What would you do with an extra $800 or $1,600 refund?
The stock market is all over the place lately, way down from the levels it was at last October. We have the media screaming recession, which may be true. I don’t think we will truly know if we are currently in a recession until months after it actually happens. The economy could be in trouble if something doesn’t happen.
Today President Bush plans to announce an economic stimulus package to help boost the economy. What would be part of this program is a tax rebate of $800 for individuals and $1600 for married, as long as you at or below the household income threat hold of $85k individual and $110k married. So what would you do with the money?
The government wants you to jump for joy like you won the lottery and go out and spend it. Sure, spending it will be a positive thing for the economy, but is that the best thing to do? You could instead put it in the bank and save it for when you really could use it. While it doesn’t stimulate the economy as much as spending, many people have no savings anyway. It could be used to help pay off some debt and help increase the net worth. I don’t think there is anything necessarily wrong you could do with this money.
I think the real thing we have to look at is will this package really help our economy come out of a recession, if that is what we are in. Nobody likes to pay taxes and an auto magic refund of $800 to $1600 is icing on the cake. Like all good things that come, birthdays, bonuses, tax refunds, we just have to be patient and see what will happen when the time comes. As far as what I think we’ll do with this money if we do get it, probably a bit of spending, saving, and paying debt.
If it comes from the federal government as earned income, then it would be reported in my 2008 income tax return and I would have to pay most of it back to both state and federal agencies. Not much of an incentive I’m afraid…..
I wonder if it would help the economy if people spent that money to pay off some of those bad debts that have been crippling the finance companies. Although $800 wouldn’t go too far for many people. Hmmmm.
For me, $1600 would pay off either my student loan or my last remaining revolving credit card debt. That would be fantastic, and would give me approximately an extra $100 a month to spend as I choose. (We are paying $100 every month on the credit card, and $65 on the student loan.)
Jim, I would put this money (1,600) in my emigrant bank account and pretend I never got it in the first place. If a true emergency comes up due to the recession that’s looming I would use those funds.
There’s no way I would go out and purchase goods with that money.
I would probably take that money and put it in my emergency fund. Maybe I’ll take out a $100 for myself but the rest will be used to beef up the EF. you never know when a true emergency might strike.
Ed, it’s not like the government is just going to cut us a check, we have to still file 2007 income taxes. To clarify it is a tax refund or rebate which is basically the government giving money for taxes back. You are not taxed on income that you have already been taxed on, it is 2007 income. Depending on how you handle your allowances on W-4 will determine whether or not you’re taking out enough or too much money for taxes. This would be treated as a reduction in taxes owed and given back to us added in a tax refund if it happens. Normally you don’t want to receive an income tax refund because it means you paid too much money into the IRS in the first place. I have no problem with the government giving me my own money back though.
Sounds like people so far would pay off debt or save the extra money. The government would like us to treat it like everyday spending money, but no matter how you look at it this is a short term solution. When President Bush gave his speech this afternoon it did not have a specific individual dollar amount, so we will have to wait until his State of the Union speech on January 28 to find out most likely. Congress controls our tax dollars anyways so they need to approve these suggestions to help our economy.
Those who one day want to be financially secure and/or wealthy will use this refund to pay off their debts (including mortgage) or save/invest. Most people WILL treat this as spending cash.
I will pay my taxes with it.
I would just toss it into my emergency fund…nothing exciting…no helping the economy if I get a refund
As this is pretty much the figure for my yearly freedom fund, I’d have to say that that’s where my $800 would go. The way I see it, given my current credit card debt, I’ve done more than my share of helping the economy in the past. Now it’s time to help myself.
Of course, it’s not a done deal that this plan will be enacted, so no counting chickens until the eggs are hatched.
I will be using this to pay off the remainder of my student loan and the leftovers will go towards another debt. However, this will free up monthly income that will quickly enter the economy!
nothing to do with taxes…
I found a blog through robinmadrid’s comment on needtobedebtfree
It’s called Diary of a Reformed Spender. I thought of your wife because I’ve started reading the archives and the woman saved up her money so that when her mom took her to NYC as a treat, she could buy herself a Coach purse. It’s not that getting £40,000 out of debt wasn’t a priority (do the conversion to dollars on that amount!), but that she needed to treat herself and celebrate her progress, too.
Here’s the address:
http://nomorespending.blogspot.com
That $800 would be just enough for me to pay off my Cap-1 bill which would further ruin my credit score because I’d have an open card with a zero balance and I wouldn’t be charging on it.
Makes sense to me.
Assuming I’d actually get this money, I’d probably take a little and go to dinner with the family. Take a little and buy something on our need list (most likely some upgrade/repair for the house), and put the rest towards debt or into investments.
My wife would have it spent on either a vacation or something else she really wanted to buy, and would be lobbying heavily to either buy the product or start planning the vacation prior to actually receiving the money.
This is based on past experience with tax returns. I always know I’m in trouble when she signs it and goes “Oooh, we’re getting that much back?”
Most times its a compromise, sometimes I agree to pumping up the vacation (hey, we all need a break now and then), and sometimes the house or new vehicle downpayment, etc. comes first.
One thing I’ve noticed looking through your posts is I see a lot of myself and my wife in you guys. My one pinch of advice comes out of the “the Wealthy Barber” and is that you are young and need to keep putting money away into your retirement (e.g. that old “pay yourself first” thing). Do that and everything else can go wrong, but you can be okay (not great, but okay) in the end. Between my wife and I we’ve done a lot wrong in our lives, and are finally crawling out of the debt hole we’ve been in pretty much since we got married. But the one thing I think I’ve done right is fund my retirement through it all, and most importantly, starting when I was in my late 20’s. Even with planned catch up contributions when I hit my 50’s, the money I’ve already put away, even at a reasonable interest rate, is projecting to being nearly double what I can put in and earn between now and retirement, even though I’m earning two and a half times the inflation adjusted income I had in my late twenties. That’s the power of compounding and time.
The deal has been put together and it sounds like we’re getting $600 for individuals and $1200 married. If you have kids it’s an extra $300 for each on top of that. Income levels is you have to at least made 3k and paid a minimum of $300 in taxes in order to get it back. Maximums are 75k for individual and 150k for married. Don’t expect the check soon though, it sounds like it won’t come until May or June when we have all forgotten about it. I’ll probably still be in debt this summer so I’ll just apply it to a credit card later I guess.
Hey that sounds good If only I was married well no Im still young so i guess i will go shopping
im paying rent and fixing my car so i can make it to work so I can pay my rent again!
Does anyone know how this will go? I’m just wondering if I file my taxes BEFORE March 1st, would I still get a check for this amount?
Or should I wait until after March 1st so I can get all of the money? I was hoping to file my taxes earlier this year so that I could get my refund faster.
The check is based on 2007 taxes, so you have to file this year’s taxes to determine what your check will be. Don’t expect the money until May at the earliest. This is all based on whether or not it is passed through Congress and signed off by Bush.