Financial Abundance

In the next few days you may be receiving a tax “rebate.” How are you going to spend it?

While our elected officials want you to go out and spend your rebate to help “stimulate” the economy, you might want to use it to begin to recession proof your life for the present as well as future recessions. If you would like to begin approaching life from abundance instead of scarcity, here are some possible ways to “spend” your rebate.

1. Use it to pay off your credit card debt, one of the most expensive forms of debt available.

2. Begin funding your “emergency fund.” An emergency fund is a highly liquid account which provides coverage for between six months to one year of your current expenditures. This fund will allow you to survive a business downturn, job loss or short- term disability without invading your retirement accounts.

3. If you are saving for a first house, use it to fund a Roth IRA. Even if you have a company retirement plan, you can contribute up to $5,000 annually to a Roth IRA, if you are single and earn less than $101,000 or earn less than $159,000 if you file taxes jointly. Once your Roth IRA has been established for five years, you pay no taxes when withdrawing up to $10,000 of Roth income plus all of your Roth contributions for a down payment on your first house.

4. If your employer provides matching funds to your company retirement plan contribution, use it to contribute up to the maximum amount that your employer matches. The matching funds are “free money” that virtually guarantee you a high rate of return.

5. If you have children that will one day go to college, use it to fund a Coverdell Education Savings Plans or a Section 529 College Savings Plans. With both plans, the invested funds will grow tax free and can be withdrawn tax free when used for educational expenses.

6. Invest it in either an IRA or Roth IRA for retirement. In future posts, I will demonstrate how you can never have too much for retirement.

You have probably heard the expression “use it or lose it.” If you spend the rebate buying another “thing” you will lose it. If you put it to work for you in one of the ways listed above, you will use it now and in the future.