>I filed my Australian tax returns in January when I was back home on holidays and will soon be doing my US taxes. I cannot explain to you the sheer joy of doing 2 tax returns (note the sarcastic tone)! Having to collate paperwork, get employer/investment documentation, health expenses across two countries is not something I look forward to. All I can recommend is to get a good accountant like I did. Anyway the good news from doing the tax returns is that I should be getting tax refunds from both my filings. This got me thinking about what I will do with the tax refunds. So based on personal experience and searching the web, here are ten ideas
1. Retire your debts. Put your refund towards the balance on high-interest credit cards or other outstanding loans
2. Start an emergency savings account. Financial experts recommend keeping a savings account with 3 to 6 months pay to cover emergencies
3. Save for a down payment on a home or new vehicle. If home or vehicle ownership is one of your long-term plans, a larger deposit will lower your monthly payments and interest costs
4. Save for education. Take a course that improves your professional career prospects or save the money for your kids future education expenses
5. Make an extra car or house payment. Just be sure there are no prepayment penalties and tell your lender to apply the extra funds to the principal balance, not the interest
6. Put the money in your superannuation (or 401K in the US). Make a post-tax contribution to your retirement account
7. Donate to charity. You’ll help someone in need, and the donation can be deducted on your future tax return
8. Consult with a financial planner. Make an appointment with an expert and do some long-range planning
9. Take a mini-break. Be careful not to spend all your refund on the holiday, but it is always nice to reward yourself and get away from your everyday routine
10. Invest the refund. Maybe not such a good idea in the current market, but keep the money in a high interest account for use when good investment opportunities come up
One word of warning. It is good to plan ahead, but wait for your refund to arrive before spending it. Don’t spend what you don’t have yet.
Do you have any other suggestions? I will soon be publishing a post comparing Australian and US tax rates with some interesting findings.
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