Last updated on July 12th, 2016
You just filed your tax return and you can’t wait for your refund. Most people consider it a highly anticipated windfall- and as most windfalls the money gets spent in the blink of an eye.
But since tax refunds are simply the money you overpaid to the government during the year – you would be better off putting that money to good use.
Here are some of the things you can do with it:
Pay off your credit cards
In most cases it’s better than paying your mortgage or investing in stocks. You’d be hard pressed finding an investment that returns 21%. And yet a lot of people ignore the outrageous interest rate for carrying balance on their credit cards or consumer debts.
Make an extra mortgage payment
This is the second obvious choice. It’s extremely easy, can be automated and in most cases outperforms returns on term deposits, GIC’s and savings accounts. If you don’t have a winning investment strategy in place- make that extra payment and you are guaranteed a respected return.
Get your RRSP going!
For most people contributing to your RRSP makes sense. Most people will enjoy tax savings once they retire and their income is decreased. Plus- putting money into your RRSP will increase your tax refund!
Make sure you use your tax savings for paying down debts and investing.
TFSA is just as important
TFSA is just another valuable tool in combating taxes and keeping more money in your pocket. For some people it will make more sense to only have TFSA, but most will have a use for both in combination with RRSP. With TFSA you will enjoy tax free withdrawals and tax free investment growth- it doesn’t count as income. What’s not to like? Fund your TFSA or open one right away!
Don’t forget about kids- fund their RESP!
Free money! No seriously- the government will give match your contributions up to $500 and most provinces will kick in too to get you started. The account can grow tax free and withdrawals are taxed in the hands of the student when they start higher education. It seems now that it pays to have kids.
Save for a rainy day or invest in yourself
You can’t predict everything- family emergencies, unexpected expenses a purchase you can’t pass- you might want to have some money put aside. The rule of thumb is to save up at least 3 months of total family income. Feel free to mix and match other ways to access funds- line of credit, credit card, and short term investments.
Anyhow, be creative! You can get a better payoff taking courses, exploring a business venture- or even taking a trip for inspiration!- whatever floats your boat.
As always, on our website you can find the whole range of financial products as well as helpful tips on travel, immigration and personal finance. As well, if you have any questions or would like any further information, feel free to contact one of the advisors at Arbetov Insurance, we’re here to help!