Personal-Finance

How to ‘spend’ your tax refund

2019-08-02 16:23

When the important things are done and out of the way, writes Mapalo Makhu, it’s time to have some fun; whether it’s a weekend getaway, spa day or trip overseas.

It’s that time of the year again; the tax season is officially in full swing. If you prefer the convenience of the SA Revenue Service (Sars) eFiling system, you can file from July 1 until December 4 2019, and for the taxpayer who wishes to file their income tax return at a Sars branch, you can do so from August 1 until October 31 2019.

For many, tax filing can be a daunting task and most people leave it to the very last day; I know because I have been there myself! But the sooner you get it done, the better. Whether you get a tax refund or end up owing Sars, doing your tax right now can ensure peace of mind.

For those lucky enough to get a refund, have a plan for those funds. Money that is not budgeted for has a way of “disappearing”, leaving you wondering where the money went.

Here are a few ideas of where you can direct your newfound small fortune:

PAY OFF YOUR DEBTS

Credit card debt, personal loans, overdrafts and the like are some of the biggest obstacles to a healthy financial life. With interest rates as high as 25%, carrying this type of debt can cripple your finances.

For this reason, taking a large bite out of your debt by using your tax refund is one of the best things you can do for yourself.

There’s also the added benefit that your credit score will improve over time, as you reduce your balance.

START A RETIREMENT ANNUITYOR TOP YOURS UP

With only about 6% of South Africans being able to retire comfortably and maintain the lifestyle they are accustomed to, having a retirement annuity (RA) is a no-brainer.

There are good tax benefits to having an RA too. You can contribute up to R350 000 in all retirement vehicles and get a tax break; so try to maximise this as much as possible.

If you have a pension or provident fund with your employer, don’t just make the assumption that this will be sufficient.

PAY FOR YOUR CHILDREN’S EDUCATION

We all know school fees come with a big price tag, so what a good idea to start putting money aside right now for next year’s school fees for your kids. It brings such relief, knowing that important things like school fees are taken care of months and months ahead of time.

And if you are comfortable and happy with your child’s school and you don’t plan on changing schools, you can pay in advance; most schools offer a 10% discount for fees paid a year in advance.

START AN EMERGENCY FUNDOR TOP YOURS UP

I can never say this enough – having an emergency fund is so important because you never know when a financial crisis might happen, so it helps mitigate that risk. Not being prepared financially for a crisis could mean you have to take out loans or go into overdraft, which would certainly set your financial journey back. Try by all means to save for an emergency fund into a separate liquid account, by putting aside either a set amount or a percentage of your income monthly.

INVEST IN SELF-DEVELOPMENT

No matter which stage of your career you are at, self-development is key to getting to the next level, whether it be studying further, putting money aside to finally start your business, signing up for a course or seeing a coach to help you get unstuck; it is all well worth it. Continually investing in yourself is one of the best ways to navigating your career and setting yourself apart from the rest.

RENOVATE YOUR HOME

Renovating your house or one of the rooms in it not only brings new life to your home but potentially increases its value. We all know that this can be an expensive exercise, so the “free money” can go a long way towards affording it.

HOP ON A PLANE TO JAPAN FOR THE WORLD CUP!

All I am saying is, when done responsibly, the options money brings can be a source of enjoyment. If the important things are done and out of the way, it’s time to have some fun. Whether it’s a weekend getaway, spa day or trip overseas, do it. Life and money is to be enjoyed!

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August 18 2019