How to Spend Your Tax Rebate Checks
The 2008 economic stimulus package, H.R. 5140, just sailed through Congress, and the bill is awaiting the President’s signature. The month of May will bring tax rebate checks for around 111 million households, worth up to $600 for individuals, $1200 for married couples topped off $300 for every additional child.
And the first thing that comes to mind when you get an unexpected bounty of cash is to splurge – Buy that iPhone you always wanted, but never could afford? Get a swanky new plasma television? Take a vacation on a beach front resort? But think again. It’s not everyday that the federal government shows its largesse and drops checks in the mail to the whole country, and you need to make the most out of it. So, what are the things that you can do?
If you really need this extra cash, chances are that you are living paycheck to paycheck. Which means you should consider setting up an emergency fund. If you cannot fathom how people manage to save up huge nest-eggs in addition to conventional and qualified retirement plans like 401(k) plans, this is one of the ways you can start. You now have a lump sum to invest in to an additional savings or investment account.
It’s a good start and you can keep adding to it as and when you have some more extra cash. Good options for this would be paying a years’ worth of premiums for an additional life insurance policy, a Roth IRA or a diversified portfolio with stocks, bonds and indexed mutual funds. Or you could simply max out your 401k, and if you are still left over with additional funds, set up an IRA.
Purchase something which will not only reduce your monthly expenses, but also provide more, and valuable, tax credits. A good example would be to install a solar heating device, which offers tax credits of up to 30%, based on your usage and the type of equipment purchased. More details about solar tax credits here. Besides, this will reduce your utility bills, help you reduce your carbon footprint, help save the world from global warming and help the country achieve energy-independence. Can’t get more bang for your tax rebate check than this.
If you have credit card debt from multiple cards, use the rebate to reduce the balance on the card with the highest interest. It’s a perfect opportunity to become free of credit card debt using the debt repayment snowball method.
Even if you just indulge yourself and go shopping, that’s just fine, so long as purchase goods made, and assembled, in the U.S. This will help local manufacturers, increase consumer spending and boost the economy. This, if you look in to it, is the basic intention behind the tax rebates in the economic stimulus package.