Getting a tax refund, bonus or inheritance

If you get a windfall such as a tax refund, bonus, or an inheritance, you might be tempted to splurge on things you don't need. Here are some smart ways to spend this money that will give you long-term benefits.

Pay off your debts

You could use this money to pay off your credit card debt or pay down your mortgage or personal loan.

Smart tip - Pay off higher interest debts like credit cards first.

Paying off debts means you'll pay less interest and save money. Find out how you can reduce your debts faster by making extra repayments.

Work out how much you'll save in interest by making extra repayments.

Put it in a high-interest savings account

Make this the start of a new savings plan by putting the money in a high-interest savings account. There your money will grow with the power of compound interest. For example, if you put a $3,000 tax refund into a high-interest savings account that earns 5% interest, in 5 years time you'll have $3,850.

Work out what money you will have if you save a regular amount.

Contribute extra to your super

Making extra contributions to your super can boost the amount of money you have to retire on. The catch is you won't be able to spend it until you retire.

Smart tip - If you are on a low income, the government will match your after-tax super contributions. The co-contribution matching rate is 50c for every dollar you contribute up to a maximum of $500.

Work out how contributing more to super can affect your final super payout.

Consider investing your windfall

Investing your windfall can help you grow your money and keep it safe. If you choose to invest, make sure you take the time to consider your investment goals.

If you would prefer to rely on professionals who are skilled in making investment decisions, a managed fund could be right for you.

Get financial advice

For large amounts of money, such as an inheritance or a redundancy payment, you should consider getting financial advice. An adviser should be able to help you work out a strategy to make the most of your money.

Think through your options and use your windfall to give you a real financial boost.

Author: Money smart ASIC