In this tax season, you will maybe expect a tax refund on last year tax. You need to plan how you will use it. Maybe you already know what you will do but this will give you more idea of what to do with your refunds.
If you are having a huge refund, you should adjust your withholding at your job since you are given the government an interest-free loan and you could invest or use that money sooner than next years tax season.
Also, be sure that your tax is done correctly before using the return money since if they are looking back to your declaration you could be obligated to reimburse that money and if you don’t have it under your hands, you will be in debt for the money you shouldn’t have ever received.
1. Reimburse consumer debt
You should first reimburse any consumer debt you have like credit card debt. This should be your priority number 1! This will make you a guaranteed investment return by saving the interest rate on these debts. Since these debts are at a high-interest rate, it’s a good return on your investment.
2. Create an emergency fund
If you don’t have an emergency fund, you should park it in an emergency account. If ever you have an emergency, you will have money on your hands and will not need to get into debt to pay it.
3. Invest in an RRSP
You can kick-start your year by investing the tax refund in your RRSP so that will be a start to have a new tax refund next year and it will make your RRSP grow without even touching your salary.
4. Invest your tax refund
If you are in a low salary class, invest it in a CELI so you get a tax shelter investment and can try to max out your new $5500 you are having this year.
5. Invest it in an RESP
Invest your money in an RESP fund for your kids and get the advantage that RESP is offering to you. This is an easy way to fund a post-high-school study of your kid. The younger you are starting it the higher the return will be.
6. Start your business
Do you have a business you want to start? Use your tax return to invest in it. It’s interest-free money so no need to take a loan to invest in yourself. This will also be a great investment since your business should make you money back. If not, you have not taken money from your saving to start it.
7. Invest in your own education
You always wanted to take some class? Take your tax return in invest it in yourself. This way you will have more knowledge and will be more valuable in your career and on the job hunting market if ever needed.
8. Pay your mortgage
Doing a lump slump or paying your mortgage could save you thousand dollars over the year on mortgage interest. So why giving free money to the bank when you can keep it for you? Also, this investment is 100% sure to give you back this interest. Low interest but it’s a safe investment.
9. Invest in your home
If you have some improvement you want to do in your house or some maintenance that is needed, it should be the good way to spend this tax return money. This investment will make your house more valuable so you are growing some equity with this money.
10. Donate to charitable causes
If you can do it you should donate to charitable causes that need money. Maybe you will not get a good advantage on this investment but it will be a benefit to the community where money needed. That will make you a tax deduction for your next tax so you could get a better refund.
11. Treat yourself – Spent it on something you want
You want to take a vacation, buy a ps4 or buy something else? Use this money to buy what you want. Just don’t get into debt while using this money like taking a bigger trip than what you refund and saving will permit you
So whatever you do with your tax return, just use it for something you want and will be useful to you. Don’t use it on something unnecessary that you will regret after buying it because you’ve done some compulsive spending.