Once you have filed your income tax take some time to sit back, relax and think about what you will do with your refund. In May 2010 the Canada Revenue Agency reported the average refund was $1,480. There are so many ways to spend this newly found money; a new sofa, family vacation or 52 inch flat screen television. What you really don’t want to do is pay down credit card debt or deposit money into a savings account.
“People get excited when they receive a windfall of cash and want to buy something new rather than paying off their debt,” says Jeffrey Schwartz, executive director, Consolidated Credit Counseling Services of Canada, Inc. “We advise our clients to use the money to offset outstanding credit card balances and budget regular deposits to a savings account as the way to achieve their spending goals. This is a more efficient use of their money”
Schwartz offers the following recommendations:
- Put the money aside until you have an effective plan for its use.
- Assess your debts – are you paying high interest on any of them? If so, pay down the high interest debt first.
- No debt – Save it! Put the money towards your retirement plan, create an emergency fund or even a shopping account for the holiday season.