Peak World Articles

Let us begin by taking a look at a hypothetical situation. Let's pretend that you have a child in their early twenties that has severe money problems. He or she holds a job, but has student loans, a car loan and over twenty thousand dollars in credit card debt. With all that debt, rising interest payments and rent to top it off they keep falling behind every month. Well, unfortunately for many of you this situation may not be hypothetical, but the rest of you go ahead and imagine this problem. Now, lets also imagine that you have worse money problems and are in even worse debt than your child. In fact... you are on the verge of being a debt slave for the rest of your life. Would it make sense to borrow thousands of dollars on your credit cards to give your child a cash gift to help them out with their money problems?? Even if you were crazy enough to do that for your child, would you then ask them to spend the money you gave them instead of asking them to pay down their debt or save the money? The obvious answer should be an emphatic NO! Yet, this is the exact strategy the US government is using by giving the US population an approximately 145 billion dollar stimulus package in May of 2008.

I, like many Americans will run to the bank to cash the check as soon as it comes in the mail. But, I won't be in such a hurry for the reason the government hopes. I won't be buying a flat screen TV with the money. I'll cash it quickly to get the money before the US government starts bouncing the checks. Oh, that's right... they are the government and are in control of the printing presses, they will just print more money. Silly me! Don't get me started on that... I would need to write a whole other article. But, what I will do with the check is quickly put the money directly on my house mortgage principle. I would use it to pay off credit card debt but I was fortunate enough to dig my way out of that hole a while back.

The US government seems to have forgotten that they are in worse trouble than the US citizens are. If you personally were running the same percentage of deficits that the government currently is your creditors would have repossessed everything from you by now. The US is running record deficits and they think they are going to bail us out? This makes absolutely no sense. They are going to have to borrow all of the money they are giving to us via treasury debt sales. Many people don't really understand government debt or don't care. It is easy to take the stand that one really doesn't care, after all it doesn't affect 'my' debt. Well, when the government takes on debt who is ultimately responsible for paying that back? The US taxpayers of course. So, actually citizens should be down right mad about this stimulus package. Our taxes and/or our children's taxes will be paying for this bailout plus interest for years to come. How exactly does that help any of us?

Since this 'bailout' is really coming out of our own pockets later down the road in the form of higher taxes or less government services, please think twice about spending your rebate check. Instead use the money to pay down debt or put it away as a cash emergency fund. It looks more likely everyday that one should prudently prepare for worse financial times ahead.