6 clever ways to get your tax return to work for you
Expecting a decent tax return this year? It could be tempting to scoot off on a holiday or revamp your wardrobe – but if you’re keen to secure your financial future, consider these six options instead.
1. Downsize your debt 🔻
The greater your debt, the more interest you’re likely to pay. Plus, the interest rate to borrow money is usually higher than the rate you earn on a savings account. So, if you have some spare cash lying around, you may want to consider paying off a chunk off your debt instead of putting it into your savings (if you have a healthy emergency fund already).
Got more than one debt? Start with the one with the highest interest rate or associated fees, then work your way down. Or consolidate your debts into one, potentially scoring a lower interest rate in the process.
2. Hide it away in a high interest savings account 🙌🏻
Don’t have any debts, or want the option to use the money in the future?
You could pop it into a savings account with a high interest rate or take it one step further with a term deposit. Term deposits remove the temptation of spending your savings, as they’ll be safely locked away for a fixed length of time.
The emphasis here is on a high interest rate. If you leave the proceeds of your tax return in a savings account with a low interest rate it may actually lose value over time – because the inflation rate is so high right now.
3. Establish or expand an emergency fund 🚑
Everyone needs an emergency fund. It’s a special savings account to draw on when something unexpected happens and you’re unable to work – like losing a job, getting sick, or needing to care for a loved one.
Ideally, your fund should contain three to six months’ worth of living costs.
If you’ve already got an emergency fund, top it up. If you haven’t, use your tax return to get it going.
4. Banish your buy now pay later bills 👗
Now is an especially good time to pay down your buy now pay later accounts.
First, you’ll avoid missing repayments and their accompanying late fees.
Second, you’ll get ahead of proposed changes in regulations, which are likely to see buy now pay later treated more like traditional credit products.
5. Use it on your utilities 💡
Utility bills, along with other living costs, are likely to keep rising over the next year.
Get on top of them early with your tax return – by either paying in advance or setting up a dedicated account.
6. Hit your HECS debt 💥
Your HECS debt increases annually in keeping with the inflation rate. So, this year many debts will jump up significantly in line with the current high inflation rate.
Your tax return could be a golden opportunity to put a dent in your HECS debt. Read our blog here to help you decide if this is the right move for you.
Money-smarting your future
As seductive as it might be to splurge your tax return on a shopping spree, using it to put yourself in a better financial position will give you greater peace of mind – whether that’s from knowing you’ll have the money to pay your utilities all year-round or looking forward to reaping the rewards of a high interest savings account.
The information in this blog article is provided by MONEYME Financial Group Pty Ltd (ACN 163 691 236, Australian Credit Licence 442218) and SocietyOne Investment Management Pty Ltd (ACN 604 960 018, AFSL 477365). It is intended to be factual information and not financial advice. If this blog article does contain advice, it has been prepared without taking into account your objectives, financial situation or needs. Before you act on any such advice, you should consider whether it is appropriate to your individual circumstances.