Top tips to make the most of your windfall
If you get a tax refund, bonus or inheritance here are some smart ways to use this money that will give you long-term benefits.
You could use this money to pay off any short-term loans or credit card debt you have. Or, you could use it to reduce your personal loan or mortgage.
Pay off higher interest debts like payday loansor credit cards first.
If you have more than one credit card, pay off the one that charges the highest rate of interest or the smallest debt first. For more information, see our webpage on how to pay off multiple credit cards.
Paying off debts means you’ll pay less interest and save money. Find out how you can reduce your debts faster by making extra repayments.
Work out how much you’ll save in interest by making extra repayments.
If you don’t already have one, start an emergency savings fund. Open a high interest savings account and, if you can, aim to build up 1-3 months’ worth of living expenses, so the next time life throws you a curve ball, you’ll be ready to face it head on.
Compound interest will help your money to grow. For example, $3,000 in an account earning 3% interest would grow to $3,485 in 5 years’ time. If you deposit extra money into this account, your savings will grow even faster.
See how compound interest increases your savings.
Take a look at our tax refund infographic to find out the average refund and how people spend it.
Making extra contributions to your super can really boost the amount of money you’ll have to live on when you retire.
If you’re on a low income, the government will match your after-tax super contributions with 50c for every dollar you contribute, up to a maximum of $500. For more information on boosting your super see super contributions.
Work out how contributing more to super can affect your final super payout.
Investing your windfall can help you grow your money and keep it safe. If you choose to invest, make sure you take the time to consider your investment goals.
If you’re new to investing, our section on investing smarter is a great place to start.
If you would prefer to rely on professionals who are skilled in making investment decisions, you might consider a managed fund. These types of products give you access to a range of investment types with the benefit of having a professional investment manager choose which individual assets to invest your money in.
For large amounts of money, such as an inheritance or a redundancy payment, you might consider getting professional financial advice. An adviser can help you develop a plan to make the most of your money.
We have tips on what to look out for when you are choosing a financial adviser.
Publicly committing to your goals is a great way to motivate yourself to achieve the things you’re aiming for. Decide how you’ll use this year’s tax refund to boost your finances, and share it on your own Facebook page.
I commit to making the most of this year’s tax refund, instead of spending it on something I don’t really need. SHARE TO Facebook
You could also follow MoneySmart’s Facebook page. It’s a safe and supportive community that will encourage you to stay on track to reach your money goals.
If you don’t use Facebook, or would prefer to make a commitment another way, why not write it down on a post-it note and keep it in a place where you’ll see it everyday.
This could be:
Alternatively, set a reminder in your calendar about your tax refund commitment when you lodge this year’s tax return.
Think through your options and use your windfall to give you a real financial boost.
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at www.moneysmart.gov.au/life-events-and-you/life-events/getting-a-tax-refund-bonus-or-inheritance
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