It's tax season again and while many will hear happy news, a few are in for a shock. We often hear stories about people getting many thousands back in returns. If you earn a taxable income which is above the tax threshold and you are a registered tax payer you should file your annual tax returns. So this tax season when filing your returns consider your three possible outcomes:
1. You might get money back
2. You might need to pay in to SARS
3. You possibly could receive nothing and wouldn’t have to pay in a cent
No matter the outcome of your tax returns you need to always be mentally and financially prepared. One might need to pay money to SARS because your taxes for the previous year might have been under-calculated. An emergency fund would be very helpful here because otherwise people often need to use credit to pay the Revenue Service.
If one is so fortunate as to be getting money back from SARS it is important to remember that this is not free money. It is money that you have already worked for that you are now getting back. Tax returns should serve you in the long run financially rather than short term. It is important that you either save this money or use it very wisely to alleviate some of the pressure from debt rather than spending the money faster than it came in.
A few important things to remember:
Make sure to do your returns as soon as possible, last minute procedures don’t work and can be troublesome. Your knowledge is power, if you don’t have the knowledge, acquire it and get the necessary help in order to make sure you’re on the right side of the ‘tax man’.
The South African Savings Institute has declared July as National Savings Month. Saving should be an essential part of all our finances but for most of us it isn’t.
Currently only 44% of South Africans have formal long term savings, that is: less than half of our population. The debt-to-income ratio is now reported as being 78.4 %. That means that not only are people not saving, but also that for most South Africans large portions of their salaries go towards paying back debt.
The stats are shocking and it brings a realisation that most people are really financially unaware.
It is important to save for the following reasons:
Or 10 or even a 100 million rand?
If I said you’d have to lose everything and everyone in order to get tons money, would you be happy after getting it? For most if not all of us the answer would be a resounding “No!!”
We are constantly bombarded with this idea that money and accumulation of vast wealth beyond what we know what do to with is what life is about. We are in fact wired to be very money hungry at times going through extreme lengths for money that we feel would make us happy.
We are given the idea that money equals happiness. On one hand we see some of the wealthiest of people, who spend lavishly but suffer from mental illness and resort to substance abuse just to get through.