Before you take your tax refund to your favourite store to shop until you drop – take a step back and put your refund to good use. A tax refund can put you ahead – if you use it wisely and to your advantage.
“Although your tax refund may appear like free money – it’s not. It’s money you’ve worked hard for and you should treat it not like a bonus, but like hard earned cash,” says Jeffrey Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“This is why it’s important to put your money to the best possible use for you. Don’t treat it like money you throw away; treat it like money you can use to advance your financial goals,” says Schwartz.
The best way to put your financial goals into motion is to resist temptation and put it somewhere with the most benefits. Consolidated Credit Counseling Services of Canada recommends the following:
Slay your debt – If you’re stuck in the cycle of paying only the minimum payment on your high interest credit card, you are wasting your money. Minimum payments can be a trap designed to make you stay on the “forever and ever plan.” You don’t need to pay interest on your purchases for decades to come; – you need your money to work efficiently. So take your refund to slay your debt today.
Avoid a financial emergency – If you do not have an emergency savings fund, now is a good time to create one. Don’t wait until the inevitable happens – stay ahead of a financial emergency by being financially prepared for it. Creating an emergency fund with your tax refund is a useful way to use your refund especially if you are short on cash.
Think about tomorrow – It is great to live in the moment and enjoy your life however you have to think about your future too. Sit down and decide on the kind of retirement you want and start planning for it. To get everything in motion you can invest in a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA). The added benefit of investing in an RRSP is deferring the tax payable until you withdraw it.
Save for your child’s future – If you’ve contributed to your RRSP, have a decent emergency savings account and you do not know what to do with your tax refund – consider topping up your child’s Registered Education Savings Plan. You should know that an RESP comes with a 20 per cent federal matching grant on the first $2,500 per child, per year.
Don’t forget yourself! If you’ve topped up your RRSP and/or TFSA contributions, slashed your debt, have an emergency fund and have a healthy RESP for your child – you’re doing a wonderful job managing your personal finances. So go ahead and treat yourself. However remember not to go overboard. Keep everything within moderation.
If your personal finances are not where you would like them to be or you’re simply overwhelmed by the debt you are carrying day in and out – stop doing this alone and get some help. You can have a life free of debt with just one phone call. Give one of our trained credit counsellors a call today at 1-888-294-3130.