Put Your Tax Rebate to Good Use
Tuesday April 29, 2008
The 2008 tax rebate checks are just now beginning to arrive in bank accounts, so this means many people are receiving an extra $600 to $1,200 or more. The purpose of this rebate is to stimulate the economy, but the fact is that most people are simply going to use the money to pay off some debt, or save it. While this might not be what the government wants to hear, it is a good idea for many people.
If you have high interest credit card debt, then without a doubt, this rebate could be put to use by reducing or eliminating the debt. For example, if you're carrying a $1,000 balance on a credit card with an 18% annual interest rate and you use your rebate to pay it off in full, you're essentially earning close to 18% on your money compared to just making the minimum payment each month. If you could put your money in the bank or into the stock market and guarantee an 18% return, wouldn't you jump at the chance?
If debt isn't much of a problem, you may want to consider funding an IRA. You can put up to $5,000 in either a traditional IRA or roth IRA for 2008. Contributing to a traditional IRA will give you a tax break up-front, while a roth contribution will benefit you in the future since qualified withdrawals are tax-free. Either way, you'll get far more from your rebate than instant gratification from buying a new gadget that you'll end up throwing away in a year or two.
If you have high interest credit card debt, then without a doubt, this rebate could be put to use by reducing or eliminating the debt. For example, if you're carrying a $1,000 balance on a credit card with an 18% annual interest rate and you use your rebate to pay it off in full, you're essentially earning close to 18% on your money compared to just making the minimum payment each month. If you could put your money in the bank or into the stock market and guarantee an 18% return, wouldn't you jump at the chance?
If debt isn't much of a problem, you may want to consider funding an IRA. You can put up to $5,000 in either a traditional IRA or roth IRA for 2008. Contributing to a traditional IRA will give you a tax break up-front, while a roth contribution will benefit you in the future since qualified withdrawals are tax-free. Either way, you'll get far more from your rebate than instant gratification from buying a new gadget that you'll end up throwing away in a year or two.
Comments
Help the local economy & treat the family to a nice dinner at that restaurant that does not fit the family budget. Most of the rebate will still be available to pay debt, invest, and all the other stuff you “should” do!!
Being debt free for decades now, and an accredited investors as well, the foolish checks were wasted on us. Our emergency fund is more than a hundred times the size of the pair of checks.
We did put the money to use by using it for the quarterly estimated taxes to the US and state.
My concern is that half the population is so mired in debt that these checks will make no significant difference, and for those who commute will it be eaten up by four buck a gallon fuel costs.
Being retired we use less than a half tank of fuel each month. And our hybrid goes a long ways on this amount. We walk and bike for short trips rather than using a car. Our public transit is free for those who are over 65 except for the subway which has reduced fares.
Make a buck squeal like a fiver!