If you are employed by someone else it’s likely you either have or are about to have your taxation return completed. Now, whether its $500 or $25,000 you need to have some kind of plan for the money. If not, it will somehow be spent over the post-refund weeks and you will wonder what happened to it.
Here are some ideas for you to think on and perhaps you can see a real benefit from the money you receive.
First, spend some. Yes, spend it. Not all of it of course but by spending just a portion you might just avoid those nagging feelings of unfairness that it’s your money and why does it all have to go to sensible things. So, take 10% and no more than 20% and go buy something for yourself. Then make some decisions about the rest of it.
- Pay it: Choose any loan or credit card with the highest interest rate and pay it off. If you have a credit card owing say $4,000 that you never seem to pay off then over a year it could be costing you between $600 and $1,000 in interest. Not only that but the monthly payments of $120 are back in your pocket as well.
- Save it: if you are on a wage at the moment and don’t have an emergency fund of cash available (and I mean emergency) then maybe now is the time to start one. Open up an account that you cannot access with an ATM card and start putting cash aside until you have around 3 months of basic expenses like mortgage payments or rent, food and electricity. If for some reason you lose your income for a period of time, this fund will be your saviour.
- Pay it: If you have a mortgage then now is a great time to be reducing it as much as possible. With mortgage rates below 5% every extra dollar you can pay toward your mortgage will benefit you. Remember this, if interest rates were to rise 2%, then a $400,000 debt will cost you an extra $700 a month, for the same house.
- Put it down: Is it large enough to consider investing? As little as $1,000 can be invested into a range of managed funds to start you off on a path to wealth building. You might start saving for a deposit on a property by investing it into these types of funds to begin with or simply open a high (as high as you can get) savings account. If it’s large enough, you might even want to consider using it as a deposit for a property.
Of course there are plenty of other ideas, the key is to actually have one at all. Paying down $500 from your mortgage or credit card may not seem much now but it can make a real difference.