How to Use Your Tax Refund Money Judiciously?
Most taxpayers will admit how tedious it is to prepare self assessment tax return and submit it before the deadline. Yet, many of us do not adopt any suitable plan for utilising our refund money properly. Read the article to find out how you can use your tax refund judiciously.
Though we anticipate for a refund from our tax returns, there is no doubt about the fact that we all fear the deadline. The esoteric forms, nearly undecipherable instructions and complicated financial situations do well in making every year’s return appear overwhelming. At present, many of us generally have the government hold our refunds for us after filing online tax return through some effective apps like Tax Return UK or directly via the HMRC website. However, there are many other ways we can opt for accomplishing our savings goal:
Paying Down Debt
If somebody has a high-interest debt on their credit card, they can use their refunds to pay it off and get great returns. This is because when credit card balance sinks, the interest on the debt goes down simultaneously. Based on the interest rate, one can save a significant amount through interests on any part of the credit card balance they wipe out every year. Thus, this simple act can help in saving hundreds of pounds in later finance charges.
Funding The Emergency Savings
In case an individual does not have any debt hanging over their head for purchases made with a credit card, they can do the prudent thing of putting their refunds into their emergency savings, which can help in meeting sudden vital expenses like unanticipated medical bills. A properly funded account of emergency savings can also eliminate the need to take loans at high interest rates from banks or credit card companies.
Saving For Retirement
This is another wise thing that someone can do with the refund they get after submitting their self assessment tax return . As per the state pension of £144 every week, a retired person can earn upto £25,000 a year as pension income if they have been saving £1000 every month since they were 30 years old. Therefore, investing in the retirement savings is anything but a bad way of using the tax refund money.
Starting A College Savings Fund
With the refunds received from filing tax return, one can even open an account to save money for the college tuition fees of their children well in advance. Time and compound interest would do their work on it and provide additional money for computers, books and other requirements when the savings are cashed out.
Although the above mentioned ways of using refunds may not seem attractive to some people, they can very well provide a significant amount of financial security if put to action.