7 Ways To Spend Money From Uncle Sam

It’s not “free money”, Lesko!

It’s tax time! According to data from IRS.gov, the average return for a single person in tax year 2005 was $4,983 (estimate based on all income levels for taxable returns). Obviously everyone’s situation is different; however, whether or not I suck at math, I’m going to assume a majority of you will get some sort of tax return. And don’t forget those Economic Stimulus payments we are supposed to be getting in May. In most cases, these rebates will range from $300 to $600 for individuals.

So, what do you plan on doing with this money? Many believe it’s your patriotic duty to put that money right back into the economy. However, I’ve got 7 ideas to consider that are sure to add stimulus to your life.

1. Eliminate Credit Card Debt. This might be the obvious choice for most. Some financial advisors may suggest that you cush up the retirement accounts first. Hey. Credit cards are among the highest interest rates you pay. If yours are high, this should be your first priority with your extra funds. Not only will you save on interest and elminate balances, but you’ll likely increase your FICO score. Get your current score at myFICO.com
2. Stuff Tax-Free Savings Accounts. Let’s say you’ve got your debts under control. Why not pad your retirement accounts to their limits. Each of these types of accounts has its own benefit. The bottom line is that you’re thinking about your future instead of blowing the cash on a big screen or some other unnecessary “toy”. Read this article. It explains everything you need to know about retirement accounts.
3. Start a 529 Account. With tuition costs rising (certainly outpacing inflation), this is a great way for you to help your children save now rather than having to worry about it later. Student loans are no fun and financial aid doesn’t always cover all of the expenses. Maybe your child will be like mine and become an elite athlete. =P
   There are many advantages to using a 529 college savings plan versus a traditional savings account or other savings vehicles. Earnings on a 529 aren’t taxed. If your kiddo gets a scholarship, any unused funds can be withdrawn without penalty. However, you must still pay income tax on the amount. As the account owner, only you have control of or access to the account. For most 529 plans, there is no age limit for the end user. If you decide you want to head back to grad school someday, you can use the 529 to do that. You also have the option of transfering the account to another family member.
   Be sure to check out sites like Upromise to see how you can save money with everyday purchases. To learn more about 529 Plans in greater detail, the SEC (sec.gov) has a great Introduction to 529 Plans.
4. Home Improvement. Upgrading the bathroom or kitchen might be the most important when it comes to adding value to your home, but they tend to be costly. If we’re talking about 1,000 bucks or so, consider upgrading the master bedroom or living room. Think about it. Some nice beefy 4-5/8″W crown molding is around $40-$80 per 12′ plank depending on the type of wood. Two gallons of paint (~$60), a couple of brushes/rollers (~$15), and drop cloth (~$10). That’s an affordable upgrade. You’ll have some left…change the drapes (or add some) or bed covering…or both. If you’re feeling “green”, consider upgrading appliances. The U.S. Department of Energy has a great Consumer’s Guide to Energy Efficiency that you can check out for ideas on how to save on energy bills.
5. Open a Stock Trading Account. So you’re not versed in the trading of equities. Cool. It’s never to late to start learning. I would highly recommend that “rookies” pay attention to guys like Jim Cramer. He makes investing seem like less of a task, and more of a pastime. Get that check. Open a brokerage account (I use Scottrade). And buy some stock. The most important thing in all of this is that you do your due diligence. “Pulling the trigger” is perhaps the hardest part of buying stocks. But it can really be alot of fun, and it is definitely a learning experience!
6. Get The F*(& Outta Dodge. So you’re all set with the debts and the retirement funds and the investments…yada yada. Fine. Take a frikken vacation then. If we’re talkin’ rebate check amounts, you’re not going very far. But a bed & breakfast, a nearby body of water, or some camping or hiking should do the trick. Nothin’ like a little stress relief.
7. Donate It To Charity. I only put this one last because doing this won’t directly benefit you. But if you think someone can use the cash more than you can, by all means…donate to charity. There are tons of local and national charities you can give to. I usually lean toward helping disadvantaged children or life saving organizations.

One of these seven ideas is bound to make you feel like you did the right thing with your dough. Be smart about picking the right one for you.

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