While sorting my mail a while back, I found what looked like just another credit card bill. But to my surprise, it proved to be a check – my credit card company was paying me more than $100 in cash rebates for the purchases I'd made. That unexpected windfall made me wonder what other sources of extra money I might be overlooking.
If you're lucky, your employer may match some or all of your contributions to your 401(k) plan, absolutely free. If your company matches 25% of your contributions up to $6,000 annually, contributing that full amount could score you $1,500 every year!
Dividends aren't free money, but they're the icing on the cake of a good investment. Most stocks reward you only with their own appreciating market value. If those 200 shares of Chevron
Better yet, Chevron pays a dividend. Over the decade you owned stock, you'd have raked in nearly $17 per split-adjusted share in dividends, for a total of more than $6,700. (If you' reinvested that free money into additional Chevron shares along the way, those new shares would be spitting out more free money for you). To turbocharge your own earnings, check to see whether your brokerage will automatically reinvest dividends for you.
Even when a terrific company hits an occasional lull, and price appreciation bottoms out, you'll likely still get dividend checks to reward you for your patience. Coca-Cola
Your friendly local bank can also provide extra income. In exchange for watching over your hard-earned cash, it'll pay you a small but significant slice of interest. Current interest rates aren't very enticing, but you don't have to resign yourself to getting nothing. Discover better rates by shopping around. I recently found good five-year CD rates at the bank units of Discover Financial Services
IRA tax benefits
Getting to know your Roth IRA could pay off handsomely. You'll pay tax on the dollars up front, but when you hit retirement age, a Roth IRA will let you withdraw your accumulated earnings tax-free. The current rate for capital gains in a taxable account is 15%, or $4,500 of a $30,000 gain. With a Roth IRA, that $4,500 would stay firmly in your pocket, instead of Uncle Sam's.
Tax deductions are welcome enough, since they reduce the income on which you're ultimately taxed. But tax credits are even more exciting, because they subtract from the actual amount of tax you have to pay. In the 25% tax bracket, a $1,000 deduction would save you $250 in taxes; a $1,000 credit would reduce your tax bill by the full $1,000. It may not exactly be free money, but it's close enough.
Last but not least, don't forget the benefits of the humble coupon. A few minutes with a pair of scissors and the Sunday paper's ad section could help you save a surprising amount off your weekly grocery bill. As long as you're paying for the newspaper, why not recoup your investment – and then some – in coupon savings?
As you can see, Fools, the world is full of free money. Don't pass it up when you have the chance!
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This article was originally published on June 22, 2005. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned. Kraft Foods is a Motley Fool Income Investor selection. Coca-Cola and Discover Financial Services are Motley Fool Inside Value recommendations. Try any of our Foolish newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.