With the new year in full swing, and income tax season upon us, it’s easy to start thinking about how you’re going to spend your refund (if you’re lucky enough to be getting one). While it may be tempting to spend your refund on consumer goods or a trip, consider these suggestions that will provide you with more bang for your buck.
Re-invest the money into an RRSP or TFSA.
This will allow you to earn interest and help fund your retirement years. The contribution will also provide you with a deduction on the following year’s tax return.
Pay off/down high interest credit cards/loans.
The money you save on interest and payments can be used towards other debt.
Make a lump sum payment on your mortgage (if allowed).
This could save you thousands in interest over the life of your mortgage and allow you to pay it off sooner.
Set the money aside for emergencies.
Everyone should have an account that is not accessible online or through your bank card that is only to be used in case of emergency. This can save you from putting these types of expenses on your credit card which in turn saves you money on interest.
Invest the funds into a RESP.
I’m not sure it needs to be sad, but this will help years down the road when it’s time to fund your child’s education.
Do home improvements.
Make improvements to your home such as replacing drafty windows or purchasing an inefficient furnace. It will save you money in the long run.
Pay off your property taxes.
If your bank does not automatically take out your property taxes as part of your monthly payments then paying off your property taxes in full will save you on interest plus free up cash flow.
There are no doubt other ways to put your income tax refund to good use so we encourage you to think it through before spending the money. Remember, this is not money that you should be counting on so try to avoid the temptation to spend it all on things that may not have any lasting value.
