Released March 6, 2008

AMES, Iowa -- What should Iowans do with their government rebate money — the economic stimulus payments they’ll be receiving from the federal government after May 15?

“Spending the rebate funds may be the best choice for some families, especially if the purchase has lasting value,” said Pat Swanson, Iowa State University Extension family resource management state specialist. “But compulsive spending is never a good idea and is not a financially wise use of these funds. Families should plan before spending.”

Swanson offers the following advice for families.

Plan purchases. Swanson encourages people to think through spending options — even the ones that aren’t especially exciting or glamorous. She recommends involving the family to identify all possible purchases and deciding together which one is the most important. Extension has numerous resources available to help with planning personal finances (http://www.extension.iastate.edu/finances/personal), including a free online course called Take Control of Your Money, (http://www.extension.iastate.edu/finances/personal/money/webcourse.htm).

Pay off debts. Paying on over-due monthly bills or credit card bills with high interest rates are both wise uses of the rebate, according to Swanson. “If a person is paying $50 per month on a $2,000 credit card bill with an interest rate of 18 percent, he or she could save $800 in interest by applying $1,000 of the rebate to the bill and continuing with $50 per month payments.” To figure how paying off debts can save money, check out Extension’s PowerPay© (http://www.extension.iastate.edu/finances/personal/creditdebt/PowerPay.htm).

Start or add to an emergency fund. Having money saved for emergencies can get families through minor tough times, like car repairs or medical bills, without causing great strain on finances. An emergency fund also can help relieve the initial stress of the ultimate emergency, loss of employment.

Put rebate in savings for irregular expenses. There are times when something comes up and pulling out the credit card seems like the only choice to meet the expense; a savings fund can eliminate the need to add to credit card debt. Big bills — like holiday expenses, an insurance bill, or school tuition and supplies that come once a year or every few months — are more easily managed if money has been set aside for them.

Many people will be determined to make a special purchase with rebate money. Before spending on a purchase, Swanson advises putting some of the rebate toward paying off debt, planning for upcoming needs or long-term savings goals. Then, use remaining rebate dollars to make day-to-day life better.

“Make a wish list, choose the most important item, and shop for it wisely,” Swanson said.

For more information on smart saving and spending, see these ISU Extension resources, available from the ISU Extension Online Store, https://www.extension.iastate.edu/store/.

PM 1873H, Reduce Your Debts the PowerPay Way bookmark (https://www.extension.iastate.edu/store/ListItems.aspx?Keyword=PM%201873H)

PM 1673, Take Control of Your Spending - 9-step foldout worksheet (https://www.extension.iastate.edu/store/ListItems.aspx?Keyword=PM%201673)

PM 1121, Getting Organized - Personal and Financial Records - forms for getting organized (https://www.extension.iastate.edu/store/ListItems.aspx?Keyword=PM%201121)

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http://www.extension.iastate.edu/news/2008/mar/120602.htm

Contacts: Pat Swanson, (515) 294-2731, pswanson@iastate.edu

Laura Sternweis, (515) 294-0775, lsternwe@iastate.edu