‘Tax refund mentality’ is an interesting thing. Most people see tax refunds as great, afterall, the idea that you may be getting money put into your account takes away some of the pain associated with getting your tax return completed. However, a refund just means you have overpaid on taxes and given the Government an interest-free loan for a year, rather than saving or investing that money for your personal financial benefit.

Getting a couple of hundred or even thousand dollars back is exciting. Once you see the money come into your account it can be difficult not to go and blow it on some new tech, clothes, designer items or something that you’ve been wanting to splurge on for months but simply haven’t had the money. While blowing your tax refund on yourself may seem like a great way to reward yourself, there are some smarter ways to utilise your tax refund which can also improve your financial situation.

Invest in your home
From small to large projects, renovations can add value to your home as well as make it more liveable. Upgrading parts of the kitchen, a fresh coat of paint, freshening up the bathroom or some landscaping; these all can add value to your property. Little renovations that cost under $1,000 like DIY painting your home, replacing the mailbox, a new bathroom vanity or pressure cleaning your patio - these are often put off because we don't have the spare funds lying around to complete the renovation. Using your tax refund to complete and tick of those often forgotten renovations or maintenance jobs may help add value to your home or prevent expensive problems down the track. However, it is important to stick to your budget and make sure that what you decide to renovate will add value to your property. To learn more about this topic read our other blog: 5 home renovations that actually pay off! https://www.actonadvice.com.au/resources/blog/86-under-the-roof/293-5-home-renovations-that-actually-pay-off?highlight=WyJyZW5vdmF0aW9uIl0= 

Top up your savings
While putting your tax refund straight into savings may seem boring, future-you will be thankful! Having readily-accessible savings to deal with those unexpected life events that inevitably pop-up goes a long way to contributing to peace of mind. Whether it is an overseas family emergency or your car suddenly dying, your savings account will be an absolute blessing it these situations. Furthermore, you can research and organise to put your tax refund into a savings account that earns you interest. A term deposit is another option. One benefit of a term deposit is that because the money won't be accessible for a fixed period of time the temptation to spend your tax refund will be removed.  

Look into investing
The Australian Securities Exchange (ASX) has more than 2,000 companies listed. Talking to a financial advisor can help you understand the opportunities and complexities that come with investing in shares.

Deal with your debt
There is ‘good debt’ like taking out a mortgage that allows you to grow your wealth and make money; and then ‘bad debt’ like big credit card bills or car loans. When it comes to ‘bad debt’, for many people this can be a huge stressor. Denial, stress, resentment and anxiety are often part of the emotional baggage that comes with this debt. Whether it’s paying off all of your debt in one go, or just slowly chipping away at it; using your tax refund to reduce debt can be a step in the right direction. If you need extra motivation, just add up how much you are paying in interest! Think about the joy you’ll feel when you no longer have to throw your hard earned money at a debt, and instead can focus on wealth creation strategies.

Speak to our friendly team at ActonFinancialPlanning about wealth creation strategies that might be suitable for you.

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