Aussie’s all around the country are eagerly waiting for their tax refund. For some people that means scraping together enough to pay their tax bill for the year. For others, it means a nice juicy tax refund. If you’re in the latter category, don’t be tempted to go out and spend it all at once. Here’s why.

Yes, you’ve worked extra hard this year and you deserve a treat. Or it’s been a really tough year for you and you deserve a treat. It’s not hard to justify either. You got yourself a promotion, started a new business, or overcame some difficulties. Well done.

We’re all for treating ourselves for surviving another year, but we’d encourage you to think again before spending your ENTIRE tax refund on something you wouldn’t have otherwise bought.

It might feel like free money, but it’s really not. The ATO isn’t giving you a handout as a favour; it’s just refunding what you overpaid in tax during the year. Think of it as a savings scheme you didn’t have any say in.

Your tax refund is YOUR money that YOU earned.

Now, we don’t want to earn a reputation as spoil sports but we DO care about helping you make good financial decisions. If you’re dreaming of the holiday, new shoes or gadget you could buy when your tax refund comes through, we have a few other suggestions for you to consider.

Got any debt?

It’s certainly not as fun as a week in the sun somewhere, but paying down some extra debt on your loan or credit card will be worth a whole lot more to you in the long run.

If you bite the bullet now and put that money towards paying down your debt, your interest bill will immediately drop. That means then when you make your regular repayment the following month, more of that money is paying off your debt rather than paying interest.

The cumulative result is you’re debt-free sooner and pay much less interest over the life of the loan.

Could you even clear your debt?

If your tax refund is enough for you to clear your credit card or loan debt completely, surely that’s a no-brainer?

Even better if you take it one step further and start saving the money you would have usually put towards loan repayments. You’ve been living without that money up until now, so you shouldn’t miss it if you keep setting aside the same amount each month. But instead of it lining your bank manager’s pockets from never-ending interest and charges, it’s piling up in YOUR account ready for you to invest.

Think about it: by this time next year you could have a slightly worn pair of shoes or distant memories of a holiday but the same pile of debt you have right now. Or you could have a few grand with your name on it. Which would you prefer?

How about investing?

Interest rates are great at the moment, so once you have built up some savings you might look at ways to put your money to better use. Shares, property, super and fintech are all possibilities that open up to you at this point. And owning an investment property or having shares in a new startup is, arguably, much more impressive than owning the latest model of phone.

This is all about thinking long-term and delaying instant gratification in order to set yourself up better for the future.

But I don’t have any debt…

If you’re in the happy position of having no debt in the first place, good for you! But the same principles apply. You COULD spend all your tax return money and be no better or worse off, but think about the opportunities it could open up if you used it more wisely.

Consider your long-term goals… Start a business? Buy a house? New car? How far would that tax refund money get you towards that goal if you just saved the whole lot?

Really, you have to decide what’s more important to you – being able to buy a house a year sooner or having a bigger TV now.

Scale it back

Is there something smaller you could do or buy to reward yourself for your hard work this year without blowing it all? A night out or a spa day instead of a full-blown holiday, maybe?

We’ll say again that your tax refund isn’t a gift – it’s money you earned. Being a little bit sensible with it now will deliver some serious rewards in the future.

So, if you’re lucky enough to have a lump sum coming your way soon, why not speak with us? We’ll help you work out how you can put it to good use and never look back.