The tax returns season has officially closed and the South African Revenue Service is said to have paid back approximately R15.5 billion to South African tax payers in the form of refunds.

Ester Ochse, Channel Head at FNB Financial Advisory says, “As an individual tax payer, if you received something back from the tax man you may be tempted to spend it to spoil yourself during the festive season. However, it’s better to put the money aside into a savings or investment account where you will earn interest or capital growth. If you already have an investment account, you can allocate this cash to bulk up your portfolio.”

“The only way to really build substantial savings is to save any extra cash you receive over and above your monthly income. Another option to consider is a tax free investment or unit trust account. These offer some form of flexibility in a sense that investors can either invest in cash or equities linked tax free savings account.”

You can also use the refund to put yourself in a better financial position instead of spending the money frivolously. Here’s what you should consider:

Pay off your debt

By allocating the extra cash towards debt you will save on interest repayments in the long run. Consider putting the money towards paying down your car or home loan, the amount may not be substantial but it will make a difference. If you have credit card debt or other short term debt, consider paying it off with any extra cash that you receive.

Home improvements

Use the money to improve your house as this will directly influence its value. Small improvements such as painting the house or landscaping your garden can make a big difference. By the end of the project your home will be worth a bit more.

Retirement

If you already have a retirement fund, use the extra cash to build up your retirement savings. Remember, this is will be in addition to what you are already contributing towards retirement so it will put you in a better position financially. If you don’t have a retirement fund, use the refund to start one before it’s too late.

Start an emergency fund

Put the money away so that you can access it in an emergency, in this way you will not have to tap into credit to deal with an emergency. Ensure that you place the money in an account where you can access it quite easily so that you don’t have to wait for long periods before the money is available to you.

“There are various ways in which a tax refund can be stretched instead of having it misspent. As soon as you receive the refund, look at your finances to see how best the money can be used. Most people are tempted to spend the cash because it seems like a bonus, but it can be put to better use,” adds Ochse.