Think before you spend a tax rebate

By Megan K. Scott Associated Press Writer - 02/11/2008

The options seem endless: purchase a new television, build an emergency fund, invest in an IRA, pay on some of the bad debt you’ve accrued from too many impulsive buys.

If Congress passes the national economic stimulus plan, many people stand to get rebates. The precise amount varies by proposal and by factors such as income and number of children. But let’s say you’re set to receive $600.

Many Americans probably have multiple places they’d like it to go. So consider these thoughts from some experts to ensure wise spending.

FIX YOUR FINANCES If you are living paycheck to paycheck, consider putting that $600 into an emergency fund, says Mike Peterson, financial expert and author of “Reality Millionaire: Proven Tips to Retire Rich.” Financial experts recommend three to six months of living expenses.

If you already have an emergency fund, apply the $600 to the credit card with the highest interest rate, he says.

If you have a child, ranging in age from newborn to early single digits, start a college fund, says David Kauffman, an investment management specialist, because it’s important to start those as early as possible. Or you can increase the percentage going into your 401(k) until the rebate is gone. If your 401(k) is maxed out, put the money into an IRA.

INVEST IN YOURSELF If you’ve been putting off going to the doctor, buying your kid a new winter coat, purchasing groceries or even paying that electric bill, take care of those things.

If you’re going to spend it on a non-emergency item, think before you hand over the cash.

“It ought to be something that is going to give you the most bang for your dollar,” says David Urban, a marketing professor from Virginia Commonwealth. “Something that is not going to decrease a lot in price, that is going you give you some utility for a few years.” His suggestions: a laptop, some nice kitchenware, or an investment in yourself, such as taking a class that will increase your earning potential or purchasing a piece of exercise equipment.

HELP THE ECONOMY Spend the $600 on services or products that are manufactured in the U.S., says Peterson.

“That’s not to say if you go out and buy a TV made in Japan, that’s not going to stimulate the economy,” he says. “The store that sold it to you will obviously profit. But if we’re spending that refund on services and items that are manufactured in the U.S., a lot of that money will ultimately stay within our U.S. economy.” SAVE THE EARTH You could also choose to spend money on things that will also improve the lives of others in the long-run.

Purchase an Energy Star washing machine, refrigerator or dishwasher, suggests Deborah Barrow, founder of thedailygreen.com, a Hearst Web site devoted to environmental change.

The washer can save a consumer $550 in operating costs over its lifetime compared with a regular washer, she says. A refrigerator with the label uses 40 percent less energy than conventional refrigerator models sold in 2001. Purchasing an Energy Star dishwasher uses 35 percent to 50 percent less water each wash, she says.

INDULGE Stressful times can mean a get-away is order, and there are bargains for the vigilant.

Go on vacation. Several cruise lines offer four, five and even eight nights for under $600, acccording to cruisecritic.com. (double occupancy; airfare not included). Or spend three nights at the El Morrocco Inn & Spa in Desert Hot Springs, Calif., or the Cocobelle Resort in Fort Lauderdale, Fla., both are in TripAdvisor’s top 10 best bargain hotels in the U.S.