How to use your tax refund or bonus
Getting an unexpected inflow of extra money from a tax refund or bonus is exciting, and it can be tempting to spend it on spoils for yourself and others. While it’s important to enjoy your money, and treating yourself is reasonable, consider using (some of) the extra cash to serve your financial goals.
By being purposeful about how you use this money, you could extend its benefits. Here are some smart ways to spend your bonus or tax refund.
- Pay off your cards and loans
Before spending any more money, consider paying back money you owe on credit cards and other loans. Even if you can’t pay off the entire loan, paying towards it can put a significant dent in it.
The benefit: Having debt is a mental and financial burden; by paying towards that debt, you could reduce the associated stress. It will also reduce the amount of interest you pay over the life of the loan, and it could improve your credit score.
- Build your emergency fund
Having money available to cover unplanned and urgent expenses is crucial to ride out those unexpected and usually very expensive costs. If you haven’t quite built an emergency fund that gives you peace of mind, putting your cash windfall towards accessible savings will ensure you’re prepared and support your financial stability during uncertain times.
The benefit: By setting money aside for those moments in life that you didn’t prepare for, such as a car or home repair, medical emergency or even loss of income, you’ll have the peace of mind of being able to take care of those expenses without going into debt.
- Boost your retirement savings
Supplement your existing contribution and bump up your retirement savings with a lump sum ad-hoc payment, which you can make at any time. It’s an easy way to grow your money and set you up for the future.
The benefit: Taking advantage of compound interest means the higher your investment amount, the greater the potential for your compounding returns and growing your money.
TOP TIP
Put your tax refund or bonus money into a tax-free savings account to supplement your retirement savings.*
- Save or invest it
Put the extra money in your current investments to give them a boost or open a higher interest-earning savings account to help accelerate your money’s growth, benefit from compound interest and get to your financial goal faster.
The benefit: Having savings means you have financial options and you can pay for travel, a wedding, education etc. without going into debt.
- Upgrade your home
Using the extra money for maintenance or to make upgrades and repairs could increase the value of your home and resale potential. Painting, installing energy-efficient components, renovating etc. can lead to significant financial, functional and structural benefits.
The benefit: Besides increasing your potential property value and its impact on your financial stability, poorly maintained properties cost more to operate and are more vulnerable to additional damage, which will cost you more later or require you to take on unnecessary debt.
*Terms and conditions apply.
Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).
Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.