At ITP, we understand the excitement you feel when you receive your tax refund. A sudden influx of cash has you dreaming of ways to flitter away your hard earned money. You may instantly think of your favourite hobbies, or that next purchase you have been eagerly saving for that you can now buy. But ask yourself….is this the wisest approach to seeing those extra dollars in your bank account?
At ITP, we know it’s a little boring to ‘invest’ your refund however our experts recommend you view this money as ‘extra’ and not part of your household budget. We advise our clients to commit the money to one of a number of long-term plans.
Pay off debts
One of the wisest ways to use your tax refund is to pay off any outstanding balances to reduce high interest debt. By paying off some or all of this debt, you will feel a sense of freedom and will ultimately reduce your regular budgetary outgoings and give you an opportunity to get ahead.
Plan for large bills
We all dread the quarterly household bills that all seem to be due at the same time. By keeping your tax refund aside in your bank account, you will have the funds to pay them if you find yourself struggling when the bills pile up.
Contribute to super
Whilst this seems like a particularly mundane option, contributing to your superannuation has some great benefits to give you a head-start on retirement, including a low tax rate of 15% on after-tax super contributions and the compound interest your super earns over your working life.
And for some fun… go on holiday
Yes, this option may not fit into the long-term planning for your tax refund. It is, however, good for the soul to take some time out and make some memories with friends or family by going on that holiday that’s been at the back of your mind for some time. Of course, the ‘fun’ option should only be considered if your finances are in order and your splurging is within your budget.
To make sure you get the most out of your tax return, visit an Income Tax Professional who will get you the maximum return in the minimum time.
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