How to wisely spend your rebate check

The federal government hopes you’ll soon be flooding the floors of malls, aisles of grocery stores, and doors of home improvement stores spending your tax rebate.

Suzanne Graboski of Franklin County already knows how she’ll use it. She and her husband have already picked out the flat screen television they’re going to buy.

“My husband wants a TV and that’s the purpose of the rebate check is to help stimulate the economy so we’re doing our part,” she said.

There’s little doubt that Uncle Sam would like that answer, but is it the smartest way to use the check? Should you buy something, pay off bills, or invest it?

“It’s free money. It’s free money that the government is giving to you so you want to make a wise decision with it,” said Charles Equi, a CPA in Salem.

Equi has some expert advice on how to use your rebate. First, he says to check your finances starting with your credit card bills.

Ricky Joseph of Roanoke City has already done that.

“I’m waiting on it desperately,” he said. “My credit card bills are pilling up. I need to get some of that credit card up off me.”

Equi says that’s smart. Pay off the credit cards as quickly as possible, especially those with high interest rates.

“Even it if it is real high and it doesn’t pay it off completely, I’d still just dump it in there,” he said. “Because they are just going to keep compounding and they snowball so fast.”

Next, if you’re struggling financially Equi says to focus on the basics.

Many seniors living at the Edinburgh Retirement Home in Roanoke City know this. The home is for low-income seniors and many residents complain that the money is sorely needed for the basics like gas, medical supplies, and groceries.

“You live from day to day. You have to watch every dime you spend,” said Ruby Brown, a resident there. “I would use the money for groceries.”

So, an offer from Kroger could be a big help for Brown and many others. The grocery chain is offering a 10% bonus on rebate checks. Here’s how it works: if you sign over your $600 rebate to Kroger, they’ll give you a gift card for $660. That’s 60 extra bucks to pay for groceries or gas. Company officials say they’ll take checks that are $300, $600 or $1,200. And, if you got your rebate check through direct deposit, you can simply bring a personal check for the amount to a grocery store. Officials say they’ll honor that as if it was the actual rebate check.

If you’re doing okay financially you should consider investing the money. Equi says you have several options including starting a rainy day fund by putting the check in a CD or money market account. That will help you earn interest from .25% to 4.5%.

“Something that you can readily get to because you know you’re going to need that cash but you can earn some cash while it’s sitting there,” Equi said.

Younger people could consider taking the money and investing it in a Roth IRA that will give strong returns or create a college tuition plan for your kids. That can actually be deducted from your state income taxes. You could also make an additional house payment for the year. For any of these options to make a difference in the long term, you have to make them a regular investment. In other words, you need to use the rebate to start a new savings plan that includes yearly deposits into the tuition plan or Roth IRA.

“Technically, $1200 into a mortgage is not going to be a significant jump on you, but it does start to snowball effect,” Equi said.

Finally home improvements could be the best use of the money.

“It’s a good way to increase the value of your house,” Equi said.

So spend your check fixing up the basement, improving your curb appeal, or updating your appliances. Check Sears or K-Mart as they are also offering deals to give you 10% extra on your rebate.