“How Should I Spend My Tax Return?”
Usually I use my tax refund to help fund a nice holiday, but that won’t be happening this year. I don’t want to just fritter it away. Any advice on what I could do with it instead?
- Maria, 56, Tamworth, NSW
I am a big believer in allowing yourself to take pleasure in spending. The last thing you want is to associate spending with guilt. A positive relationship with money is about saying, “I can do things for me now and I can look after my future self.”
If your tax return was already earmarked for fun, are there alternative ways to spend it that would give you joy? If you can’t come up with an immediate answer, consider putting the tax refund in a high interest cash account so it’s still there in 12 months or two years when you are ready to have some fun with it.
If you want to build on your money, a cash account is a better option than playing the sharemarket. The sharemarket works best for long-term investment, a 10-year-type time horizon, rather than a few months.
As you work out what to spend your return on, why not also give some thought as to what your values, priorities and goals are. I talk about this in my book, The Joy Of Money. Do you have any goals for the medium term that this money could help with? For instance, if you have been thinking about taking a course to learn a new skill, that is a great way to use your money, especially if the new skill can help you earn more or you make you more marketable.
If your tax refund is larger, say, $10,000 plus, using some of that money for your future self should be more of a priority. Still allocate an amount for having fun, but put some of the refund aside to pursue your life goals. That might include topping up your super, investing, upskilling and training, or even using it for health and wellbeing. Spending money on health and wellbeing can ensure that you have the energy to continue to work for as long as you want and need.
Kate McCallum is a financial adviser and author of The Joy of Money.
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