Spending Tax Refund
What’s the best way to spend your tax refund? A few good ideas
Spending Tax Refund
It is not unusual for a person to let out a big whoop of joy when they receive their tax refund but actually– the refund is tax you have overpaid, not the lottery.
To ensure you make the most of money that you have worked hard for, we have compiled a guide on where you should deposit your tax refund, depending on which stage you are at in your life. Some ideas are included below:
First job or tertiary student
- reduce your credit card debt
- deposit it into a high-interest savings account but be sure to check the fine print – many accounts will entice you with a high interest rate but the headline return may drop once your money has been in there for between four to six months.
House savers
- deposit it into a high-interest savings account, as long as you do not have a substantial credit card debt or high-interest car loan.
Mortgage payers
- pay lump sums into your mortgage but be sure to check your mortgage arrangements as fixed-rate mortgages and many variable-rate home loans will not allow you to deposit lump sums or pay out early.
Mortgage payers with children
- children’s school fees
- Christmas presents
- mortgage repayments
- credit card debt
- electricity bill
- deposit on a much-needed new car
- a holiday for the frazzled nerves.
Business owner
- reinvest the money directly into your business
- credit card debt
- mortgage repayments
- quarterly business activity statement payments
- year-end tax bill.
Pre-retirees
- contribute to your superannuation
- high-interest savings account
- acquire high-yielding shares that deliver dividends
- mortgage repayments, as your mortgage may be within reach of being paid out, if it has not been already.
Retirees
- high-interest savings account instead of a bank transaction account where you will receive zero or minimal interest
- high yields that ensure your savings are enhanced before they are diminished by inflation.
Whichever stage you find yourself at, be sure to exercise restraint and a good deal of common sense when deciding where to deposit your tax refund.
So are you a spender or a saver when it comes to the ‘bonus’ things like tax refunds. What will you be doing with your refund this year?
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