Tax Time

Well, it is that wonderful time of year again...Tax Time. Most of us will have to do our little dance with the IRS, filling out the endless bureaucratic forms, pledging our firstborn for debts, and hoping we don't get audited.

Some of us will likely be getting a refund from Uncle Sam.....some small, some large (I am very grateful for that child tax credit). Most of us will be getting the economic stimulus rebate as well. With a minimum $600 payment for adults ($1200 for married couples), and additional rebates for qualifying children (who said having kids wasn't worth it), it could turn out to be a serious pay day for a lot of American tax payers (here's to hoping that all of you are among the lucky ones).

The question then is, what to do with all that money? I've heard that most Americans overpay their taxes (by having too much withheld from their pay checks), banking on the tax refund to pay off debts, finance vacations, or force them to save a nice chunk of money. While the topic of tax withholdings is an entirely separate article, it is important to carefully consider what to do with any money the IRS will be sending your way.

Options

I'm going to Disneyland!

There will undoubtedly be many Americans who will channel their rebate and refund checks to pay for the annual family vacation. Whether it is Disneyland, Yellowstone, or Italy (which is my choice for my summer trip), be sure you spend those funds wisely.

I'm not advocating that you not take that trip, in fact part of the point of the rebate is to stimulate the American economy, and so taking that trip could be a good thing for everyone. Consider making it a nice weekend, a long weekend, instead of a two week extravaganza.

Check out sites that offer vacation packages, which often save you money. Just make sure you're not paying for a package that costs more, and getting extras you won't use. Be sure to compare prices between sites for the same packages or services to make sure that you are getting the best prices. Sometimes these sites will match prices from their competitors just to get your business. You may also be able to haggle out some extra features for your money.

Consider doing a local vacation. Visit all those fun and/or historical sites in your town or state. You don't necessarily have to go far to find something to do. Plus, by visiting local sites, more of your money will be circulating in areas that directly affect you.

Now might also be the time to spend those extra dollars to visit Grandma and Grandpa. It's not a "sexy" vacation, but spending that money to make some memories might be the best investment.

The most important thing to remember is not to get conned into going on a trip you can't afford. You won't be too relaxed if you know that trip is going to leave you in debt.

A shiny new set of wheels

Some of you may be drooling over the latest fad from Motor City, or maybe the new import on the showroom floor has caught your eye. Once again, purchasing a car can be a good use of your refund and rebate (still in line with the spirit of the economic stimulus package), just be smart.

While that car that can do 0-200 MPH in 3 seconds, or has a phone, a coffee maker, and a wet bar, might look like a dream come true, being saddled with a car that is showy but useless, can be a nightmare.

Find a car that meets your needs. Notice I said NEEDS and not WANTS. While your wants can be important, don't drag yourself into debt for a bunch of fancy extras. Make sure that the car meets the basic needs of space, durability, gas mileage, and some of those psychological needs (hey go for the leather seat covers). If you are a soccer mom with 4 kids, that two door Mustang probably isn't going to be a good investment.

Make sure that you also choose a car that you can afford. When you make the average wage (usually around $40,000 a year), going for that $250,000 Lamborghini is probably not a good idea. You should review your income to make sure you can either afford to outright purchase the car, or that you will be able to reliably make any payments required under financing. You don't want to buy a car and then find the repo man towing it away a few months later.

Research your financing options. While I would usually argue that you shouldn't buy a car you can't pay cash for, I realize that sometime that isn't possible (whether that is due to emergencies or simply a lack of funds for those who are just starting out). Make sure you understand all the options for payment. Often dealers will offer in home financing, which can be a good deal, but check the rates form your local bank or credit union.

Also look into dealer rebates, or other rebates you may qualify for due to your status (some dealers or manufacturers may offer special rebates for veterans or active duty military service members). Compare the cost of buying the car off the lot, or financing it. Sometimes it can be a close call, but make sure you've reviewed all the options.

Realize that the car will be worth 5-15% less than the purchase price the minute you drive it off the lot, so don't expect to be able to sell it for what you paid. Also, check the dealer policies on returns. Some dealers offer a 72 hour return policy, some do not.

Consider buying a used car. Some great places like CarMax.com offer a wide selection of used cars. With CarMax, they have generally thoroughly inspected the vehicle, cleaned it, and made sure it's in good shape. Used cars have already depreciated in value, so your immediate (driving off the lot) loss in investment value is much less.

With either new or use cars, make sure to get information on the manufacturer's warranty or dealer warranty for service and repair. Sometimes even new cars can have serious mechanical issues, and you don't want to dig yourself deeper in debt fixing it up.

Also, make sure to review your insurance costs. Buying a new car will likely raise your insurance costs, especially if you opt for comprehensive and collision coverage (which will help to replace the car in case of an accident). Call your insurance company and ask for quotes based on the make and models you are looking at. Compare the costs for both used and new vehicles (used cars will likely have a lower insurance cost), and factor insurance premiums into the overall cost of the vehicle. You'll also need to consider the cost for registration of your new ride in your local jurisdiction, some areas require you to pay registration fees based on the age, make, model or gas usage of your vehicle.

Keep the gas mileage of the car in mind as well. In the current era of skyrocketing gas prices, buying the fuel efficient hybrid (like the Toyota Prius), might be a better idea than the monster Hummer.

Get rid of the shackles

Getting out of debt can be a great way to spend those new found funds. It is usually a better idea to pay off your highest interest rate debt first (likely to be credit cards or car loans). Even if you have smaller debt amounts at lower interest rates (such as $1000 at 5% versus $5000 at 22%), apply those funds to the higher interest rates. It will be more effective, and save you more money in the long run.

Also evaluate the status of the debt. Some debt is considered "good" (such as home loans and student loans), and doesn't necessarily reflect negatively on you. Some debt is considered "bad" (such as high interest credit card debt), and can negatively impact your credit ratings or ability to get loans.

If you are lucky enough to not have credit card debt, or car loans, or student loans (or some other form of financial shackles), consider putting the money towards your home. If you own your own home, consider making an extra mortgage payment (or two), to cut down the principal. If you haven't bought a home yet, consider putting some of that (or all of that) money aside for a down payment.

You may want to consider consolidating your debt into one place (usually a HELOC or onto one credit card). Consult a financial advisor to determine what might be best for you.

Saving for a rainy day

Now might be the time to start that rainy day fund. Most financial experts recommend that you have at least 3-6 months of your living expenses in an emergency fund. Calculate what you would need to have to survive (pay all your bills, utilities, rent, food, car fuel, etc) for that time frame, and then put that money aside in a savings account.

If you are already on the ball and have your emergency fund, start another fund for college, a new car, a new house, or whatever else you might want to buy in the near future. Save that money up so you can pay for the item outright, or in the case of college or a home, you can let that money sit there and grow.

Look at putting some of that money into a retirement account, such as a Roth IRA or employer sponsored 401(K). It is never too soon (or too late) to start saving for the future. Make sure to research your contribution and income limits. Research the options to make sure you are getting the best bang for your buck, and the best tax savings for the future.

You may simply want to put the money away to grow. Consider a high interest savings account (available from INGdirect or other online banks), CD, or brokerage account.

Other Options

There are plenty of other ways to spend your money: a shopping spree to the mall, that new plasma TV, a new computer, a pet, or the newest gizmo to make life easier.

Whatever you decide to buy, consider a few things.

1. Do you need the item? Is this something that you will use or need, or will it simply acrue dust in the attic/basement?

2. Is this the best price? Compare items, and retailers, to make sure that you are getting the best price. If it is a seasonal item, consider waiting until it will be on sale.

3. How long will the item last? Is this a long term investment, or a short lived high?

4. Have you met all of your financial obligations?

5. Can you afford it?


Tax rebate time can you give you a high, but don't let that high leave you broke, or in more debt than you had before.

The Simple Dollar

This is another good site for some financial discussion and advice. Check it out.

The Simple Dollar

Make it Yourself....Laundry Detergent

One way to save money is to make items yourself. I found this great article on-line about making your own laundry detergent. Though I don't know if I would want to have a large bucket of sludge in my house, it might be worth i....

Here is the link:

How to Make Your Own Laundry Detergent

Shopping for Kids Clothes

You all know that kids clothes can be very expensive, especially when they seem to grow out of them every other day. Here are my recommendations for saving money on this expense.

1. Make a list of basic needs. Create a list of basic wardrobe needs (number of pants, number of shirts, etc). These are the items that you HAVE to have to dress your kids. Don't be too stingy, but don't go overboard either. make sure the list includes items you need for your regular activities (school, sports, church, etc).
2. Keep a list of items you need. It helps to have a list of clothing items you need for the coming year. Start with your basic wardrobe list, and make sure the list has a quantity for each item. Keep this list in your purse or car, essentially carry it with you, so if you are ever out shopping and you find a good deal, you know what you need.
3. Shop clearance racks. Scour the racks at your local department and discount stores. You can find great deals here. This is where your "needs list" comes in handy. Make sure you aren't just buying stuff because it is on sale. It is okay to get extra items, or special items, that you don't really need, but make sure you don't go overboard.
4. Shop off season. Using your needs list and basic wardrobes list to decide what you need each season. You can save money by shopping off season clearance sales. Wait to buy your winter clothes until spring and summer, and vice versa. There may be slim pickings, but if you watch carefully, you can snap up some great deals and beef up those wardrobes.
5. Visit your local outlet mall. You can find great deals at the stores in these malls. Often these malls are home to regional stores, which means that they get the clearance from others stores in the area. These stores also tend to have "clearance" racks, with deeply discounted items.
6. Know your local stores. Talk to store managers and ask about scheduled sales, when they clearance items out, and any special offers they might have. Getting to know the staff and managment of your local stores can help you find the best deals.
7. Shop thrift stores and consignment shops. Most of these places offer special sales or coupons, which can lead to additional savings. You can often find brand new clothing (with tags still attached), or nice gently used clothing here. These are also great places to find gently used toys, books, and other kids items.
8. Start a clothing swap. Have a ton of boys clothes you don't need, but looking for some cute girl's dresses? Start a clothing swap in your neighborhood, church or other community group. Members can trade items they no longer need for items they are looking for. make sure that you check the quality of items you plan to swap...you don't want to be giving away spit up stained t-shirts.
9. Prowl E-bay and other like minded sites. Just like thrift stores and consignment shops, you can find great items for low prices on these sites. You can also sell your unwanted items there, and help finance your new purchases.

Happy Shopping!

Online Coupons

Considering that I am a big fan of online coupons, and I have been writing about them lately, I thought you might enjoy this article about them. The article includes references for sites where you can find some good ones.

The article originally appeared on MSN Money.

The Basics: How online coupons save you hard cash

Saving on a Shoestring

Saving is an important part of financial health, and one that in our culture, is often overlooked. This is an old article that I downloaded from MSN ages ago, but it still applies.

No matter how much you make, you can save money. You may start out small, but starting is the hardest part.

Here is the link to the article: 20 Ways to Save on Shoestring

Taking a "Money Day"

This was a good article. For those of us trying manage our finances, or those who may be trying to get started on that journey, taking a "money day" may not be a bad idea. Just think, we usually take time to do our taxes, go to the doctor for a check up, take our car to the mechanic, etc. So why not take (at least) an annual "money day" to take care of our financial health?

Here is a link to the article for those of you who want to take a look

Taking a "Money Day"