Make the Right Call with Your
Economic Stimulus Payments
by: Jonathan Kolanowski for the Debt Consolidation Loan Directory - 5/01/08
Do you know the best way to avoid the need for debt consolidation? The best solution to avoid debt is to not incur it in the first place. Most US households have been presented with just such an opportunity, which began on Monday. In fact, many of you may have already received a tax rebate direct deposit from the IRS. Designed to bolster the US economy, these rebates are being distributed ahead of the original schedule and will arrive in the hands of millions of Americans by the end of this week. When completed, more than 130 million households will have received payments.
[Hundreds, perhaps thousands of articles have already been dedicated to the question if you will receive money and how to make sure that you get your share. We are not going to add to the chatter, however, if you would like details, go to the source. The IRS has all of the information you will need, including possible scenarios and frequently asked questions at this web address: http://www.irs.gov/irs/article/0,,id=177937,00.html]
Rather than go into the details of who will receive money and for how much, let focus on personal responsibility and what you should and should not be doing with the money you receive. Do not let others decide for you, such as falling prey to tax rebate sales and other gimmicks to get you to part with this money. Be smart! Only you know what is best for your own personal finances.
The thinking behind the stimulus checks is that money in consumers hands will strengthen the economy. Before you rush out to purchase that new flat-screen TV or book a lavish summer getaway vacation, keep in mind that stimulating the US economy does not have to mean that you spend the money on unnecessary items. If you have necessary purchases to make, by all means make them. It is better to pay cash now, rather than rely on credit cards and loans later. You won't need to consolidate debt if you don't have it.
This is where personal responsibility steps in. As with all buying decisions you must make an honest determination between "wants" and "needs." Most importantly, be honest with yourself. You know the difference between the two. What if you don't have any purchases you need to make? Well, you have several responsible choices you can make:
Bad credit? Behind on your bills?
Did you know that if you are behind on your mortgage or other debts you can actually help stimulate the economy? Applying your tax rebate to catch up on your payments will ensure that you are doing your part. A large catalyst of America's sluggish economy stems from mortgage defaults, prompting the financial markets to experience a severe credit crunch with the near collapse of such financial giants such as Bear Stearns. However, the mortgage crisis is only the beginning of the problem. From there, this problem has spread out to other forms of credit, such as credit cards and vehicle loans. Essentially, lenders belts are tightening, and borrowing money, especially if you have had credit problems, is not as easy as it has been in the past. So, do yourself and the US economy a favor. By making your payments on time you do your part to stimulate the American economy by helping our lending institutions recover. More importantly for you personally, you help yourself by making on time payments and improving your credit rating. With a better credit history you will be able to obtain a loan or credit card when you truly do need it, along with a better interest rate.
Pay down your high interest rate credit cards.
Do you have credit card debt? Considering that the average American household carries a sizable amount of credit debt and that most balances have interest rates in the double digits, this is a no-brainer. Taking into account that you are visiting this web site, you are most likely concerned about how much debt you are carrying. Suggestion? Pay it down. Even if your payments are all on time, donâ€™t be content with paying high interest rates. Pay more than the minimum payments and make sure that your loan or credit card lender applies the extra amount to your outstanding balance, not future payments. You can do this by calling into customer service, or by submitting your request with your check if you pay by mail.
What do you do if you experience a personal "credit crunch"?
This is mentioned throughout the Debt Consolidation Loan Directory, but it deserves to be brought up again. Do you have a safety net of money that you can access when you get hit with an emergency that requires cash? If your car breaks down will you have the money to pay for the repairs, or will you rely on the convenience of an easy credit offer / 90 days same as cash deal? Or worse yet, will you have to take money out of your budget causing you to miss payment due dates resulting in extra fees and charges?
If you don't have money saved up, take your stimulus money to your local bank or credit union and open an account strictly for this purpose. Many advocates suggest saving up to six months of payments in an emergency fund. Although for most, this is simply not possible. Don't be discouraged! Do the best that you can because some money is better than none, and never dip into your available funds unless you really need to.
When you get your economic stimulus money, be sure to use it to buy something with real value... peace of mind!