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Columns: Boomer Bucks
Barbara Mlotek Whelehan   Expert: Barbara Mlotek Whelehan
Boomer Bucks
Rebate check dilemma: Help your household finances or help the broader economy
Boomer Bucks

Spend, invest or pay off bills?

Over the next several weeks, beginning April 28, about 130 million Americans will get some easy money, compliments of Uncle Sam. Well, it's actually courtesy of ourselves, the taxpayers.

But Congress and the president decided that giving Americans rebate checks is a great way to boost the economy.

The idea: Put some money back in the hands of Americans, who can be counted on to squander it. It's almost our patriotic duty to do so.

But we don't have to go along with this idea. We live in a free country, after all. So we can take advantage of this opportunity to bolster our personal finances.

This economic stimulus check serves as a reminder that every day we make financial choices that have a trickle-down effect on our lives.

Decisions involve trade-offs
For example, if you spend money you have today on a flat-screen TV, that money isn't available for future needs or desires. If you instead invest that money for tomorrow, it's not available for your present desire to watch "American Idol" on that beautiful plasma screen.

Lastly, if you spend money you don't have today by financing a TV purchase, you commit future earnings to this expenditure. Since interest is normally levied in this scenario, your purchase could end up costing a heck of a lot more than the original price of the TV, making this the least attractive of all options.

Rebate checks on the way
Decisions involve trade-offs
Mixed messages
Practical uses for the extra cash
Sage advice from the experts
A look at your options

Yet we routinely choose that option. According to a recent article in The Wall Street Journal, Americans are heaping on more debt, with average credit card balances up 9.5 percent in the first quarter of 2008 over the year before. Home equity lines of credit are up 8.1 percent. Credit card balances rose even more precipitously in California, Florida and Nevada -- the states most affected by the housing crunch.

Mixed messages
Bankrate regularly sounds the drumbeat about these consumer trade-offs in its Financial Literacy Guide, of which I am privileged to serve as editor. The "fin-lit" team attempts to make the tortuous journey of personal finance an easier one for consumers to navigate. And we learn a lot about consumer concerns, too. In February, our savings poll revealed that 80 percent of Americans would like to save more money, except that the cost of living gets in the way.

The problem is that our message -- and that of other worthwhile organizations -- is getting drowned out by louder, more insistent, marketing noise that urges consumers to spend, spend, spend.

So, are you planning to buy a big-screen TV in time for the HDTV conversion? Or have you traced the route to the Grand Canyon on a road map in anticipation of a cross-country trip? Or are you going to cave to that pretty gold bracelet?

Hey -- here's a chance to stash away some money. For households with incomes of less than $150,000, these rebate checks will range in value from $300 to $1,200, and couples with young children will get up to $1,800.

Practical uses for the extra cash
During a recent visit to my home, the pest control guy started griping about the dire state of the economy. I asked him what he planned to do with his rebate check, and he said he's going to use it to pay bills. "I know that's not what I'm supposed to do with it," he added quickly.

Actually, he's in good company. A recent survey by H&R Block found that nearly half of Americans -- 45 percent -- will pay bills with their rebate checks and their tax refunds from the 2007 tax year. Two out of 10 (21 percent) will buy necessary goods or services (food, car repairs, etc.) with their rebate checks, while just 18 percent will invest it. Only about 16 percent of Americans will splurge on such things as electronics, jewelry or a vacation.

That's great news -- Americans are taking the opportunity to pay down their bills. The so-called bad news is that this might not help our economy all that much, 70 percent of which depends on consumer spending.

Next: "If you don't have debt, call the Guinness World Records people."
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