If you’ve received this year’s tax refund, did you spend it wisely? Have you saved it or did you go out and treat yourself? It can be very tempting when getting your highly anticipated refund, to go straight out and splurge on something fun. But, for the longer-term planners and those who want bigger gains, there are other more useful and effective ways of leveraging your annual cash injection.
1. Get free: Reduce or eliminate your debt
Household debt can really hold families back from financial freedom. If you’ve got credit cards or loans, your tax return is the perfect way to start paying those down and put you in a better financial position. So where do you start? With the high interest debts like short-term loans and credit cards. If you have more than one, start by paying off the account with the highest interest rate. This is the best way to help you reduce the amount of interest you pay and save more money in the long-run.
2. Plan for the future
Consider boosting your retirement fund by topping up your superannuation or making an investment. Research shows that investing your annual tax return into your super can reap huge rewards when it comes time to retire. Plus, if you’re one of the 3 million+ Australians who took their super out under the Government’s Superannuation Early Release Scheme, then it’s a good idea to consider topping that back up using your tax refund.
3. Add to your mortgage
A mortgage for most people is the single biggest debt you’ll pay off in your life. If you’ve got a mortgage, consider adding your tax refund into your mortgage’s offset account or redraw facility. This is a fantastic way to reduce interest on your loan, while still giving you full access to the money if you were to need it down the track.
4. Create a rainy day fund
Did someone say COVID? Many families struggled financially in 2020 as a result of the Coronavirus pandemic. A nicely sized savings fund may help you out if the worst were to happen and you suddenly needed access to money either for medical bills, to replace a lost wage, or other emergency. By putting your tax away each year into a ‘rainy day fund’ this can give you and your family peace of mind no matter what life throws your way.
5. Renovate your house
Does your home need repairs or a revamp? If you’re planning to refinance or sell your house any time soon, your tax refund can help fund some of that renovation work you’ve been putting off. By being smart about your renovations and picking projects that will add the most value to your home, you can make a tidy profit when it comes time to sell and move on.
6. Buy the essential big ticket items
If you’ve got any one-off purchases to make that are hard to save for throughout the year with your regular spending money, your tax refund is a great way to fund these purchases. Maybe your washing machine is broken, you’ve been putting off an elective medical procedure or your car needs repairs. Whatever the big ticket purchases are which you’ve been putting off, consider using your tax refund each year to cover these, so it doesn’t impact your regular income or require saving.
7. Donate to charity
Consider donating your tax refund to a charitable cause, not only will this ensure your money is put to good use, it’ll make you feel good and it’s tax deductible for the next financial year. Make sure if you’re going to do this, that you don’t have any more pressing debt that should be paid off first. Or consider splitting it - every little bit counts!
8. Sit down with a professional
Last but not least, sit down with a professional to discuss the best way to spend your money. Our tax professionals can assist in planning for next year’s return by advising on what records you should keep to boost your refund. Plus, our fees are tax deductible (which is also great for next year's return!).
And if you haven’t done your taxes this year, it’s not too late. Come into one of our offices and we’ll guarantee you the maximised return available. You now know how to spend it wisely! Call us today on 1300 555 773 or simply book in an appointment.