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Columns

What should you do with the government rebate?

The checks can be used to help pay down debt or fulfill dreams.

By Helen Huntley, Times Personal Finance Editor
Published February 3, 2008


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Are you set for a spending spree?

I hope not because "spree" implies a binge of mindless indulgence. The tax rebate checks coming our way offer a great opportunity to make a well-thought-out purchase or investment. And I'm here to get you started thinking.

For many of us, the rebate will be a lot more than chump change. Congress is still working on the details, but it looks like all of us who pay federal income taxes will get a rebate of taxes paid, up to $600 (single) or $1,200 (married joint filers) plus $300 for each child claimed as a dependent. Still up in the air is what people who don't pay income taxes will get. Will only those with earned income get a bonus or will retirees be included?

The rebate's financial potential is multiplied by the fact that it will come on top of the usual income tax refund, which last year averaged $2,255. Some families could end up with $4,000 or more.

My advice for handling the money: Do something that will make a difference in your life.

If you're carrying a balance on one or more credit cards, this would be a great time to get out of that hole you've been digging for yourself.

John Fetzko of Tampa said he's planning to use part of his rebate to pay down the MasterCard balance he built up with Christmas expenses. I hope he'll have done that by the time his rebate check arrives, which might not be until July. If he has, then an equally smart thing to do would be to set the money aside for the 2008 holidays so this year's expenses won't end up on a credit card.

Paying off debt and avoiding future debt improve your financial well-being. Have you charged unexpected expenses because you didn't have the money to pay them? You can prepare for future financial emergencies by setting aside money for a rainy day fund. Or use your rebate check for big expenses you know are coming up.

"I will use it as a 20 percent down payment on my upcoming homeowners insurance premium, which has not gone down, let alone like a rock," said Michael Curi Jr. of Seminole. Tracy Simpson of St. Petersburg would like to "get ahead on a bill or two."

Bonnie Jessee of St. Petersburg is anticipating the great television changeover. A year from now television stations will broadcast only in digital format. Viewers with old analog sets who don't have cable or satellite service will need to buy a converter box or a new television. Of course many will choose the new TV.

"With the new digital TV mandate coming in February next year, we've decided that since this is 'found money,' we'd reinvest in the economy and buy a new TV," Jessee said. "It would be a boost to our family and the economy. We'll have it all researched before we get the rebate and know what's the best deal out there."

I suspect lots of other taxpayers will do the same thing. The rebates could turn out to be a huge boon for Best Buy and other electronics retailers, who were the big winners this past Christmas season.

If you are a homeowner, a practical use for your rebate check might be to finance a home improvement project. Pat Cooper of St. Petersburg will redo living room floors in laminated wood. "We will put up a privacy fence, so we don't have to look at the neighbors' yards," said Sandra Novak of Port Richey.

Does that sound too boring? How about putting your money toward one of your dreams? Your check could get you part of the way toward a car, a house, a college education, a vacation or that dental work you thought you could never afford. It could give your retirement fund a boost.

Can't decide what to do? Hang onto it.

Andrew Butler of Port Richey said he'll stash his rebate in a bank CD. "It's free money and I plan on keeping it," he said. "It will make up for the loss I've taken in the stock market since the beginning of the year."

[Last modified February 1, 2008, 21:16:57]


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