Tax Cuts - Trash or Treasure?
The new tax cuts have just kicked in, and you may be overjoyed to be pocketing more money each week for doing nothing. But the reality is that inflation has already eaten up your tax cuts, and then some. Some commentators claim that the cost of living is rising so rapidly that you would need several tax cuts just to account for the increased cost of petrol, groceries, electricity and other day to day living expenses that have risen over the past year.
And according to some analysts, it’s going to get worse. Oil will eventually run out, and we are already starting to see the effects of limited supply of this precious resource on everything from petrol to food prices. The days of cheap, dirty energy and limitless supplies of oil may be coming to a close.
With this in mind, over the next few years we may need to re-evaluate our living expectations. It may be tempting to put your tax cuts into luxury items such as a new dress or suit, or fritter it away on a new iPhone or a Nintendo Wii. But doing so will cost you.
Here are the top six tips, to help you turn tax cuts into treasure:
1. Don’t buy luxury items
The iPhone is amazing, but do you really need it? Luxury items are all very well and good, if you can afford them. But if you’re struggling to make ends meet, you need to have a re-think. Analysts are saying that the cost of living is going to get much worse before it gets any better, so tightening your money belt now may save you from grief in the future.
2. Don’t waste money on expensive junk food
This includes coffee, donuts, and anything else that’s bad for your health and over-priced. Get in the habit of making lunches at home, and limit eating out as much as possible.
3. Set up a budget and stick to it
Knowing what you’re spending and what you’re earning is key here. Once you’ve figured out the areas in which you’re spending more than you should, take action to cut back on that spending! Perhaps have services that aren’t a necessity cut off - such as cable TV. If you don’t really need it, put that money into savings instead.
4. Set up an automatic savings plan
The easiest way to do this is to open a high interest online savings account and then set up automatic deposits to the account every time you get paid. A person on a $30,000 salary has received a tax cut of $21.15 per week. Putting this into a savings account earning 8% interest, after one year you would have $1,099 in the account!
5. Put tax cuts into your mortgage
If you have a home loan, one of your highest priorities should be to pay it off as quickly as possible to lessen the amount of interest you need to pay. An extra $21.15 per week put into a mortgage would save you many thousands of dollars in interest over the life of the loan, and you’d own your home sooner.
6. Make the most of your tax return
When the time does come to fill in your tax return, be sure you seek advice so that you claim as much back as you are eligible to. This means keeping your receipts throughout the year if purchases are made for work purposes, and know what other items you are eligible to claim for.
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