So you hit the jackpot! You just got a windfall (from the government) and you are waiting to blow it somewhere before it burns a hole in your pocket. Vacation? Visit to the casino? Could you use an Apple watch? A bet on March Madness?
Not so fast. If you do get a tax refund from your upcoming return just remember it’s not ‘found money’ and can be used effectively as a part of smart financial planning. Could there be smarter choices to utilize it? Could it be time to spend it on the most important asset you know? Like yourself? Here are some ideas:
- Pay down your high-interest debt. Paying down your debt should be the first thing for you to do when planning your finances. That credit card. You’re underwater with your overdraft account again. That 10 year-old student loan? Extra money can go a long way and take away a big chunk of your debt. If you want to find out how long making minimum payments will take on these debts, take a look here.
- Time to invest in yourself. That accounting course. The yoga class. Becoming handy? Have you been thinking of joining a gym? Whatever you do, do your homework and ensure you are getting real value for your money.
- Invest in an RRSP. It’s a good time to confirm if you have contribution room left and see if you can contribute more to your RRSP. This will mean additional tax savings for you next year and assist your future retirement.
- Donate to your favourite charity. Want to find out about a charity or cause you really love? Check out canadahelps.org, see if the charity is registered and see how it stacks against your perception. And especially if there is a tax receipt for your donation.
- Pay your bills. You probably forgot about that hydro, water or gas bill. Time to get it out of your hair with your chunk of change.
- Start an emergency fund. There’s nothing like having extra money in a savings account for emergencies. Think of the accumulated interest on your deposit over a period of time. Planning your finances can turn your return into a smart investment.
- Gift it to yourself. Taking a trip to the museum, Art Gallery, wine country. Taking a well-deserved break can really help you re-charge your batteries. You may even want to buy something you wanted for a while
These are some of my ideas about what you can do with your tax refund? If you have better ideas (and I’m sure you do), I would love to hear them.
