Invest Your Tax Rebate AND Help the Economy

02/13/08 posted by Prosper Blog

Guest post by Brett of Personal Loan Portfolio.

Although the tax rebate is not yet finalized, many people are already mentally spending the money. Most people only consider the options: save or spend. I have noticed many finance bloggers already announcing their plans to save the rebate. Other people feel it is a patriotic duty to spend it. I believe that the choice is personal, but I have an idea to help resolve this dilemma.

Paying off high interest debt or saving an emergency fund should be your first choice of uses for the money. But if you do not need the money for those purposes, should you invest or spend the money? When congress passes a rebate, they hope that Americans will spend the money to lift the economy. However, the majority of Americans saved, invested, or paid off debt with their 2001 tax rebate. According to one study, only 22% of people said that they spent the money.

Investing in stocks (with the exception of a public offering) does not help a business grow. Investing in the stock market only passes money between investors. There is an alternative to investing in stocks that will allow you to invest your rebate and stimulate the economy - Prosper loans. With a Prosper loan, you can put your rebate in the hands of people who will spend the money stimulating the economy. Dilemma resolved. You can earn a reasonable return on your investment and do your part to help the economy with your tax rebate.

As you search for Prosper loans, limit an advanced loan search to borrowers who need the money for Small Business or Home Improvements. Personal loans and Other loans may also be good categories but you must read the descriptions to ensure that the borrower is planning to spend the money. Funding a vacation, a kitchen remodel, or a wedding are just a few of the opportunities regularly available for lending on Prosper where the money will be used to help the economy.

Investing your tax rebate on other people’s spending using Prosper loans eliminates the false choice of spend versus save. When someone asks if you are spending or saving your tax rebate, you can honestly answer “Both!”

Brett is a relatively new Prosper lender who writes about his lending experiences on the blog Personal Loan Portfolio.

Posted in Get A Loan, Personal Finance Education, Prosper Borrowers, Prosper Lenders

2 Responses

bignosebob | February 13th, 2008 at 4:12 pm

I would only like to add the option to “give” as opposed to just saving or spending the rebate–as in always setting aside some amount of money for charitable causes that match your values. I suggest doing all three (assuming you have an emergency fund and are taking care of your family’s needs).

Chrisfs | February 14th, 2008 at 12:28 am

If you have a decent amount in your emergency fund, and no high interest debt, then Prosper is a good place to put it. Ironically, I was wondering today, how many suggestions on what to do with your rebate, will be produced between now and May. I can see stores having sales, mutual fund companies doing mailings, nonprofits doing mailings, debt collectors making extra calls. Everyone is going to want a piece of it.