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Four ways to use your economic stimulus check to simplify life

Any day now you may be receiving a nice-sized check from the government. Their objective is to get you to spend it to stimulate the economy. But before you run out and do your patriotic duty by purchasing that HD TV you’ve been eying, consider how the money could simplify your life if used wisely. Here are four ways you can use your economic stimulus check to simplify life by easing some financial stress.

Pay down debt. The money you put toward paying down the principle on debt is going to be worth more than the dollar figure of your refund. Let’s say your stimulus check is $1,000 and you put it toward your credit card debt which is at 15%. That’s $150 you’re not paying in interest so your $1,000 has become $1,150.

While you’re at it, ask for a lower rate. I have a friend who works for a major credit card company and he says if they won’t give you a lower rate, you can threaten to cancel your card. Be prepared to have some competitor’s rates and state that the Feds have dropped the prime rate so you want yours lowered. They’ll most likely comply. And be sure to make the lower rate apply to your existing balance, not just your future purchases.

Few things add more stress to life than having debt linger over your shoulder, day and night. Heck, it’s what got us into this mess to begin with. Do what you can to remove the burden of debt – your stimulus check could be a good way to start.

Save. Stick it in savings for an emergency fund or for a significant purchase you’ve been saving for. My wife and I are putting ours in our “someday we’ll have a house fund.” Often it seems that when we get some extra money and put it aside we end up needing it almost right away for a car repair, medical bill or the like. We’re always thankful we put it away in savings instead of spending it so those unplanned expenses are easier to handle.

Invest. Mutual funds, CDs, 401k, IRAs are all options. Factors to consider are liquidity, rate, risk and length of the investment. Check with your bank or financial advisor for more information. Another option is to take a portion of it and check out the do-it-yourself stock trading sites. It could be a good way to learn some stock market basics.

Donate it. If you’ve gotten by just fine without it this far, why not help someone else out who might not be getting along so well? Depending on who/what organization you’re giving it to, it may be tax deductible which means the government will give you money for giving away the money they gave you (which, realistically, you gave them in the first place).

Even if you already have a plan for your stimulus check, please consider how it could be used to simplify your life by reducing worries about debt, or even just putting it away so you can have peace of mind for a rainy day.

Any other ideas? I’d love to hear them in the comments!

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Thursday, May 15th, 2008 at 5:19 pm and is filed under Finances, Shopping. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.