15 Aug How to ‘spend’ your tax refund
Tax season is in full swing and if you are anything like me, you convince yourself that you will submit your returns long before the cut-off date in October, but religiously every year, you do it just a week before that! Get to it already!
This past tax season SARS paid out 1.82 million refunds to the value of R15 billion – you might just be lucky enough and get a piece of the pie this year.
So you can either buy another pair of shoes that you probably don’t need, go on an unplanned vacation so you can post all about it on Instagram or you can choose a less glamorous but rewarding option from the following:
- Build an emergency fund – because you never know what life will throw at you, having some rainy day money goes a long way. The rule of thumb is that you should have at least 6 months’ worth of salary put away for any type of emergency, this could be retrenchment, car breakdown or even illness etc.
- Invest for a comfortable Retirement. Put the money into your Retirement Annuity, better yet, if you do not have one, start one. Research shows that only 6% of South Africans retire comfortably, you want to be part of the 6%.
- Start a unit trust, tax-free savings account or Exchange Traded fund investment – either one of these investment vehicles is simple to setup and easy to access should you wish to. R500 is normally the minimum monthly amount required but you can make a lump sum contribution as well. You can do this through companies like e.g. Stanlib, Coronation, Allan Gray etc. and for Exchange Traded Funds (ETFs), SATRIX is a good platform.
- Pay off your debt – while this may not be the most exciting way to spend your tax return, the benefits cannot be ignored. You get to save on the interest charged, which can be quite expensive.
- Invest in yourself – buy books that will help you with your personal development, sign up for the gym…and actually go! Or register for that course you have been thinking of. The best investment you can make is in yourself.
Even though your tax refund might make you feel like you have just won the lottery, spending it purposefully is still the best way. Financial freedom comes only when one is disciplined and makes sound decisions about their money.