For many of us, tax time is an exciting period. It’s like Christmas for those of us in the working field. But instead of getting our present under the tree, Santa transfers the funds into our bank accounts.
If you’ve followed our post last week on the claimable tax deductions commonly forgotten, then you’re probably expecting to receive a hefty amount on your tax return this time. What an exciting feat! The things you can do with all that money — oh, the possibilities are just endless! But before you go ahead and buy a brand new gadget or spend a grand night at the pokies, you might want to also consider spending your tax return on other, more meaningful things.
Here are 7 ways you can make the most out of your tax return:
1. Treat your self
While others will tell you to save everything, we suggest using a part of your tax refund to treat yourself. Go out for a nice dinner, go to the movies, or get a massage. Do whatever you need to do to re-centre and feel relaxed without feeling guilty. By treating yourself, you avoid feeling deprived. Seriously, you’ve worked so hard this past financial year. You, at least, deserve to give yourself a pat on the back.
2. Pay off debt
After you’ve treated yourself, you can use a portion of your tax refund to pay off debt. Since the tax refund is completely different from your monthly budget, avoid using this found money as your monthly payment. Instead, consider topping up your payment with this tax refund to really get that debt down. While you won’t pay it off completely, you at least chip off a portion of the debt that’s incurring interest. But if your tax refund is equal to, or more than, your debt, then, by all means, pay off that debt completely.
3. Build an emergency fund
This would also be the perfect time to start building your emergency fund. You can place a portion of your tax refund into a separate savings account, which you can label as your emergency fund. In case something happens, you have funds to get yourself out of the situation without touching your income or monthly budget.
4. Invest in yourself
You can also use your tax refund to enrol in short courses that will enhance your skills. If it’s directly related to your employment, then you can definitely claim this in your next tax deduction. It’s hitting a whole flock of birds with one stone – you enhance your skills, increase your chances of getting a promotion, and get to claim it in next year’s tax deduction. You can also invest in learning a new skill so you can start a side hustle for extra income.
5. Top up to your super contributions
Even if it’s still too early to discuss retirement, you might also want to consider putting in a portion of your tax refund into your super. Not only will you get to grow how much you have when retirement comes, but you can also claim this again in next year’s tax deduction. Find out ATO’s guide when it comes to tax deductions for personal super contributions here.
6. Put it into an Offset Account for your mortgage
If you’re paying off a home loan, then you might also want to consider opening an offset account with your tax refund. An offset account is like a savings account that’s linked to your home loan. When you deposit funds into your offset account, your lender will deduct that from the total home loan amount when calculating interest. See how you can save thousands of dollars on your home loan repayments through offset accounts here.
7. Pay for a yearly subscription
If you’ve consistently been using Netflix, Stan, or any other content subscription services, you might want to put your tax refund to good use here. While these services don’t offer an annual subscription plan, you may consider buying gift cards worth a year’s subscription to Netflix or Stan. Once you’ve connected this into your account, you will no longer need to use any of your income to pay for these subscriptions. Think about it: that’s at least $180 saved since your using your tax refund instead of your monthly income.
The Bottom Line:
Unless absolutely necessary, we suggest avoiding using your tax refund to pay for bills and your weekly shop. While how you use your tax refund is totally under your discretion, we believe the 7 items we’ve listed will help you make the most out of your tax refund.
If you decide to use your tax refund to purchase items that can be claimed on your tax deductions next year, be sure to use Frollo’s new tagging feature. Use #hashtags to pull similar transactions in one list so you can easily search for them when you need them.
Watch the video below to see how you can make the most out of this new feature:
How will you use your tax refund? Let us know in the comment section below! We’d love to hear your thoughts.