Tax season is here, and lots of South Africans will be submitting last minute tax returns. If you’ve done yours and are patiently waiting to see if you get a tax refund then before you start clicking ‘add to cart’ on those shoes you’ve been coveting, take a few minutes to think about what else you could be doing with that little tax-season gift. Here are five ways to use that extra money smartly and get yourself ahead of the game.
- Make a dent in your debt
It’s good practice to pay off the debt with the highest interest first, so use your tax refund to put some extra money into your home loan or car repayments. If you have debt on credit cards or store cards, you can also pay this off.
- Start or increase an emergency fund
Having an emergency fund of 3-6 months’ salary is always a good idea in case anything should go wrong. It isn’t unheard of for people to be made redundant suddenly or landed with unexpected medical bills. Having funds in place to cater for these emergencies can alleviate some serious stress in times of need. These savings should go in a separate account to the one you use for daily expenses – consider a higher interest savings account with a short notice period for withdrawals.
- Start a trust fund for University for your child
Put some of the money into a high interest long term account and keep it for higher education fees when your child leaves school. Over the course of fifteen years or so, you could save up quite a bit!
- Buy something you really need
Whether your car needs new tyres, your daughter’s winter coat was outgrown two years ago, or your bed creaks and hurts your back every time you move, there is often a “big” purchase hanging over us which we feel guilty about making, but actually really need. If there’s something that you really need to buy or replace, put your rebate towards it.
- Take out a life insurance policy
They’re not as expensive as you think and a comprehensive life insurance policy is the cheapest, easiest and safest way to make sure you plan for your family’s future and keep them financially protected in times of need. Even if something were to happen with you, a life insurance payout would ensure your kids could still go to University, your family could keep the house, and that they would be able to afford the kind of lifestyle you’ve worked so hard for.