Tax Refund – Spent already?

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Want to be sensible for a change?

Tax season opens in nearly a month and anyone that is expecting a refund from SARS is probably ready to go on the 1st of July. SARS are surprisingly quick at refunding you these days that refund could be in your account within days.

So, what are you going to do with it?

These refunds will have come from a number of different sources :- Over taxation at source (more common than you think), Retirement Annuity contributions, Medical tax credits etc. This is a windfall. Unfortunately like most other windfalls the money is quickly spent, usually on luxuries. Instead of getting a new TV, mag wheels, Jimmy Choos, here are some ideas to really make it work for you:

  • Put a R30,000 lumpsum into a TFA or TESA (New Tax Free account). This is your annual limit. It will take 16 years of these lumpsums before you reach your cap, but it could easily be worth R1.7m in 20 year’s time. READ HERE for more.

  • Top up, or start your emergency fund (3 months’ after tax income). Don’t make it too easy to access and don’t mix it up with other funds. Use a dedicated savings pocket, or if that is too tempting, open something like a Capitec account and lock the card away.
  • Add to your flexible investment. Use a provider that has a modern, easy to access system so you can do this quickly and easily – preferably one of the LISPs.
  • Plow it back into your RA ( retirement annuity)and get yet another refund. Warning: If you only have insurance platform RAs this could increase your penalties so rather use it to open a new one on a LISP where these penalties don’t apply, READ HERE for more on RAs.
  • Pay off expensive credit, and then cull your cards down to just one (that has the best benefits). Read HERE for more on good and bad debt. It is way better to do that than put it into your bond.
    Use it to upskill yourself. If you don’t keep learning and upskilling every day you’re going to get left behind. You need to protect that money generating machine – a sharp, energetic and skilled you. It isn’t cool to be clueless, invest in your future self.

 

Action: You have thousands of thoughts a day, so before a little twinkling becomes a mega-highway ‘forcing’ you into a purchase, start thinking about how to save your windfalls (not just tax refunds). Do the homework, get quotes ( we can help with that), find out the interest on all your debt, find out the best place for your emergency fund.
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Author Dawn Ridler  

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