Mar 30th, 2008
Ask the Readers: What do You Plan to Do With Your Tax Rebate?
Much has been made of the economic stimulus package and the expected $600 per person (with a lot of catches dependent on income) tax rebate coming from the federal government this year. The idea behind this part of the stimulus package is, well, to stimulate the economy. For the most part, that means the government wants you to do one thing with it: spend it.
While spending that money may be the best thing to do for the nation’s economy, it may not be the best thing to do for your personal economy. Here’s a few other things to consider doing with $600.
1) Pay off debt. This good old fashioned personal finance staple is never out of style. If you’ve got debt, particularly high interest revolving unsecured debt (this mostly exists in the form of credit card debt), consider paying it down or outright eliminating it.
2) Save it. Maybe your emergency fund is a little low (or non-existent). Maybe you found a great deal on a CD somewhere (in these tough times, if you have, let all of us know where!) and want to put a bit of money away for a few months or a year. Maybe you’ve paid off all of your debt (congratulations!) and aren’t sure what to do with the stimulus rebate yet, so you’re considering parking it in a money market account. Nothing wrong with any of these either.
3) Invest it. If you’re following a pre-established plan for investing, keep following it with this “extra” $600, or maybe buy a fund, ETF, or stock you’ve had your eye on. If you’re not following a pre-established plan for investing, maybe it’s time to start! If you’re somewhat risk averse, consider going with a high quality bond fund rather than something in the stock market. It’ll be too late for the 2007 IRA contribution, but 2008 is front and center. Keep it socked away for the long term.
4) Diversify. Not in the typical sense; just do a little of each of these, or split the difference between just a couple.
For myself, I’ll be saving my rebate, because my personal savings account tends to take a bit of a hit with tax time for a month or two, so this will help to replenish those.
What are you planning for your tax rebate?
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Car payment.