5 Ideas For Your 2008 Tax Stimulus Check

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While the 2008 tax stimulus check has not yet become a reality (in fact, it’s far from it), I wanted to share five ideas you should consider for this new “found money.” The bottom line is that you should take care of yourself, first and foremost, and use this money to make your life a little easier.

#1. Spend It On Essentials

If you’re at the point where you need the $300 to continue, by all means spend it on the essentials you need to survive. If you’re at this point, this is a much needed breath of fresh air… take it. Don’t let anyone tell you that you should save it for the future when you need to put food on the table now. However, you must take stock and decide whether you’re spending this on needs or just spending this on wants. You also need to look down the road at your own personal finance decisions because you’re in a tough spot – this stimulus check may not come! Cut back on some of the wants in your life and you can create your own $300 savings for the year very very easily.

#2. Pay Down Credit Cards

I know many people carry credit card debt from their years of indiscretion and that’s perfectly fine. Life is about learning, it’s about making mistakes, and since you’re still standing then hopefully the lessons have taken, right? So, if the stimulus check comes through, please do the responsible thing and pay down some of this ridiculous 20%+ interest rated debt because it’s holding you back. Hey, if you’re reading this, chances are you’ve already realized this so good for you.

#3. Pay Down Other Debts

The government wants you to spend this tax stimulus check to lessen or eliminate the effects of a potential recession, don’t listen to that crap. Take care of yourself. That means taking this money, paying off any other high interest debt (I called out credit cards specifically because of their high interest rates) because that enables you to be more efficient with your money in the future. If you lose $50 each month to interest payments, that’s $50 you can’t spend on gas, groceries, whatever.

#4. Pad Your Emergency Fund

Let’s be honest, if there is going to be a recession then your $300 (or whatever it turns out being) isn’t going to save the country. Do the selfish thing and pad your emergency fund. If you have 6 months (or a year) of expenses in there already, good for you – put more. Whatever you planned for your emergency fund was in a non-recession-threatening world right? The environment has changed so you might want to put a little more into that emergency fund.

#5. Fund Retirement Accounts

$300 today, appreciating at a conservative 7% a year, will turn into $1,160.91 in twenty years. If you have 40 years, it’ll become $4,492.34. Retirement will be a beautiful time in your life if it’s adequately funded. Do you need to spend the $300 right this minute or can you spare it to fund your happiness when you don’t have to work 40 hours a day?

Anyone else have any good (responsible) ideas for this (potential) tax stimulus check?

{ 23 comments, please add your thoughts now! }

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23 Responses to “5 Ideas For Your 2008 Tax Stimulus Check”

  1. Lily says:

    Where are the other 5 ideas? 😉

    I won’t be getting a check, whether the bill gets passed or not. If I did, though, I’d add to my short-term savings (house/MBA) fund.

  2. adfecto says:

    Open a Roth IRA! If you don’t have one already, this is a great opportunity to start one. It is important to remember that you can take your principle out AT ANY TIME without penalty or taxes. You can start saving for retirement and still have access to your money if things get ugly. If you are just starting out (and lack an asset allocation strategy) you can start with short term 3-6 month certificates of deposit at your local bank to give you easy access and FDIC insurance on your IRA holdings. If you have plenty of cash for your immediate needs you can open a Roth IRA with a brokerage firm (Fidelity, Schwab, Vanguard, E-Trade, etc) to buy stocks for long term investment. No one can tell you what stocks will do short term, but in the long run there is nothing better than buying stocks after they have dropped in price.

  3. Posco says:

    Hmmm. What do you think about this: Since I’m a grad student and we’re partially living on savings, we’ll be spending it on essentials, resulting in less divesting of stocks in the near future. But should I avoid reminding the wife that the check has been received and deposited (provided that it DOES arrive), so that there’s less temptation to splurge?

  4. Frugal Dad says:

    I’m putting the first $500 in savings to pad my emergency fund and adding any remaining (depending on which version passes the Senate) on credit card debt.

  5. JB says:

    It is definitely going to my Emergency Fund or ROTH. Probably Emergency fund, since I already have planned to fully fund it from my paycheck.

    This might be a silly question but if one gets a refund will that be included on taxes for 2008? Will I have to pay taxes on that money eventually…or did I already pay taxes on it since it’s a ‘refund’?

  6. No suggest to save it? That’s what I’m going to do . . . put it in an interest bearing savings account and let it go to work for me.

  7. jim says:

    I would think the emergency fund is considered savings?

  8. TheWalrus says:

    Great blog. I know I’m saving this. It’s always nice to get a “free gift” to help pad my reserves.


  9. RacerX says:

    I am putting mine towards saving for some yearly bills (e.g.. Property Taxes!)

  10. dakboy says:

    We’ll be paying down debt/credit cards with most of it, but the $300 we get for having a child will go into his 529 account.

  11. Mediagal says:

    My ex-husband gets to claim the 2 children who live with ME as tax deductions. I’ve just discovered that he will be the one to get the 2 checks for $300 each AND he’ll get the $1200 because he remarried–not to mention the stepchild for another $300. That leaves me raising the 2 teenage boys with just the $600. Does that seem fair?

  12. Matt says:

    @Mediagal: The checks are going off the 2007 tax returns. So if he is entitled to claim them as dependents because he pays child support, he is entitled to the rebates. If you are employed, and filed a return and claimed them as dependents, YOU are entitled to the rebates as well. (that means you will get $1200, not $600).

    However, if you were married in 2007 and filed jointly (with him as Head of Household), and you were awarded sole custody when you divorced, then he is NOT entitled to keep the $600 in child credits. If he refuses to turn them over to you, you can take action on him.

  13. Jackie says:

    Save, save, save… ’nuff said.

  14. Cheryl says:

    I have heard that we will have to pay this “stimulus” back with next year’s taxes. Does anybody know??? Thanx!

  15. Jim says:

    It is no a gift. This “incentive” will come off the top of your 2009 tax return. So save it… so you can pay the taxes YOU WILL OWE NEXT YEAR!

  16. Cheryl says:

    So, what’s the point? What a crock!

  17. jeannette says:

    I pay child support to my ex. My children live with him. I have visitation. He captures my returns every year. Will he be entitled to capture my “incentive check”?

  18. Anonymous says:

    If I made 160 a week for exactly 5 months, 07/31-12/31 did I make 3,000$.?

  19. Nadine says:

    If I made 160 a week for exactly 5 months, 07/31-12/31 did I make 3,000$.?

  20. Shirley says:

    I will be putting it toward the purchase of an ounce of gold bullion.

  21. lou says:

    im putting it in the bank to cover some of the income tax i had to pay

  22. Jimbo says:

    The idea is to spend the money on something you need. Spending it will boost the economy, but saving it will only push us further toward a recession.

  23. BaysoxFan39 says:

    I am going to use the $300 to pay down my credit card bill. I firmly believe the interest payments is what burns a hole in a persons finance. I love this site and thanks to all of you for sharing experiances. I like Pres Obama but this government is focused on helping the businesses with our tax dollars and leaving the people who work and pay their bills on time to fend for outselves. I would prefer tax money going back to people that were responsible rather than bailout those that made decisions based on greed.

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