When you pay more tax than you owe, the South African Revenue Service returns the overpayment as a refund. People often see tax refunds as bonus money, but actually a tax refund is money that should have been yours all along!
If you’re expecting a tax refund this year, it’s good to have a plan for what you’re going to do with it. That way, you’ll be able to use your refund for something that’s valuable in the long run instead of wasting it on something frivilous.
Here are 8 ways to use your tax refund wisely:
1. Pay outstanding bills
Use your tax refund to get up to date with as many of your payments as possible. This includes paying off outstanding services bills like water and electricity.
2. Pay off some debt
If you have more than one overdue account, you can use your tax refund to help pay off the one with the lowest amount – that will mean one fewer account that you owe interest on.
3. Start or increase your retirement fund
It’s really important to plan properly for your retirement, even if it seems to be still a long way off. Putting your tax refund into your retirement fund can help to boost your savings.
4. Start or increase your rainy-day fund
When you have a crisis, it helps to have a bit of extra cash saved up. You can use your tax refund to make a significant deposit into your rainy day fund.
5. Pay school fees up front
You can use your tax refund to pay the school fees for the next few months or terms. Many schools offer a discount if you pay in advance.
6. Invest in your own education
Learning new skills is a great way to boost your career prospects. Use your tax refund to pay for any classes or courses that you’d like to take.
7. Put aside some money for upcoming extra expenses.
If you’re going on holiday soon, planning a wedding or know there’s something else coming soon that will take a toll on your finances, your tax refund can help you get through it without going into debt.
8. Do some home improvements
Home improvement projects can increase the value of your home. You can use your tax refund to pay for some renovations that you need done.