It’s an annual rite of spring, right up there with dusting off your golf clubs and watching the Stanley Cup playoffs: Getting your annual tax return from the CRA. Rather than blow it—though you certainly could—here are four ways you can use your refund to put some spring in your finances.
1. Use it to pay off debt
There are few investments you can make that can compare with paying off any outstanding debt you may be carrying. Debt repayment offers piece of mind and a guaranteed rate of return—make that a guaranteed outstanding rate of return if you are paying off a high-interest debt like a credit card balance.
2. Use it to invest in your future
Take your tax rebate and put it into a Registered Retirement Savings Plan (RRSP) or a tax-free savings account (TFSA). Both are excellent products for long term saving that can help reduce your tax burden, either later this year or in your future. Talk to a financial advisor about which one is best for your situation.
3. Use it to pay down your mortgage
Most mortgage lenders offer pre-payment options, so why not use your tax refund to take advantage of them to beat down that mortgage? Remember that any pre-payments go 100% against your principal which means you’ll be reducing the amount of interest you pay over the life of your mortgage. As an added bonus, this will help you become mortgage-free sooner and who doesn’t want that? It’s truly a win-win strategy.
4. Use it to save for your kids’ education
As any parent will tell you, there’s not a lot predictable about raising kids but the one thing that is certain is they aren’t going to remain kids forever. Someday they’ll be heading off to college or university—and that’s certain to cost a lot of money. Prepare for that eventuality now by directing your tax refund into a Registered Education Saving Plan (RESP).
All of the above strategies will help inject some pop in your finances but remember there’s no law that says you have to use all of your refund this way. There’s nothing wrong with setting a little something aside to treat yourself. Maybe a new putter for your golf bag. Fore!