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April 2008 - Posts

  • Your tax rebate is coming early. Now what?

    If you’ve been breathlessly awaiting your tax rebate, you can exhale sooner than expected. The first of the direct deposits will be hitting the bank April 28, and by Monday, May 9 the paper checks will be in the mail. All $100 billion of the stimulus payments should be released into the economy by the end of July.

    The rebates were originally scheduled to go out starting May 2, with final paper checks mailed out by the end of the summer.

    So, now that you nearly have your rebate in your hot little hands, what are your going to do with it? If you’re thinking about a shopping spree, take another deep breath and hold it until sanity prevails. Are you there yet? Here are your real life options for spending your rebate:

    1. Pay off a debt, and if you can’t do that, at least pay on a debt. With gas and food prices what they are, you can’t afford to be carrying any extra debt.
    2. Save it for your 2008 tax debt. These rebates are coming out of the taxes you’ll owe in April 2009, so let’s call them “prebates.” If you usually owe federal taxes, you’d be wise to save or invest your “prebate” and earn a little interest on it before you have to give it back next year. And remember, if you usually receive a refund and use it to pay down debt, you’ll be getting a smaller return next year. 
    3. Start a rainy day fund. It’s a law of nature that when you’re already living a little close to the bone, your car will need a $1,200 repair. Rather than put emergency expenses on a credit card, have at least $1,000 set aside. Some experts advise having enough to replace several months of salary in case of serious illness or layoff. This payment can be your starting point.
    4. Compound the rebate’s value by investing in an energy-saving home improvement. Even if you’ll be receiving the minimum $300 payment, that’s a lot of CF light bulbs and weather stripping; you could even insulate your water heater. If you’re half of a married couple receiving the maximum $1,200 plus $300 for each dependant child, consider a solar water heater, bicycles for quick commutes, or new Energy Star appliances.
    5. If you’re one of the rare Americans who has no debt, has money in savings, rides a bike to work and lives off the grid, go ahead and spend the money…but spend it compassionately. Donate it to your favorite cause, and write off the donation on your 2008 taxes. Remember, while some of us have been forced by higher fuel and grocery costs to eat out less frequently, many Americans are turning to non-profit food pantries to help them through the month.


    Posted Apr 25 2008, 03:04 PM by moneycoach with 1 comment(s)
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