Lifestyle

Spend or save? What to do with your tax refund

With costs of living rising, every citizen can appreciate a bit of money coming in. For some South African’s this may be a reality as SARS announced it paid out R321 billion in refunds this past financial year.

Pippa Hudson spoke to senior tax specialist at Allan Gray Carrie Norden about the best things to do with a tax refund.

While there might be a temptation to celebrate this unexpected income by treating yourself to a fun purchase or a night out, it could be best to use this money in a way that has long-term benefits.

According to Norden, before you make any of these purchase its best to always check if these purchases are necessary and rather not make a frivolous purpose you could regret later.

The best thing to do is to treat the tax refund like any other income. Use some to service your debts, a portion to cover expenses and then if you can, use some for other spending.

If you are able to there are great benefits to invest the unexpected income, either into retirement planning or into an investment fund which can see long-term growth.

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A tax refund is a great opportunity to be able to increase your retirement saving pot in a tax efficient way… If you can afford to do so there is never any downside in increasing your retirement contributions.

Carrie Norden, Senior tax specialist at Allan Gray

When making decisions with any income, its always best to work out what your long-term and short-term financial goals and plans are so you can decide how best to utilise your funds to make these goals a reality.

To find out more, listen to the full audio above.

This article first appeared on CapeTalk : Spend or save? What to do with your tax refund

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