$250

Where Will You Spend $250?

One of the current proposals to bail out the US economy includes offering $250 to each taxpayer ($500 per family). The goal is to encourage purchasing consumer goods and ignite the faltering retail industry. Why say “no”? After all it is “free” money. Or is it?

That $100 billion stimulus package will be added to the already overburdened debt. Future generations can’t even begin to appreciate how this debt will lower their standard of living. That gift of $250 will be the average per person per week food bill in 15 years! Of course if the US were to stop funding the Iraqi civil war, the country could save $9 billion a month and then the stimulus debt could be paid back in less than 2 years.

But it is fruitless to focus on the big stuff; as the “poster boy” for all the presidential candidates Ronald Reagan once said: “Government is part of the problem.” The mantra of less government over the past 8 years has led to a trillion dollar debt. It’s better for you to focus on your $250.

Where will you spend your windfall of cash? The average US household has a credit card debt of nearly $10,000. Even $500 won’t make much of a dent in that bill. As the Fed lowers interest rates, your $250 won’t earn much more than a few cents a year in a savings account. Not exactly retirement planning, is it?

The average US household spends around $650 per year in cell phone charges. Well that would almost cover 6-month’s worth of text messages like, “C U L8tr.” Of course when you factor in other communication costs like high-speed Internet, cable TV, land-line phones and subscription services that allow your budding teen age whiz kid to engage in online gaming (to support the growth of unusually large thumb muscles), the average US household is spending close to $3500 per year for these services. And here is a “shocking” fact from the New York Times Magazine: at the end of 2005, Americans had “stashed away” over 500 million old cell phones in boxes and drawers, never to be used again. Remember that there are only 300 million US citizens!

Maybe you could use your $250 for an annual physical. Most insurance doesn’t cover preventive health checkups until you meet the deductible, so this may be a good idea. According to the Los Angeles Times, Americans now spend $7,026 on health care per person per year. So, put a little bit more into this $2 trillion a year industry and at least feel like you got something for your money.

With energy costs rising at a blistering pace, you could use your $250 to fill up your SUV two or three times this month. Or you could pay for one month’s winter heating. Maybe you could buy a pair of those new $250 Nike Air Jordan basketball shoes and start walking every day to work. Can’t you just feel financial relief coming ‘round the next corner?

Face it: unless you are in the most desperate of situations, $250 or even $500 is not much help. And if you are in desperate need, that $250/$500 should come every month for the next few years instead of a one-time gift.

If you really want to improve your situation then cut back on your spending. Recessions are the economy’s way of saying: “enough, take a breather.” Saving and investing during a recession is the right answer and not more spending. Every downturn is followed by better times – if you want to enjoy those upcoming years, then don’t put you or your family in more debt buying “stuff” that will eventually end up in your shoe box or in a landfill.

One final idea: invest in yourself. Insure your future success with continuing education and a commitment to life-long learning. That's good use of $250!

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