Russell Ward Finance Writer
With tax time behind us, 82% of Australian taxpayers are likely to have received a tax refund, according to the Australian Securities and Investments Commissions’ MoneySmart website.
If you were fortunate enough to get a surprise windfall, there are plenty of sensible things to do with your new pot of cash – from clearing your debt to saving the money for a rainy day. Rather than splurge your lump sum, here are five smart ways to spend that tax return.
1. Pay down your debt
Paying off debt is usually the last way people want to invest a bonus payout. Still, it’s important to pay something towards the variable interest rate home loan or high interest credit card debt, not doing so might hurt your financial situation later on. A smart strategy is to attack the more expensive debt first that is costing you money in terms of fees or interest.
2. Put extra into your savings
A savvy option for investing your tax return is to put some, if not all, of the money into a high interest savings or term deposit account, then use this money as an emergency fund or simply save for future expenses. With a bit of research, you can identify some great deals on new savings accounts and if you have a mortgage, consider putting the tax return into an offset account to reduce the overall interest you’ll pay on your home loan.
3. Top up your super
While the idea of retirement might be a way off, it’s never too late to top up your super with additional funds to ensure your fund grows in time for eventual retirement. Speak to a professional and find out how to make a personal after-tax contribution and transfer your tax return into your super to boost your savings and secure your financial future.
4. Invest in your passions
A sudden injection of cash can bring greater financial freedom to your life. Things that you previously thought were impossible can suddenly become possible. You might now be able to start a side-business or pursuit that wasn’t feasible and could potentially deliver future cash flow. Whatever you decide to do, consider the risks, plan well ahead of time, and always seek out professional advice.
5. Have fun and spend some of the money
Once you’ve allocated a portion of the money to your debt or savings, why not have fun with your cash because, after all, life is for living. You could put it towards an experience you always wanted to try but could never afford – that European travel trip you dreamed of or an adventure holiday here in Australia. Have fun with it but don’t spend it all at once!
About the author
Russell Ward is a professional business writer who has been published in The Huffington Post, The Telegraph, CEO Magazine, Global Living, Mamamia and Thought Catalog.
Please note that this article is not financial product advice and does not take into account any person’s individual objectives, financial circumstances or needs.