How to get the most from your tax refund
So you’ve just met with your accountant and received the exciting news that you’re getting a tax refund. Congratulations!
Immediately, ideas start rushing through your mind on how to spend every last dollar. A new TV, bills, credit card debts, a shopping spree, so many options! But are you spending it efficiently and effectively? It’s important to get the most out of your tax refund so you can manage your current financial situation and reach your goals sooner.
Let’s take a look at how Australians spent their tax refunds in the 2014/2015 financial year. According to Moneysmart’s website, people spent their refund in a variety of ways:
- 29% Paid bills
- 21% Saved it
- 13% Paid money onto loans or credit cards
- 9% Paid money onto home loans
- 28% Spent it on other things (holidays, education, household appliances, parties) or didn’t get a tax refund at all
Here are 3 ways you could spend your tax refund this year:
Reduce current debt stress
If it has been a stressful year and your debts are piling up, it makes sense to pay off those bills or debts that accrue the most interest. Which of your debts have the higher interest rates? Hint: It’s normally credit cards.
Do you have a mortgage on your house? Perhaps you could look at putting the funds in an offset account, which will reduce your monthly home loan repayments while your refund is sitting in an account you can access at any time.
Set yourself up for the future
Consider your plans for the future. Could your tax refund be used towards a house deposit, or to help reduce the amount of money you need to borrow for that new car loan?
Perhaps you can use your tax refund to make those home improvements you’ve wanted to make for the past year, and increase the value of your property?
Don’t forget your superannuation. The more you can contribute to your super fund, the more you’re investing in your future.
If you can’t decide, don’t be impulsive and spend it just because it’s there. Put it aside for a rainy day or when you have a little more clarity surrounding your financial objectives and goals.
We all love to spoil ourselves every once in a while. You have worked hard, so why not? So if you have funds in surplus, and have paid off some of your bills and debts, you may like to spoil yourself a little. Book a weekend getaway to de-stress and reconnect with yourself or your family. Treat yourself to a massage or facial at your local beauty salon. Indulge a little!
No matter how you decide to spend your tax refund, always keep your current position and financial future in mind. Any money you have is precious, even when it is an unexpected bonus. Don’t make any hasty decisions regarding the distribution of your tax refund. If you are unsure, Finance Detective can help point you in the right direction.
*Please note that this article is for general interest only. If you would like advice specific to your personal circumstances, please contact Finance Detective on (08) 9289 7777.