Looking forward to getting your tax return soon? Me too. Most Australians are keen to get their hands on their tax return around this time of year.

For those of us lucky to get one, there can be a million ideas running through our head about what we could spend it on. These can change from day to day. Whilst there is nothing wrong with this, with the rising cost of living, it is worth giving some serious thought as to how we spend our money.

It might seem like free money but it is yours. It’s yours to spend, so spend wisely my friend.

What should I do?

Before you do your tax, consider if you need to get some expert help. For most individuals, this probably won’t be necessary, but accountants can help you get everything back that you are entitled to. Check that you have included all of your income, expenses and deductions. There’s no point rushing, only to forget some key items which could cost you.

Once you have lodged your tax return, my advice would be to write a list of your needs and wants. Get it all down on paper. There’s something powerful about paper. It really does help get the thoughts out of your head onto something tangible. If you’re more of an electronic notetaker and that works for you, that’s great too.

There are two areas that I would focus on. The first is the most important but the second can keep you focused on saving for the long term.

1. Something you need or to help your future self

Putting your tax return towards something like this can enable you to save money in the long term. It is a responsible, wise way of using your money. It can seem a little boring but can also help you sleep better at night.

Here are some ideas of responsibly spending your tax return:

• pay off debt (such as a family loan, HECS or university study, Buy Now Pay Later accounts, credit card, car loan or personal loan).
• savings towards a house deposit or bond for your next rental (keep this money aside)
• a chunk to your mortgage (this can save you thousands or tens of thousands over the life of the loan)
• new appliance (that might use less energy or water, and your sanity)
• installing solar (saves money on electricity bills)
• buying a solar battery (experts think they will get cheaper in coming years)
• installing electric hot water tanks (if you have solar)
• installing water tanks (to reduce your water bills)
• buying chickens (particularly useful if you eat a lot of eggs or enjoy cooking)
• a car service, replacing tyres or fixing something (nip any problems in the bud)
• dental check-up or work done (might be more painful and expensive if you wait)
• signing up for health insurance (consider making your first payment using some of this money, particularly if you are under 31 to avoid paying the Lifetime Health Cover fee)
• signing up for the gym, team sport or similar (to help you stay fit and healthy)
• investing in shares (I personally invest with Pearler but my husband is with CommSec. It’s all about personal preference.)

These are just a few ideas. Look at your list and see what is most important for you in your season. It will look different to everybody.

2. Something you want

It’s important to treat yourself sometimes, and spending your tax return is no different. Consider it dessert after you’ve eaten your veggies. If you are always super strict with your budget and don’t allow yourself to live a bit, you’ll either feel a bit dull or not stick with this for the long term.

This can be a large treat like:

• a holiday
• TV
• renovation
• couch
• appliance (like a Thermomix)

A medium-sized treat like:

• noise-cancelling headphones
• AirPods
• new speaker
• bluetooth technology for your car
• a night or weekend away
• a staycation

A small treat like:

• a massage (the ones at shopping centres are just as good as Endota, in my opinion, and far cheaper)
• Uber Eats
• book
• subscription to a new streaming service
• exercise gear
• candles
• chocolate

Write down all the things that you want, even if you know they are not an option right now. Categorise them into priorities. Those that you can’t afford or justify right now can go on a later or someday list. Add them to a list in your phone with a future date to consider them again. Sometimes, it’s just nice to acknowledge that we want things.

Just as children feel better after they take a photo of what they see at the shops or have you write it on their birthday list, we too feel better once we add things to our cart. We may know deep down that we will never actually buy them, but there is something powerful about simply considering it or pretending to buy.

If you like the idea of a tax return because you enjoy having a savings system in place, without having to think about it, perhaps you might benefit from a sinking fund. These are easy to set up and most banks allow you to have multiple savings accounts. (If not, find a different bank.) You can set up savings accounts for anything you like. Currently, we have ones for holidays, renovations, appliance upgrades and investing but these have changed over time.

Figure out how much you would like to debit out of your main account into each of your sinking funds each pay. You might like to work backwards, by figuring out how much you want for a holiday and dividing this by the amount of pay cycles you have left before you go. (Lauren J Lee loves travelling with her young family and has some clever ideas around this.) Arrange for this to be debited each payday. I often hide these accounts so I don’t get tempted to spend.

This way, you can get back into the habit of saving without just relying on your tax return.

What are we spending our tax return on?

In recent years, we have spent our tax return on renovations, furniture and appliances and put a chunk on the mortgage. Although it would make more financial sense to put the whole amount on the mortgage, there are always things that need replacing. We like having a few fun additions each year to keep us focused on our goals.

This time around, my husband and I are doing it a little differently. We are each spending our tax returns on what we need. For my husband, he is looking to buy a laptop. He doesn’t have one at the moment and is looking to buy a MacBook Air. The one I bought a few years back has been brilliant. I love that my passwords work across the different devices, it is reliable and fast. We both use Apple so think this would be the best purchase for him too.

I am currently paying for a new branding kit and website design. It’s been needed for a while. Up until now, I have paid for upgrades with my side hustle money but this time around, I don’t have the funds to cover it all. I’m excited for a new look and to have some professional help with my website.

If there is money left over from our tax returns and Family Tax Benefit payment from Centrelink, we have a list of things to pay for. We opt to get our Centrelink payments after the financial year instead of fortnightly. The idea of calculating our estimate wrongly and having to pay a bill scares us. My husband once had a huge tax bill and it still haunts him today. We’d much prefer a chunk of money come September and know that it is ours.

Here’s what is on our wish list:

• paving our alfresco area (finally have it finished)
• purchasing rainwater tanks for our house and shed (to reduce our water bills)
• replacing the gas system in our caravan (so we can use the stovetop and oven, and go away more often)
• carpet in our living area, bedrooms and hallway, depending on the quote (our house is freezing in winter and rugs over wood floors just aren’t cutting it)
• setting up a chicken coop (to become more self-sufficient)
• adding more lighting to our yard (spotlights on large trees, along fences and retaining walls, and hanging over our alfresco area)
• adding more plants along our fence line (to increase the natural beauty and encourage more insects, birds and butterflies to our garden)

Clearly, this won’t be covered in our tax returns and Centrelink payments alone. I enjoy writing lists and like to set goals. We can save money by doing the paving ourselves and just pay for the pavers. We might put off the carpet if it’s too expensive, or just opt for a few key areas. We could look out for free plants and cuttings for our fence line rather than buying. I find it helpful to have ideas and decide on what is most important.

What are you spending your tax return on this year?

I’d love to hear from you below or connect with you over on Instagram or Facebook. You can find discount codes here.

Melanie Wegener

Disclaimer: I’m not trained in finance so don’t take it from me. Feel free to grab ideas from this page but always see a professional for advice that is relevant and personal to your situation.