What Should I Do With My Tax Return Money?
When writing this article, it was nearing the end of the financial year, a time of panic, disorganisation and future planning in regards to organizing your tax return.
Many readers are looking forward to lodging their tax return in the hope that they will receive a refund on their yearly payable tax, yet most are not sure what they are going to do with it.
Some of the potential uses include; paying down debt, frivolous spending and shopping, investments and most importantly, finally building that savings nest egg you are always thinking about.
Today, lets look at some of the options on what to do with your tax return (if you get one) and how you can use it to benefit yourself in ways a little deeper than just buying a new pair of shoes, a handbag or that laptop you have wanted for over 6 months. You may also want to read the top tax tips for Aussies to help get the most out of your tax return.
Using your tax return to pay outstanding debts
It is kind of hard to start saving money when you know that you have debts that are wilting away at your savings via expensive interest payments. If you are like me, you will like the idea of saving money but can’t get past the notion that while you still have outstanding debts, how can you expect to feel good about your savings account?
The average Australian has over $3500 in debt owing (excluding mortgage debts and the like) according to News Ltd and yet we continue to refuse to pay down these debts as a result of continued credit spending. If the average tax return yields an extra $1000 into the hands of everyday Aussies, why not put the money towards that draining credit card debt? It will dramatically decrease the amount of interest payable on the card and reduce the time it takes you to pay it off by.
Frivolous spending and shopping with your tax return
This is likely to be the number one use of everyday Australians, we mean well but end up spending the money on everyday items like petrol, food and entertainment. I cannot convince you not to spend your money like this, but I can tell you that by saving the money, investing the money or thinking up other financial strategies to put your money to work – you will find yourself with more money to spend in the future.
Investing your tax return
I for one love investing my tax return. It normally gives me a good number to invest and put towards something with a high growth projection as I see it as money I will not need to touch for atleast 5 years. Options for investing tax returns include; Managed funds, Shares, High Interest Bank Accounts for those who are more conservative and some also pay it towards their mortgage (technically this is paying down your debt as talked about in point 1, but others see it as an investment towards property).
Saving your tax return
If you are going to save your tax return, make sure you look for the best possible interest rate available. I have quickly glanced at a number of the big 4 banks in Australia to check what rates they offer and they differ by nearly 2-3% – that is a big difference and a big potential drop in what you could be earning. Take a bit of time to find the best product for yourself and ensure that the rate is competitive. Is your current savings account not competitive enough? Change providers.
What are you doing with your tax return?
So what will you be doing with your tax return? We are looking for the most interesting ideas to further add to this article.
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