The life of a freelancer can be financially uncertain. Unlike people who have employers, you do not have a fixed income each month, and there is actually no guarantee of income at all. Some months you might find that you do better than expected whereas at other times it might seem like you can barely hold down your rent. And so receiving a tax refund at the end of the tax year can be a very nice surprise for a freelancer. Such a nice surprise that it can be tempting to splurge the money on an extravagant shopping spree.
In your head, you probably know that's not the very best idea, so here are a few more sensible ways to play with a tax refund.
Pay Off a Credit Card
When you have a difficult month of freelancing, it can be tempting, and perhaps necessary, to place some expenditure on a credit card. But that spending doesn't just disappear. You have to pay it back sooner or later. And if you pay it back sooner, you will be spending less on your debts in the long run. Sure, that holiday in Thailand might seem like a great idea, but if you are holding on to credit card debt and going on holiday, that might not be great for your financial solvency.
Kickstart Your Pension
People who hold down regular jobs are often encouraged to start a pension and their employers will sometimes make contributions towards that pension too. When you are a freelancer, nobody from HR is giving you this kind of advice and so it is all too easy to let long-term financial planning fall by the wayside. If you don't have a retirement fund yet and your excuse is that you have nothing to invest, you have everything you need to get started with the sum from your tax refund.
Start a University Fund
Being a freelancer can be tough, but being a freelancer and supporting a family is even harder. Children grow up fast, and to enter university, they will probably need a helping hand from Mum and Dad. Your tax refund could potentially be enough to fund your child's higher education for a whole year, and what could be a better investment than money put towards the future achievements and success of your child?
Think long-term and your tax refunds could really help to improve your quality of life for years to come.
Share23 April 2015
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