Are you average?
According to Moneysmart.gov.au , the average tax refund is $2,574.
However, this is important to remember, EVERY taxpayer is different. There are many factors that go into determining your refund. How much you earned, how much PAYGW was withheld on your behalf, Private Health Insurance coverage and rebates, how many children you have, single or partnered, even where you live, are included in the calculation of the amount of tax you should pay.
Now, many of us Math Geeks know that averages can be a funny thing, and may not necessarily display the true picture of what is occurring in the real world. But for this exercise lets just go with that number.
How would you spend the average refund?
Having got all of the fine print out of the way, as Tony Barber on Sale of the Century (google that kids)…”Let’s go shopping”.
Let’s take a look at what the average refund can buy you.
Imagine saving every tax refund you receive…
After 10 years, you would have a nice little nest egg to put a deposit on a house (again, many factors go into house deposits and obtaining mortgages, we are not getting into this one today), a month long holiday for two in Alaska and Canada, shout your family to a cruise vacation or holiday at an all inclusive Fiji resort (highly recommended).
The Spending Traveller
Let’s have a little fun, and get out of town for a little while.
Here is an example of where the average tax refund could take you…
The Sensible Approach
A little of both would be recommended. Even the Barefoot Investor encourages work and play…hence the Splurge account is included in his barefoot steps and date nights.
Money should be a balance of responsibilities and privilege. Save some for the inevitable rainy day, while having a little splurge to reward yourself is usually a good start, just do the math first!
Work out what bills you have, what bills might be coming up and try to knock a few of those on the head. Work out something that you want to do, a savings goal, and get that started.
In a nutshell…
Whether you are the average taxpayer or not, make a plan for your tax refund.
Use the unexpected windfall to get ahead in bills, savings or life.
But definitely, STOP, and work out what you want to do. You do not want to look back in 10 years and think, geez if only I had listened to Karen from Wall Business Services all those years ago, then I could have bought myself a ‘new-to-me’ 2 year old car for cash from my tax refund savings, or I could have shouted by best mate to a holiday touring the historic and delicious vineyards of Italy.
– Karen Patterson