It’s July, and you have received your PAYG Payment summaries. Now it’s time to lodge your tax return and potentially receive a refund. The Australian Taxation Office issues an average refund of just over $2800. However, it’s important to remember that this isn’t a windfall; it’s simply money that you have overpaid throughout the year. The question is, what will you do with your refund? Here are six ways you can use your tax refund to your advantage.
Pay off your Loans
1. Pay off your home loan: Paying off a lump sum of your home loan is a smart way to use your tax refund. When you make a lump sum payment, you’re reducing the principal amount of your loan. This means that the monthly interest payments you make will also decrease. Not only does this help you pay off your loan faster, but it can also help you save money on interest charges over the life of the loan.
Reducing your home loan balance can also have other financial benefits. For instance, if you have a variable interest rate, you might be able to negotiate a lower rate once you’ve reduced your loan balance. Furthermore, having a lower debt-to-income ratio can also make it easier to access other forms of credit, such as a personal loan or credit card. Ultimately, using your tax refund to pay off a portion of your home loan can put you in a better financial position overall.
Self-Education
2. Invest in self-education: Investing in self-education is a great way to use your tax refund. Whether you choose to take a course that will help you advance your career or learn about a hobby or passion, the benefits of education are numerous. For example, improving your skills and knowledge can make you a more valuable employee, leading to promotions and salary increases. Additionally, learning new things can help you develop new interests and passions, which can enrich your life outside of work.
Investing in self-education doesn’t have to be expensive. You can find many free or low-cost resources online, such as podcasts, webinars, and online courses. Alternatively, you might consider attending a local workshop or conference. Whatever your approach, the key is to focus on learning something that will help you achieve your personal or professional goals. By investing in yourself, you’re not only improving your earning potential, but you’re also enriching your life in meaningful ways.
Pay into Your Super
3. Contribute to your retirement: Making a voluntary contribution to your super fund with your tax refund is a smart financial move. Superannuation is designed to help you save for your retirement, and by making extra contributions, you’re boosting your retirement savings. Depending on your income and the amount you contribute, you may also be eligible for a tax deduction, which can help reduce your tax bill.
By contributing to your super fund, you’re also taking advantage of the power of compounding interest. Even small contributions can grow over time, thanks to the magic of compound interest. The earlier you start contributing to your super fund, the more time your money has to grow, meaning you’ll have a larger nest egg when you retire. While retirement might seem far away, it’s important to start thinking about your long-term financial goals early on.
Donating
4. Make a charitable donation: Making a donation to your favourite charity is a great way to use your tax refund for a good cause. Not only will you be supporting a cause that you care about, but you’ll also receive a tax deduction for the following year. This means that you can reduce your taxable income and potentially receive a larger tax refund next year.
When choosing a charity to donate to, it’s important to do your research. Look for a charity that aligns with your values and has a good track record of using donations effectively. You might also consider donating to a smaller charity or a local cause, where your donation can have a more direct impact. Whatever cause you choose to support, the act of giving can be incredibly fulfilling and can help you feel more connected to your community.
Take Care of Yourself
5. Take care of Yourself: Using your tax refund to take care of yourself is another wise option. Many people neglect their health because they simply can’t afford to go to the doctor or dentist or pay for a gym membership. With your tax refund, you can use the money to invest in your physical and mental health. Schedule a check-up with your doctor or dentist, and ensure that you’re in good health. Book a massage or attend a yoga class to help reduce stress and tension in your body. Alternatively, invest in a gym membership or hire a personal trainer to help you meet your fitness goals. Remember, a healthy body and mind can lead to a more productive and fulfilling life.
In addition to physical health, your tax refund can also be used to invest in your mental health. Consider seeing a therapist or counselor to help you work through any issues or challenges you may be facing. Taking care of your mental health is just as important as taking care of your physical health.
Splurge
6. Splurge a Little: After all your hard work, you may feel that you deserve to treat yourself. There’s nothing wrong with using your tax refund to splurge a little and do something that you’ve always wanted to do. You could take a mini-vacation to a nearby city, book a spa day, or even just indulge in some retail therapy. The key is to make sure that you don’t spend all of your refund in one place. Set a budget for how much you’re willing to spend on this splurge and stick to it.
You could also use your refund to invest in something that will bring you joy in the long term, such as a new hobby or skill. For example, you could use your refund to purchase a camera and start learning photography or buy a musical instrument and start taking lessons. This way, you’re investing in something that will bring you happiness and fulfilment for years to come. Just remember, while it’s okay to splurge a little, make sure you’re being responsible with your money and not overspending.
What are your plans?
Have you thought about how you will spend your tax return this year? While it can be tempting to splurge on something fun, it’s important to consider how you can use your money to your advantage. There are many smart ways to use your tax refund that can help you achieve your financial goals, improve your health and well-being, or invest in something that will bring you long-term happiness.
Consider the suggestions mentioned above, such as paying off debt, investing in self-education, making a contribution to your retirement fund, donating to charity, or investing in your health and wellness. You could also set aside a portion of your refund as a “fun fund” and use it to treat yourself to something special.
We’d love to hear your thoughts on how you plan to spend your tax return this year. Do you have any other ideas or suggestions that you’d like to share? Leave a comment below and let us know! Remember, your tax refund is your hard-earned money, so make sure you’re using it in a way that will benefit you in the long run.