead, put the money in a savings account, and continue to add funds weekly, or bi-weekly. When you have the amount needed for the purchase, plus a cushion, and then purchase the item.

 

Rob Taylor   

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance.