Getting your tax refund back is exciting, but as tempting as it is to splurge, consider other ways you can put that money to good use. It is easy to get caught treating your return as extra money when you shouldn't see it any differently than your regular paycheck. Give the money a purpose by thinking about your personal financial situation and determining your needs.
Emergency fund:
An emergency fund can make all the difference if a difficult financial situation comes up, acting as a backup in the case of an emergency such as losing your job or medical costs. Building an emergency fund with enough money to cover at least three months worth of expenses is a good starting point. Make sure the money is added to a high-interest savings account to utilise compound interest. If you are contributing regularly to this fund, adding money from your tax return can boost it above schedule.
Increase your nest egg:
Boost your super by making an after-tax contribution. For eligible low-income earners, the Government will match your after-tax super contributions with a maximum co-contribution of up to $500. It is important to note that caps apply to contributions made to your super in any tax year. These can depend on your age and whether you contribute before or after tax, so make sure you don't exceed these caps.
Make debt repayments:
With a bit more money at your disposal, now is the time to make repayments on debts you may have. Start with the higher interest debts and work down, as your interest repayments will drop when you lower your outstanding balance. These debts can be things like credit cards, personal loans, outstanding bills or mortgage repayments.
Treat yourself:
After being responsible and using your tax return to better your future, spending some of that money on yourself isn't something to feel guilty about. As long as you remember to live within your means and don't overspend, you should enjoy the rest of your money.
