5 ways to ensure your money continues to work for you when your Income Tax refund 2021 has kicked back.
One of the best feelings is when your account is credited with money! However, what’s better? Receiving all the TDS deducted money in your yearly ITR submission! But how do you plan on spending your tax refund?
If you’ve received a windfall from your Income Tax refund 2021, then here are 5 ways to ensure your money continues to work for you. And, if you're still thinking how to file ITR online, then read this.
Store it as savings
Saving money is like following a healthy diet – you know you should do it often but things like impulse buying frequently get in the way.
While these spur-of-the-moments are hard to resist, one of the best ways to avoid it is by stashing all your tax refund away and have better chances to utilise the money when you really need it.
Best way to do this? Transfer this amount to one of your bank accounts that you rarely use for daily transactions.
Keeping this money out of sight and out of mind, can save you from those impulse buys.
Set aside money for an emergency
Many situations need the use of an emergency fund. Establishing an emergency fund is a lifesaver in a variety of situations, such as job loss, illness, or other unplanned expenses.
Utilising your refund in case of an unwanted expense can help you stay on top of your finances since you have a back-up plan in place.
With an emergency fund, you can take care of an unexpected medical emergency or that out-of-the-blue home repair that could have cost a short loan with massive interest charge.
Pay off that debt
Having debts can be annoying, especially if you’re tight on budget and you need to pay a surplus as soon as your paycheck arrives.
These could be long term EMI on your phone, short-term loan for an international-trip or just a long overdue credit card bill.
If you are carrying such debts, it’s a wise move to spend your tax refund in clearing your outstanding amount.
Because, it doesn’t make sense if you invest Rs.30,000 in a fund that yields 2% interest and carry Rs.27,000 credit card balance, chargeable at 18% interest.
If you have multiple debts, one of the smartest things to do is to prioritise them based on the interest rates they carry.
The ones with the highest interest rates and no tax advantages are the first ones to be taken into consideration.
Buy a self-insurance policy
If you are in your 20s, then buying life-insurance might not be in your to-do-list for putting that income tax refund to good use! But, here’s why we think it should.
Creating a term life insurance from an early stage lets you get protection for you and your family members in case of any emergency.
And if you’re married with family, keeping an insurance makes all the more sense as it covers all your loved ones against any unthinkable mishaps in life.
If your refund status is bountiful this year, you can choose a one-time payment term insurance policy.
You only have to pay once, and your life insurance is covered until you turn 60 with this coverage.
For others, create an insurance policy and use your returns amount as seed money and create a budget in place that accommodates this expense.
Save for retirement
There's no better way to save for your golden years than to use money that you wouldn't otherwise have access to.
It is possible to use this extra money to purchase or enhance a retirement fund, which will keep your money safe for the future when you are no longer employed.
You'll be glad you saved for retirement instead of splurging on something you'd long ago forgotten about when that time comes.
It’s one of the best answers to the question - how to use money smartly!
Before we go…
Not in the mood to give away all this money to savings and investments? Then choose to spend it in multiple ways.
And by the way, who says spending is bad if it gets you digital gold in return! At Jar, we do just that.
So, splurge your bucks through the Jar app, that rounds off your daily spends and invests it in digital gold.
Now, that’s more like spending money wisely, right?