Got a tax refund? Good for you! Now put that bonus pay out to good use so you can reap the rewards for years to come. Read these tips to find out how you can be saving.
1 Got debt? Throw your refund at it
“Your first priority should be to pay off any existing short-term debt.” This could include debt on your credit card, an overdraft or a personal loan.”
Once your debt is cleared – well done! – direct the same payment amount you were using to pay off your debt into savings. “For example, a tax-free savings account. This money can be utilised for various needs such as setting up an emergency fund for use when your vehicle is damaged in an accident, needs mechanical repairs (if it is not on a maintenance plan) or should your medical aid be exhausted before the new benefit year.”
2 Make a dent in your home bond
If you’re a home owner, a bonus pay out from the tax man can make a great difference to your bond amount. “This can make a difference, especially in the tough economic times we are living in. Should there be an increase in interest rates, this will assist you insofar as not having to adapt to paying a higher bond installment that you hadn’t planned and prepared for.”
No bond, or your bond almost paid off? Divert those funds you’re used to putting away against your bond into a savings account or investment – it’s money you’re already accustomed to not spending!
3 Make early payments on school fees
“Firstly, you could pay off some fees in advance.” “Many schools offer you up to as much as 15% discount if you pay before the end of the first term. This means not only would you have paid your children’s fees in advance; you also get to save the money that you would have paid monthly for school fees in a tax-free savings account. This, in turn, will allow you to pay off your children’s fees upfront for the following year or you can boost their educational savings so that you won’t have to take out a loan for tertiary education.”
4 Bulk up your retirement fund savings
“The taxman wants to encourage and assist tax-paying citizens to save more for their retirement, so SARS offers tax deductions when you make contributions to your retirement annuity, pension or provident fund.”
“As from 1 March 2016, tax deductions for retirement savings increased from 15% to 27.5%. This means you can now save more for retirement and get back more from SARS as you would be a responsible tax-payer who is saving more for your retirement. This is allowed during the tax year and should be done before 28 February, before the new tax year.”
Source: Sanlam Reality.