Fund your own ‘economic stimulus’

Laura T. Coffey • Profile • E-mail

Think fast: If someone walked up to you and handed you a check for $300, what would you do with that money? How about a check for $1,200?

You just may need to make decisions along these lines as early as this spring if a federal government economic stimulus package passes as expected. Aimed at boosting the sagging U.S. economy and staving off a possible recession, the plan would provide billions of dollars in tax relief for consumers. Tax-rebate checks would be sent out in amounts ranging from $300 to $1,200 per household.

President Bush and his aides know precisely what they want you to do with that money: Shop ‘til you drop. After all, consumer spending represents more than two-thirds of economic activity in the United States, so the fervent hope is that Americans will rush out and buy stuff.

It sounds like fun, of course, but is that really what you should do with this found money if you get it? Depending on your circumstances, you actually may want to seize this opportunity to concentrate on your own personal stimulus plan — one that could benefit you and your family for months if not years to come. Consider these tips.

1. Start that emergency fund, pronto. OK, at first blush this may not sound like as much fun as buying some new pairs of shoes or an Xbox 360, but this step will be far more therapeutic in the long run. Most of us know that we should have an emergency fund stashed away that could cover six months of living expenses — and most of us haven’t gotten around to doing that. The psychological benefits of having this cushion cannot be overstated, though. This way, if anything goes wrong in your life — a job loss, divorce or illness, for example – you can breathe easy knowing that your bills can be covered. You could use your tax-rebate check to jumpstart your emergency fund and then begin squirreling away a regular amount of money toward it each month. Just pretend that you have a new monthly bill in the amount of, say, $50 or $150 — whatever you can realistically handle — and sock it away consistently until your emergency fund reaches the level where it should be. For suggestions on where to save this money, read this past “10 Tips” column about online savings and money-market accounts that offer decent yields.

2. Wrestle your bills to the ground. For many Americans out there, the answer to what they would do with the extra money is simple: Tackle their bills. If you’re struggling under the weight of out-of-control bills, this is a fabulous idea — and one that ultimately would be far more beneficial to you than buying up consumer goods. Here’s another idea to consider in this same vein: You could simplify your bill-paying throughout the year. Msnbc.com reader Bonnee Brown of Parachute, Colo., wrote in recently to share this tip: “I spend my tax return on things that make my daily life easier. Last year I called the utility company and went on a budget billing plan. When I received my tax return I prepaid it for a year. … Now I have $150 a month that I can spend on other things or bills. I did the same thing with my cell phone bill, home phone/satellite and Internet bills. It has made the monthly balancing of the checkbook just a little easier. It is also nice to know that if by chance I lose my job … my kids will have heat, electricity and something to watch on TV while I use the Internet and phone to find another job!”

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