While Sars is compiling a response to the investigation into ongoing tax refund delays, let’s use the time to plan just how to spend the money…
How To Spend Your Tax Refund
Getting a tax refund can seem like free money. But consider for a moment that it’s basically an interest-free loan you gave the government, that you’re just now getting back.
Possibly late. That changes things slightly.
It’s your own money. Let’s put it to good use.
1. Splurge A Little
This may seem counter-intuitive to the premise we just set up. But, you’ve worked hard, you’ve filed your tax return diligently and on time – you deserve a reward. All work and no play is a formula for disaster. Even diets have a cheat day to keep morale up.
Money diets (i.e. budgets) should therefor have a cheat spend for the same reason, and this should apply to your tax refund as well. Take yourself out for lunch or treat a friend or partner to dinner.
Buy yourself something you want but don’t need; get a rug, a lamp, whatever. Just be silly, but remember that it’s a ‘little’ splurge – a small percentage of your tax return to treat yourself.
2. Pay Off Debt
Item one on the serious side of the financial discussion should always be clearing debt. Financial freedom doesn’t involve being tied to any creditors for life.
As a rule of thumb, it’s always good to pay a big chunk of money into your highest interest bearing accounts (e.g. credit cards, retail accounts, etc.) but if it’s possible to clear a smaller debt completely, go for it. The feeling you get from saying goodbye to debt, even just one account, is enough to make you approach the rest of your debt with vigour.
3. Tick A Maintenance Item Off Of Your To-Do List
We all have those items that have been lurking around our two-do list, giving us anxiety, for longer than necessary. Things like taking your car for that service that was due 10,000 km ago if you don’t have a service plan can be pricey. A cash injection from Sars would be well suited to that expense. Especially considering that a breakdown due to negligence could cost so much more.
Service the car, get a filling, fix your niggly geyser… Do now what you can to avoid big expenses down the line.
4. Save, Save, Save
Whether you’re plumping up your emergency fund, your retirement, you kid’s education; whatever you’re saving for now, you won’t regret later. Just like going to the gym, nobody reaches a savings goal and says: “I wish I’d rather spent that money”.
But rather than cater to every pressing expense first, decide beforehand how much of your tax refund you want to save and then save it. The longer you procrastinate on putting money out of reach the harder it will be and the more reasons you’ll find to spend it.
Make saving a fixed percentage of everything that enters your bank account immediately a principle rather than an option.