Make the Most of Your ‘09 Stimulus Funds


The banks have their multi-billion dollar bailouts, but what about the rest of us?

Ahead of his Jan. 20 inauguration, President-elect Barack Obama is demanding that Congress work “day and night” to come through on a stimulus plan for the middle class.

Politicians on both sides of the aisle are sweating out the details while the clock ticks on our floundering economy. Meanwhile, consumers who may benefit from a stimulus plan are worried about spending when they may not have a job next month. “Virtually everyone who has a job now is concerned about keeping it,” says Greg Daughtery, executive editor of Consumer Reports. “Even people whose jobs are relatively secure are cutting back on spending these days.”

STIMULUS '08: Money for Nothing

Everyone loves getting a check in the mail, especially when it’s found money. Americans got a taste of what it was like to receive “free money” when President George W. Bush signed the Economic Stimulus Act of 2008 into law. The legislation, designed to boost consumer spending, put as much as $1,200 each into 70 million American households last year.

Things went swimmingly for a time.

Data collected through ACNeilsen’s Homescan database shows that average household expenditures increased by 3.5% and households with annual incomes of less than $15,000 per year increased their spending by more than 6% per week after their stimulus checks arrived. However, the president’s multi-billion dollar jumpstart was not enough to keep retail sales up for long.

“Sure, there was a slight blip in the third quarter,” says Steven Keith Platt, director of the Platt Retail Institute. “But, generally, the stimulus was a billion flushed down the toilet.”

STIMULUS '09: The Perks Will Be in Your Paycheck

Some six months later, the unemployment rate has risen to 7.2% and more than eleven million Americans are out of work. Consumers are clamoring for a lifeline, but anyone looking for a check from the government this year is likely to be disappointed.

“The key difference between the Obama stimulus and the Bush stimulus is that you won’t see any checks issued,” says Sara Turner, a tax research specialist for the National Association of Tax Professionals. “They’re going to adjust the income tax withholding instead.”

So, instead of a check, taxpayers are likely to see the stimulus in the form of a $20 bump in their weekly paychecks, or about $80 a month.

How Should You Deal with this New Deal?

Though employers that hire new staff and companies that specialize in renewable energy alternatives and infrastructure will benefit from tax incentives, regular Americans will only have a couple of more bucks to stretch in the economic downturn.

The good news is that now, with a little bit more experience behind them, there are a few ways to make sure that consumers get the most out of that extra $20 per week.

Here are some suggestions:

Pay down your debt. Americans went out and made purchases with the money they received from the last stimulus. An extra $80 a month is not going to get you a new car, but it could shave a little off of your 2008 credit card balance.

Plan for the future. Every penny counts, especially when you’re saving for your retirement. An extra $20 per paycheck may not seem like much but, if you factor in compounded interest, that small sum will grow to as much as $2,087.81 if you sock it away consistently for two years.

Think of the children. Funding your kids’ education can be a challenge. On average, tuition at a four-year private college increased by 5.9 percent during the 2008-2009 school year and at public universities it went up by 6.4 percent. Consider putting your stimulus into a 529 plan. Contributions are tax deferred and educational dispersements are free from federal taxes.

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