Some interesting statistics:
- 77% of taxpayers are likely to get a refund this year
- Average tax refund is $3,630
Sources: Australian Taxation Office Annual Report 2013/14 & 2012/13)
What do people do with their tax refund?
- 31% - Saved it
- 24% - Paid bills
- 18% - Loans or credit card payments
- 11% - Home loan payments
- 7% - Holidays
- 7% - Other things (including engagement ring, education, car rego/tyres, party)
- 2% - household appliances
(Source: MoneySmart poll, September 2014 (n-2240))
Some Recommendations on effective ways to use your refund:
Reduce Debt Stress
You may have a mortgage, credit cards, personal loans or outstanding bills. Reducing any of these debts will remove unwanted stress, and of course overall interest that you pay!
You should concentrate on loans with higher interest rates like credit cards first. The savings can be substantial!
Invest in yourself
There are creative ways to use your tax return, without wasting it away!
You could consider investing in a gym membership for instance, or a new pair of running shoes, or even a personal trainer… chances are you will save on healthcare costs later in life!
Fixing or renovating parts of your house can also assist to improve your lifestyle, whilst adding value to your property in the mean time. It could also save you on repairs and maintenance in the future.
Invest in your future income earning capacity.
Invest in a course or some form of further education. This can increase your chance of getting into a higher paying job (and maybe even something you enjoy more!)
Building future wealth
We of course can’t avoid the probably most expected option, of investing for your future.
If you were to invest $2000 from your tax return in the first year, then every year after that invest another $2000, over 39 years the investment would increase to $240,000!
That’s only $80,000 of your money contributed, but $160,000 in compounding interest over the period. (this is assuming an annual rate of 5%).
Of course these are just average figures and don’t take into account a large number of variables throughout a persons life, or fees and costs. But it does illustrate the power of regular investing!
You may also like to make yourself feel fabulous by investing into someone else.
Perhaps a charity that is close to your heart, or even investing in your own children. Investing money into an education fund for your kids can be one of the most satisfying investments you can make.
We would love to know how you have, or intend to, spend your tax refund. Leave a reply below!