Friday, March 28, 2008

Tax season: what do you do with your refund?

Did you know that the average American family spends 43% MORE than they earn each year? Do you see something wrong with this picture? Because I surely do!

Hopefully by now most of us have completed our taxes and are just awaiting the refund either in direct deposit (the fastest way) or check in the mail. Those who have paid their taxes this year will also receive the tax check the government is sending most in order to "stimulate" the economy.

From the IRS Economic Stimulus Information Center Website:

"Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return. IRS will take care of the rest. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. Millions of retirees, disabled veterans and low-wage workers who usually are exempt from filing a tax return must do so this year in order to receive a stimulus payment."

Please do not fall into the trap the government is luring us into; take that check and use it to pay your bills! Pay down your debt, don't go out and spend the money, put it to use. Put it towards a house fund, money towards an appliance that you've been needing to replace (make sure it has the EnergyStar logo on it!), in a savings account, your IRA, or any other retirement fund, or on your car payment. I took my whole income tax refund, which was a very nice chunk, and as soon as I saw it was in my account, transfered it all to loan and made a principle only payment. I will do the same once I get my check from the government. With the two of these checks, it will make a substantial dent into my debt and will allow me to be debt free in only a few months! :)

Yes, it would be nice to get new clothes, go out, and splurge a little bit, but why? If I chose to do that I would look at my debt and wonder, how much interest would I have saved if I had only used that money to pay it down? Did I REALLY need the new clothes or did I just want them?

Please rethink your spending habits here upon arrival of your refund as well as stimulus check; this is a good amount of money that could be put into use. With the average American household owing more than $8,000 worth of credit card debt, please, pay down your bills! Go against the Joneses!

Click here for more info on the stimulus package and to see if you're eligible.

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