Next week, the Swedish Tax Agency will pay out round two of this year’s tax refund to millions of Swedes, and it is expected to be record-breaking this year.
But when the money trickles into the account, it should not be seen as “free money”, according to private economist Felicia Schön.
– The most common mistake, especially when you get your tax refund just before midsummer, is that you are attracted by the temptation of summer and spend the entire tax refund, she says.
This year’s June refund is expected to be record-breaking and according to Felicia Schön, private economist at Avanza, the forecast is around SEK 13,000 on average.
Those who receive a tax refund during the next week, between 4-7 June, are people who have made changes to their declaration or declared no later than 2 May.
Most common mistakes to avoid
But there are some common mistakes you should avoid making with the money that trickles into the account, says the private economist. Although it can be a nice feeling to receive a lump sum, you should think about it. It is easy for the refund to be seen as “free money”, she says.
– The most common mistake, especially when you receive your tax refund just before midsummer, is that you are attracted by the temptation of summer and spend the entire tax refund. But I think most people regret it, says Felicia Schön.
But you have to remember that the tax refund is money that most people have worked together like any salary – which you also lent out interest-free during the year. Once the money is returned, it is therefore smart to handle it carefully as the delayed salary that it actually is, according to Schön.
Prioritize
Another mistake many people make with the refund is that they save the money in a savings account even though they plan to save for the long term.
– In this way, your money is swallowed up by inflation and you do not give it the opportunity to grow
so they actually lose value, which is a very big and common misconception.
In addition, it is important to prioritize where the money should go, she believes.
– You should start from your financial situation, where you are and what you need right now. Is it the case that you are behind, then it is good to catch up with the finances with the help of the tax refund.
What do you say to those who don’t get any money back?
– I don’t think you should be sad if you don’t get a tax refund. Although it is a nice feeling to receive a large amount of money in the account.
– All of us who get tax refunds have lent out of our salary, which we could have had from the beginning, to the state – tax-free. So you should just be happy that you had the money from the beginning, Felicia Schön continues.
The private economist’s priority list
1. Pay necessities first
Make sure all necessary expenses are paid – interest, rent, repayments, electricity, child care, food, etc.
2. Pay off the most expensive loans
If you have credits and loans of any kind, prioritize paying them off. The rule of thumb that applies is that the one with the highest interest is paid off first.
3. Save so you have a buffer
The rule of thumb is to have a buffer large enough to cover one’s expenses for 2-3 months. If you had to use the buffer to pay unexpectedly high interest or electricity costs, it may be time to top it up again to have financial security.
4. Save and invest
Saving for a short-term goal – for example a trip, a car or other major consumption is best saved in a savings account with a good interest rate. While saving for long-term goals – for example pension, future or indefinitely – is best saved on the stock market in shares or equity funds.
5. Have fun for the money!
Last on the list will be spending the money. Of course you have to live too! But making sure that personal finances are stable first can provide more quality of life in the long term than giving in to the will here and now.
Source: Felicia Schön, private economist at Avanza