Did you know that the average Australian receives a tax refund of $2,574?
If you are expecting this amount, you’ve probably had a bit of time to think about what you plan to spend it on. Well, we are going to give you some tips on what you could do with a couple of grand to tick a few things off your adulting list. No, we don’t mean having an affair. We mean all the things you envision a well organised and responsible grown-up should have sorted in their life and financial affairs.
Here are our top 5 tips.
- Kick start your emergency fund.
One of the fundamentals is to have an emergency or rainy day fund. No, this is not access to a credit card limit, it’s having genuine cash at call account that you only use for unexpected emergencies.
If you get into trouble, a high-interest-rate credit card debt won’t be helpful; it’ll just make everything worse. Once you have an emergency account, you can confidently start to wean yourself off any consumer debt such as credit cards and personal loans. Aim for at least $1,000 to be set aside at all times, if you are already on this path, aim to build it towards enough to cover 3 months worth of your essential living expenses.
- Pay off credit card debt
If you have an emergency account sorted but have high-interest debt, get ahead on your debt repayment plan and save yourself time and money by paying it off ahead of schedule which will free up more of your budget to build your wealth.
- Get a Will and Power of Attorney
Most people don’t have a Will, but all of us die at some point, we just never know when or how. Dying without a Will make an emotionally devastating situation that much harder for your loved ones. Even if your net wealth is nothing more than the sum of your loose change, the administration headache is massive and made that much worse if you don’t have a Will. To make it easier on your loved ones, have a properly drafted Will in place and make sure the important people in your life know where it is located, preferably with certified copies in hand.
Make sure to include a Power of Attorney (or the equivalent for your state or territory). If you can no longer make decisions for yourself because if you are seriously sick or injured, or even if you need something as simple as someone back home to talk to your bank or manage your affairs if you are in a pinch while overseas, it is that much easier if you have someone you trust who can legally act for you using a Power of Attorney. So rather than leaving this on your someday list, get it sorted, and enjoy the peace of mind.
- Pre-pay your big bills
Building up a “Big Bills” account and contributing to it regularly means that instead of paying bills month to month, you can afford to pay them in advance each and every year.
This has two advantages. The first is that some bills, particularly insurances (of any type) and things like car registration renewals cost less if you are able to pay annually rather than month to month. This will save you money.
The second is that it simplifies your banking in that you won’t have a gazillion transactions running through your account on a regular basis. The fewer transactions running through your account, the easier it is for you to keep an eye on your money and spending patterns and spot any unusual/fraudulent transactions. You’ll no longer need to stress anticipating large expenses each year. You can relax with the confidence that you have the money ready to go.
- Start or ramp up your side hustle
If you’ve got an idea that you’ve been meaning to kick off that could generate some extra revenue or it needs a little oomph to help scale it up, you can use your tax refund money to get it off the ground.
Perhaps you just need the money to get a basic website, or to purchase some Facebook ads to attract more or new customers. Or maybe you need to pay for training/certification or to seek professional advice in order to grow or get started. Whatever you do, aim to earn your money back, and more, as soon as you reasonably can.
Your tax refund can be a significant boost to tackle the 5 areas above. Once you’ve tackled the first 4 steps, you’re well and truly on your Money Madam path to making money your bi@tch!
