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Ten Ways to Invest Your Tax Rebate

The check is in the mail, or so the government says. Beginning this week, the first installment of the 10-year, $1.35 trillion tax cut will be doled out in the form of one-time rebate checks to taxpayers. The checks will be sent out based on the last two digits of taxpayers' Social Security numbers, with all rebates distributed by the end of September. Taxpayers can expect rebates of up to $300 for individuals, $500 for heads of households, and $600 for married couples.

Three hundred bucks may sound like a small piece of the pie, but it is YOUR money. Here are 10 things you can do to "invest" that tax rebate:

  1. Open a short-term savings account to protect yourself from unexpected expenses -- because emergencies will happen.

  2. Pay down some of that 18% credit card debt. It's a guaranteed, market-crushing 18% return.

  3. Beat inflation and save on state and local taxes by buying an I Bond. They come in denominations as little as $50 -- plus there are no commissions or fees!

  4. Open or add to an Individual Retirement Account(IRA) if you haven't already maxed out your $2000 contribution limit -- $300 bucks ain't much, but it's a start. Heck, at market-matching returns of 11%, $300 will grow to $55,000 in 50 years.

  5. Open a Dividend Reinvestment Plan(Drip) with a great company.

  6. Invest in yourself -- take a night course to learn or polish a skill. Or even better, learn more about your finances and investments with a few Fool online seminarsor a subscription like The Motley Fool Select.

  7. Make an investment in your home. Add insulation around windows and doors, switch your light bulbs to long-lasting energy-saving fluorescents, replace that broken gutter, or get a new paint job. Look for money-saving ideas on our Maintaining a Homediscussion board.

  8. Invest in your car. Maybe now is the time to replace those bald tires, or fix those rust spots, or get that new muffler so your neighbors stop taking cover every time you pull into the driveway.

  9. Invest in your community -- donate that rebate to worthy local charities.

  10. Invest in your friends and family -- buy several copies of The Motley Fool Money Guide and give them to your loved ones so they can take control of their finances. Go ahead, be the Johnny Appleseed of personal finance.

None of that sound good enough? Fine, then just break down and buy that Sony PlayStation 2 already. Or go crazy at Ann Taylor. We won't tell. Get those NFL tickets. Or throw a party for some of your favorite Fools. Enjoy yourself. You deserve it. You won't find us knocking at your door scolding you -- unless you blow it all on lottery tickets.

Brian Bauer and Bob Bobala are editors at The Motley Fool. This is the first time -- and probably the last -- that their names have appeared together on a Fool article. Enjoy, America! The Fool is all about investors writing for investors.


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