Are you expecting your tax refund within the next six months? If yes, accept my hearty congratulations!!! However, you should ensure you have a plan on how to spend the money before it comes. I am sure you are not planning on throwing a party to celebrate. If you are, stop the plans now.
Rather, I suggest you spend the refunds for a worthy cause. Something you will forever remember for good.
1. Add to your emergency fund or start one
If you don’t have an emergency fund, it only takes one major and unexpected expense to turn you into a debtor. Finance experts suggest that at least six months’ worth of savings should be available in your emergency fund account and it must be easily accessible to you.
Also, where possible, the account should be yielding interest. If you are using just a tiny portion of your paycheck, it would you some years before you can accumulate an amount close to your tax refunds. Why not use your tax refunds to make a significant addition to your emergency fund account?
2. Give to charity
When you are on a tight budget, it can be very difficult to make charitable donations. Your tax refunds are an opportunity for you to give to charity. Make good use of it. One of the best ways to give back to the society is through charity.
3. Set up a new business or fund an existing one
If you have an existing business that needs some financial injection or you have been looking for a startup capital for a new business venture, your tax refund might just come in handy for this purpose. This allows you to turn your refund into an income generating venture. See more.
4. Improve your home or refinance your mortgage
Is there a need for you to refinance your mortgage? A refinance of your mortgage means you still have to pay closing costs. But you can save thousands of dollars per year on mortgage interest by using your refunds to pay for the closing costs.
If there is no need for you to refinance your mortgage, determine whether or not your home needs an improvement. Through home improvement, you can make your home more comfortable as well as increase the value of your property.
Here are some ways you can improve your home;
- Buy new energy-efficient appliances. This will reduce your utility bills
- Upgrade your kitchen
- Replace your old roof
5. Open a brokerage account
If you are interested in managing your stock portfolio by yourself, index funds or ETFs is your best option.
The expenses are low and the diversification is instant. Rather open a tax-sheltered account, opening a brokerage account with a discount broker is not a bad idea. You can choose mutual funds, conservative investments or diversified investments (they usually have low expenses). If you have maxed out your tax-sheltered account, you can also consider opening a brokerage account. I suggest you talk to your financial advisor to explain each option for you more clearly. Check out this site: https://www.taxreturn247.com.au/get-started