What to Do with Your Tax Rebate or Other “Found Money”
After concluding their tax preparation activities, many people will see that they are entitled to a rebate from Uncle Sam. “Whether your rebate is large or small, you are wise to determine now what you will do when that check arrives,” says Sheryl Garrett, CFP®, author of Personal Finance Workbook For Dummies® (Wiley, November 2007) and founder of the Garrett Planning Network. “Don’t fritter it away or spend it on a whim.”
On a recent teleconference, network members brainstormed 13 ways taxpayers can put this “found money” to work:
1. Put the entire amount toward funding your 2008 IRA contribution.
2. Give the money to charity and claim that amount as a tax deduction on your 2008 tax return, if you itemize using Schedule A of Form 1040.
3. Sign up with www.kiva.org and provide micro-loans to budding entrepreneurs in third-world countries.
4. Start a tax-sheltered 529 college savings plan to fund your own or children’s/grandchildren’s educations.
5. Check that you have adequate insurance coverage on the following types of policies: property and casualty, life insurance, health insurance, long-term care and disability insurance.
6. Use the rebate money to engage the services of an estate planning attorney
7. Use the money to purchase stock mutual funds at current prices.
8. If you have credit card debt, pay off as much as possible.
9. Mortgage interest rates are the lowest we’ve seen in a long time. If you have a good credit score, now might be a good time to refinance your first mortgage and/or to wrap your Home Equity Line of Credit (HELOC) debt or second mortgage into a more attractive home loan.
10. During economic slowdowns, including a recession, job losses and/or business declines are inevitable. Take a course, add to your credentials and consider how you can improve your skill set to make yourself as attractive as possible in the marketplace.
11. Schedule your annual check ups with your doctor and your dentist.
12. Schedule a financial check up for yourself. Annual trips to the dentist, the doctor – and your financial planner – are wise investments
13. Purchase a gift certificate, for a set amount of professional financial advice, for a loved one.
For more information, visit garrettplanningnetwork.com