It’s that time of year when all of us hope or pray for a tax refund. The pleasure of receiving some tax back is sweet and most often very much needed. We usually have it spent ahead of time with a full list of needs and wants. But before you go out and spend it on a vacation or a big lifestyle item, stop and think for a minute about what is the responsible action.
Here are my top 5 ways to use your tax refund:
- Reduce high interest debts: If you have high interest debts, don’t even think about going out to buy something with that tax refund. You must use the tax refund to repay or reduce the debt. This is a no brainer and any other actions can simply not be justified.
- RRSP for the following tax year: this is where you will get the biggest bang for your buck. You will save for your much needed retirement needs and create more tax refund for next year.
- RESP for your children’s education: If you have not maximized the RESP, now is the time. Not only will you have money saved for the children’s tuitions in a few years’ time but you will also earn a 20% government grant.
- Mortgage: yes finally, you were wondering if I was going to mention this. It always feels good to put the money down on the mortgage. So go ahead and put a little. Not too much however if your interest rate is really low and you are already on track to have that mortgage paid off by retirement.
- Spend the rest: If you have done all of the above, you deserve a little reward. So, go ahead and treat yourself with a little bit of that refund!