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Financial Literacy Month blog

We hope you enjoy reading some of our thoughts as we join you on the path to financial wellness and we encourage you to yours. If you would like to follow our path on a more micro-level, we will be using twitter to chronicle our days.

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What to do with your tax rebate

Posted by Kim McGrigg on 4/28/2008

Today’s step includes the word “tax,” so I am using that as an excuse to talk about taxes—or more specifically, tax rebates. After all, starting this morning, the much-anticipated rebate checks on officially on their way!

It is always tempting to splurge with “extra” money. However, it pays to be patient and take some time before making any spending decisions. The experts at Money Management International offer the following ideas of how to spend your rebate wisely.

Pay down debt. If you pay the minimum monthly payment of 4 percent on a $5,000 credit card debt with an 18 percent interest rate, it would take more than 150 months to repay. In that time, you would pay $2,915.66 in interest charges. Accelerating your debt payments is an easy financial decision.

Save for emergencies. Americans are currently saving less than one percent of their disposable income. That means that any unplanned expense could turn into a financial emergency. Placing your windfall money in a savings account could be the difference between a financial difficulty and a financial disaster.

Prepare for the holidays. Too many people get in over their heads during the holidays and being in debt is no way to begin a new year. By using your windfall for holiday purchases, you can take advantage of lower prices and avoid post-holiday debt.

Invest in yourself. You are your most important and valuable asset. Use the newly acquired money to further your education or enhance a skill.

Give to others. If debts are under control and your savings are adequate, consider making a donation to a favorite charity. Not only is it a good thing to do—it’s a tax write off.

If you’d like to share what you plan to do with your tax rebate, visit SaveOrSpend.com.
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