It's the Wednesday before Labor Day. We're all intending to sneak out early this weekend, and we're looking forward to the escape with relish. I won't keep you from your pining very long. In fact, if you're here for deep thinking on investing or some quick stock picks, you'll want to leave now. You're not getting that here today. What you are getting is an account of how I determined to abandon responsible spending and live in the now rather than dream about retirement -- and then thought better of it.
Why I'm writing this
I got a Kafkaesque email yesterday from the Financial Writers Guild. It chastised me for not being in compliance with Directive 623.B, which states:
"Each member whose writing appears regularly in a public column devoted to stock, mutual fund, and/or personal finance themes must write a timely article about how to spend the $300 individual income tax credit. Exceptions will be granted on an individual basis to members who: a) have recently experienced gains in their portfolio and want to brag about them; or b) have racked up an amount equivalent to the credit in fines for disorderly conduct in the past three years."
Since I haven't seen portfolio gains since the bottom fell out of the hand-parched wild rice market and my last D&D fine was in 1995 (not counting that bogus Tijuana rap, which I beat because the other guy got deported to Texas), I'm on the hook. I was just about the last person in America to receive the credit, so perhaps mine will be the last story on the subject.
The moment of glory
I was surprised to see that the tax credit came with a reminder that I had George W. Bush and Congress to thank for my windfall. (In case you didn't read the letter, President Bush reported separately that other, more appreciative citizens have said to him in person, "Thanks for the $600.") It provided a nice personal touch, I thought. In Republican Rome, such a gratuity conveyed under the name of political figures (known as ambitus in Latin) would have to come out of the candidates' own pockets.
It came out in the Congressional Budget Office report this week, however, that the tax credits may push the government to tap the Social Security surplus this year, something both parties had promised not to do. It seems, though, that I had misunderstood that intention. Administration officials now say that it was purely a "symbolic goal."
With the new trend toward fiscally irresponsible largess in the face of economic hard times, I decided that it is better to join the crowd and blow my cash now rather than save it for retirement. After all, my goal of having enough to live on in my dotage was largely symbolic, anyway. I don't want to be the only sucker left with any money to be taxed in 25 years, when they really get serious about saving Social Security.
How to blow $300
My first instinct was to use the $300 to gas up the Winnebago and head to the Rockies for the Labor Day weekend. I was checked, however, by the fact that I don't have a Winnebago and I live five-days' drive from the Rockies. Besides, if the tax cut's going to work like it's supposed to, i.e. stimulate the economy, I need to get out and buy some consumer goods.
For example, it's now possible to find a Herman Miller (Nasdaq: MLHR) Aeron chair on eBay (Nasdaq: EBAY) pretty cheap. What "normally" costs over $1,000 is going for $590, with no questions asked. No wonder Herman Miller warned on Monday. Put together a couple of checks, and you've got an ergonomic chair.
I've already got one, though, so I had to look for a better idea. I went over to Amazon.com (Nasdaq: AMZN) and found some fine digital cameras that I could get for $300. Still, do I really need to replace my SLR camera yet? Do I need another video toy? Isn't there something better to do with the money?
How to save $300
On a lark, I decided to figure out how much this money could be worth to me if I chose to save it. Looking at it a certain way, since the credit is not subject to income tax in 2001, I could stash it away in my Roth IRA tax-free. At an annual return of 15%, which would be a good record to be sure, that $300 would turn into $40,000 in 35 years, or $16,000 in today's dollars at a 3% inflation rate. That should buy me a pretty decent two-month vacation in Austria in my late 60s.
Whoa, the image of me as a dapper, genetically improved old man (thank you, Human Genome Sciences (Nasdaq: HGSI)!), sitting on the banks of the Danube, sipping a fine local Riesling, all courtesy of our government -- that's powerful. It's worth saving for. It may not stimulate the economy right now, but why would I bother with $300 trinkets, when I can have the big kielbasa in retirement?
Thanks for the $300, Uncle Sam.
Brian Lund has had Riesling before and enjoyed it, but he's not sure how he'll feel about the kielbasa. Of the stocks mentioned, he owns eBay. The Motley Fool is investors writing for investors.