Don't Waste Your Tax Refund

Understandably, most of us get excited about tax time (once it’s done of course). And with good reason as many get handed back some money.

Here’s our simple 3 step guide to help you deploy any refund money you get:

1. Go to your Money Plan and review, or write down (then review) your financial priorities
2. Take stock of your finances I.e. check if anything is out of whack and needs help
3. Take action using your refund to either put out fires or progress your financial priorities

Getting clear on where your money needs to go, or where your money should go, will help you avoid wasting this money. It seems to be human nature to waste money, but don’t forget, you worked for the tax refund, it’s only fair you now let your money work for you.

Don’t forget this… having a plan for your money is near essential. Please follow the 3 steps above and your future self can thank you for it.

And just to be clear, getting a tax refund isn’t your right and it isn’t the accountant’s fault if you don’t get one (more the opposite to be honest). You get the refund because it was determined you had paid too much tax throughout the financial year. If you don’t get a refund that’s simply because you didn’t overpay tax. The only people who want to overpay tax are those of us who haven’t learned the art of saving, and therefore rely on this refund as a savings mechanism.

Here’s some ideas to get your juices flowing…

Christmas is approaching

Whilst presenting last week, we were reminded that Christmas is only about 11 pay checks away. If you are one of the many people who usually experience a financial hangover after Christmas, then maybe your tax refund needs to be locked away to help fund this year’s Christmas.

Pay off silly spending

What’s that, you’ve got credit card debt? Okay, so it’s no surprise that you’re not alone, although we wish it wasn’t the case. Take this opportunity to clear your credit card debt and then keep it that way. Everyone wants the best financial return, well here it is, pay off your credit card that is accruing interest at 20% and its not tax deductible! Here’s a crazy thought… how about you then cut up the card and see what happens without it.

Invest in your safety net

If you want to invest, aka build financial wealth, the first place you need to start is to stock your Rainy Day fund. We know, this is boring. BUT, without a stocked Rainy Day fund things can quickly unravel and you can find yourself in a situation where you need to sell investments to address spot fires. There’s only one thing worse than a poorly performing investment and that is a poorly performing investment you have to sell, locking in the capital loss. The salt in the wound is then to watch the investment rebound (as they nearly always do) and you’ve jumped out to pay for an unforeseen expense because you didn’t have your Rainy Day fund stocked. As we said, it’s boring but hugely important to ensure strong foundations for your financial house.

Now invest to build wealth

Okay, so Christmas has been funded, there’s no credit card debt and you’ve got your Rainy Day fund fully stocked (well played!). Now its time to invest. What are you investing for? Are you saving for a home deposit, are you looking to build long term wealth by boosting your super? Get clear on what the end game is for your investment and it will help you work out what the first step needs to be. Investing is actually quite simple once you have the tools to take action. If you are unsure here, we encourage you to check out our investing module within the Wages to Wealth program. It lays it all out so anyone can become a guru.

Last and most important – you!

Don’t forget to invest in yourself! The purpose of financial planning is to ensure you have enough money to live your life now and later on when you might not be earning money. So whilst investing for your financial future is really important, it needs to be balanced with investing for you today, tomorrow and next year. Research suggests that the best way to invest in you is to purchase experiences and help others. Work out how best to invest in you and start putting the money into the right places to make this happen. Your tax refund can be the perfect jump start you might need.

We hope you are now armed to invest your tax refund smartly. As always, shoot us an email at [email protected] if you need a helping hand.

Cheers,

Dan and Dave