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6 Smart Things to Do With Your Tax Return

  1. Stop treating it like found money 
    Although most Canadians are happy to receive a
    tax refund, there’s very little reason for celebration
    – you’ve actually been giving CRA an interest-free
    loan throughout the year. Instead of treating it like
    found money, it is important to spend it prudently
    and resist the temptation to splurge on material
  2. Pay down bad debts
    If you have outstanding bills, credit card balances,
    lines of credit, student loans etc. the smartest use
    of your tax refund is to put it towards amounts
    owing. Debts with the highest interest rate (usually
    your credit card) should always be paid down first.
  3. Top-up your rainy day savings
    A rainy day or emergency fund is money set aside
    to protect you when an unexpected event occurs
    that affects your cash flow (i.e. job loss, home
    repair, etc.) The rule of thumb is to have 3-6
    months of expenses readily accessible, meaning
    not invested. Without this safety net, just one
    surprise major expense can not only be stressful
    but send your financial situation into a downward
  4. Invest in your future
    If you have the contribution room, use your tax
    refund to top-up your TFSA or RRSP. Even small
    amounts with the effects of compounding make a
    big difference in the long-run. Contributing to your
    RRSP will also provide additional tax savings from
    the RRSP deduction you will get on your next
    year's tax return - brilliant!
  5. Put it towards a home improvement project
    Your home is one of the most tax-efficient assets
    there is.The principal residence exemption allows
    Canadians to pay no tax when they sell their
    house, so making improvements that add value is
    always an excellent investment.
  6. Treat yourself
    Yes, it is ok to treat yourself! If you have paid down
    debts, diligently saved throughout the year and
    are on track towards your other financial goals,
    use your refund to have a little fun. Go on vacation,
    take your family out to a nice dinner, have a spa
    day, whatever makes you happy. Just don't get
    too carried away, remember that a $500 refund
    does not justify a $2,000 trip.

Posted In: Taxes