It’s tax time in Australia and for many people that can mean a refund. And that can feel like a bit of a win, or maybe even ‘free money’. Except that it’s not really, it’s actually your hard earned that the ATO have been keeping on your behalf.

So, if it’s a sizable chunk, before you fritter it away which, let’s be honest is easy to do, maybe stop a second and think about how you might put it to its best use.

Here are our top 10 ideas for what to do with your tax refund.

1.     Clear a debt

Although it’s not up there on the list of most fun thing you could do with your refund, it is possibly one of the most valuable. Clearing, or at least contributing to clearing, your debts will certainly help with any financial stress you might have experienced from outstanding debt – be they business or car loans, or a credit card debt. Best to consider starting with the debt with the highest interest rate.

2.     Save it for a rainy day

Well known money advisor Suze Orman often advises people to have a 6-8 month emergency fund (ie: what it costs you to live as you do now for 6-8 months). This represents your ‘just in case’ money – with just in case being sudden medical expenses, loss of a job, emergency travel to be with a loved one, etc. But of course few of us just arrive at that amount of money on day one of our emergency savings plan. So use your tax refund to start one and then figure a way to pay yourself something each pay period until you get there.

3.     Put it into your home

In a similar vein to the first two, you could always use it to pay down your mortgage – thus saving yourself potentially many thousands of dollars over the remaining term. Even if lucky enough to be mortgage free, there might be maintenance issues around your house that need resolving. And let’s face it, maintenance issues don’t improve with time.

4.     Education

It doesn’t just have to be your children – or kids in general – who have money spent on their education. Learning is a lifelong process, and investing in a course to help you develop new skills (such as learning a new language, coding, or taking a management course) might just be the ‘something extra’ that you need to advance your career or satisfy your desire to learn.

5.     Invest

Investing is one of those things that people often think they should do, but don’t want to spend the money needed to really reap the benefits. Your tax refund, could be the perfect amount of ‘extra money’ to get you started investing in the share market. Of course, as with all things financial, it’s best that you seek the advice of a qualified professional to make sure you’re aware of all the risks as well as the potential rewards.

6.     Give a little or give a lot donating to your favourite charity

A little different to all the other items on this list – but donating to a charitable cause you care about deeply could offer you some real ‘feel good’ that comes from doing good, and it’s likely do a lot of good wherever it goes.

7.     Contribute to your superannuation

Your superannuation contributions may already be tracking along nicely (or you may have reached your cap – in which case be careful about paying in more and get professional advice first). But if you’re still working towards a more comfortable retirement, putting your refund into your superannuation could be the extra boost your fund needs. And time and compound interest (even at lower levels) work wonders when put together.

8.     Buy insurances – life and/or income protection

Another long-term consideration is insurance. Sure, it’s a bit morbid and it’s certainly not as exciting as investing, or even paying down your mortgage, but if disaster strikes, you and your family will be relieved that you’ve not just thought about it, but that you’ve actually done something about it. Consider it an essential part of your financial wellbeing – ensuring protection of your greatest asset – you and your ability to earn a living. That and the fact your family will be looked after in the case of an emergency.

9.     Start your own business

What better way to utilise your windfall than to invest in yourself by starting up your own business. Maybe you’ve been thinking about doing it for a while, but weren’t sure where your startup funds would come from. Just make sure before you start spending, that you have a plan for what comes after set up.

10. Take a holiday

Finally, if you’re feeling confident you’ve got debt, savings and investments under control, a holiday might be the best course of action to take. It’s important to recharge, not just continually keep forging ahead – that can cause burnout.  Consider a getaway, either to somewhere quiet and peaceful or to somewhere you’ve always wanted to travel to, could boost your morale and give you renewed energy for what’s ahead.

If anything above resonated with you or you’re looking for tax or business advice, we’d be delighted to talk to you! You can always give Kerry a call on 6023 1700drop us a note or connect with Kerry via LinkedIn.

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