The start of July marks tax time, where most people look forward to receiving (or spending) their tax refund. With the average tax return of $2574, tax time could mean a boost to the bank account, injection into paying off debts or a chance to invest – looking after your future self and boosting your financial future.
With the financial year that has just been, this tax time might be the perfect time to grab a bargain on those things you have been eyeing off, or a good time to kick-start your emergency fund to be financially prepared when life just happens!
In the spirit of tax time, MyBudget has put together 6 ways to make sure that YOU get the most out of your tax return this year.
Don’t feel guilty about spending your tax refund, it could be a good time to take advantage of those EOFY sales and pick-up those things you really need – while saving yourself money. And don’t be shy to ask for a cash discount on those big spend items.
Reduce your credit balance
Do you have a credit card balance? Tax-time could be your lucky break. Consider this: To pay off the average credit card balance of $3200 by making only minimum repayments, it would take you over 26 years and more than $10,000 in interest charges (ouch).
But if you were to pay a lump sum off your balance equal to the average tax refund ($2574), you would halve the total repayment time and save over $7000! Wow. That’s because paying off your credit card balance is the equivalent of earning savings of 18 to 19% interest per annum.
Pay it off your mortgage
Imagine we told you that you could double this year’s tax refund over the life of your mortgage. Well, you can. On a 30-year $400,000 mortgage at 3.08% per annum (average variable interest rate at 1 March 2021) making a single lump-sum payment of $2574 could save you around $3600 over the life of the loan.
Not bad, but we can hear you thinking “$3,600 over 30 years isn’t exactly earth-shattering”. Fair enough. Then consider this instead: If you were to take the same mortgage and make an extra $2574 lump sum payment into it every year for the next 10 years, you’d cut multiple years off your mortgage and save around $25,000. That’s a lot of holidays.
Couple that with a meagre 0.5% reduction in your mortgage interest rate and you could save nearly $40,000 more.
Create an emergency fund
This tax time could be your calling to start up an emergency fund. This safety fund can be the difference between having cash to fall back on or going into debt. If the dog needs surgery, your car breaks down or if life just happens, you can save yourself from financial stress by kick-starting that emergency account.
Boost your super
You don’t need a financial advisor for this one! Most working Australians have a superannuation account, so why not make a lump sum investment into your superannuation – it is the perfect way to save money while you’re working.
All the above
Don’t know which strategy to commit to this tax time? Why not consider combing some – spend some, repay some debts and invest the rest into your super.
Wondering how to put your tax refund to the best use?
MyBudget can help to design a customised budget plan that shows exactly what you can achieve with your money over the next 12 months and beyond.