According to the South African Revenue Service (Sars), 65% of taxpayers receive tax rebates, so Finance Minister Gordhan will be pleased to know that this year taxpayers intend to pay off debt with their tax rebates.
In fact, if that is the case, the rebates will possibly be better spent by taxpayers than government (think luxury cars and hotel bills).
Finance site Justmoney.co.za ran a recent poll asking: “What will you be spending your tax return on?” Nearly 60% of respondents said that they would be using the money to pay off their debt, and 12% would invest it. Only 10% of readers said they would spoil themselves.
As Andy Gilder, general manager of the site, points out, with every second credit-active person now in arrears, debt repayment should be at the top of the list.
Unfortunately most of us will not receive enough money back to put much of a dent in our loans, considering that for every R100 we earn as a nation, we have R78 of debt. However, we can be clever about which debt we pay off first.
Gilder recommends the following:
- Pay off the most expensive debt.
- The upside of paying off expensive debt quicker is often far more significant than people realise and can often be a better return than putting the same money into a low interest bearing savings account.
- When your most expensive debts are paid off, you can put the extra cash into your home loan — over the course of 20 years the savings can be massive.
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