Ways to spend your government bonus check

By Linda Stern

WASHINGTON (Reuters) - Ooh, a bonus! Washington wants to send you an extra $500 to $1,200 as a way of bailing the nation out of its housing/credit/stock market/energy/currency woes.

From a macroeconomic view, that may be asking a lot of $500. But from a micro point of view, it could be very nice for your family.

The trick is to make the most of it yourself. That may entail some selfishness -- and not of the "I want a flat screen now" variety.

Review your family finances and see where that extra cash would serve you best, even if it's not the spending spree Washington is hoping for. Here's how.

-- Don't spend it before you receive it. That's probably the most important advice. With the Senate and the House still competing over which stimulus package to pass, it's not entirely clear who will get the money and who won't -- or how much they'll get. The House package cuts people off if they make more than $75,000 (individuals) or $150,000 (couples), or if they are living on Social Security retirement benefits. The Senate would send a check to everyone, even the wealthy and pensioners, but the checks would be smaller. Right now, your kids are worth another $300 each.

-- Consider the stimulus check together with your tax refund. The average refund last year was $2,548 and it should be similar this year, says Michael Eisenberg, CPA and a spokesperson for the American Institute of Certified Public Accountants financial literacy campaign. You'll probably get both checks around the same time. Putting both together could give a family of four almost $4,400 to do something with. That's a nice chunk of change.

-- Pay down your credit card bill. There is simply no better place to put your money. If you have a credit card balance, it's like you already spent your stimulus check before you got it. Now repay that loan and save yourself 15 percent or more in interest payments. You'll sleep better, especially if the bonus check wipes out your balance.

-- Multiply the tax advantages by depositing the check in a tax advantaged retirement account. Use it to establish or fund an existing Roth IRA. You won't get a tax deduction now, but some year, down the road, you'll reap tax-free earnings from that account. How much? If you put $4,400 in a Roth earning 8 percent a year and never add another penny, you still would have roughly $44,200 in 30 years. And if you really need to get at that $4,400, you can withdraw it whenever you want, once the account has existed for 5 years.