Australians have become wed to the idea of getting a tax refund each year… For some, there is almost a forced savings aspect to the tax refund. They’re essentially letting the ATO hold onto their money because they know they’ll blow that extra cash on their own throughout the year.

The challenge then becomes, if it truly is forced savings, what happens when the refund actually comes. So how do you do that? You start by earmarking that refund money for expenditures that might have a lasting effect on your fortune.

Here are a few tips on how wisely you could spend your Tax Refund…

High-interest debt

High-interest debt is an easy target. If you’re paying 24 percent interest on an overdue credit card bill, where else are you going to get that type of return with your refund? The challenge is not to pay down your bill and then build it right back up, because then you’re back at square one with no refund cheque to fall back on.

Home repair

You may not have had money before for a project that desperately needed to be done and your refund cheque will get you started on that.

Emergency fund

If you haven’t set up an emergency fund, now is the time. People often overlook having a minimum of three months, ideally six months, to cover expenses. A refund can also be used to start a new chapter in your life after something like a divorce or a need for a new career.

Vacation

I will leave the best, or the worst, for last: Taking that money and spending it on a vacation. It might not be popular, but spending the money on “something you’ll remember your whole life” has value beyond dollars and cents. But, be cautious against just blowing the money on a meaningless trip.

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