5 smart ways to use your tax refund
For many people, spring and summer mean tax refund. If that is you, did you know that your tax refund can be the best ally of your financial health?
Using your tax refund can be an effective lever for saving more, effortlessly. And since this may be the only time of the year when you will have extra income, it is in your interest to make the most of it.
Here are 5 ideas for turning that once-yearly extra cash into a lasting financial boost.
- Contribute to your group retirement savings plan
If your plan allows it, investing your tax refund in your group retirement savings plan is a good way to make your money work for you.
As well as bumping up your savings, the money will grow over time. And if you have access to a group RRSP or VRSP, you will get double the impact by benefiting of a tax deduction, which will reduce your 2024 tax income and the tax you will have to pay1.
It is like a gift that keeps on giving!
If you have access to a group RRSP, in addition to saving for your future, contributing to it could allow you to finance a return to school (LLP) or facilitate the purchase of your first home (HBP).
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Contribute with My Client Space Contribute with iA Mobile - Build an emergency fund or save for projects
Unexpected expenses, like car repairs or failing appliances, can happen to anyone. As the name says, an emergency fund is there to cover unplanned expenses.
Want to redo your roof? Go on a trip? Buy a cottage or RV? Install a pool?
Whether you want to set aside money to fund your projects or to cover an unforeseen expense, using your tax refund to increase your reserves is always a smart move. It could save you from having to take out a loan or use credit for your purchases. And that could keep you from going into debt and having to pay interest. Goodbye financial stress!
If you have access to a group TFSA2, investing your tax refund in it is an excellent way to grow it tax-free while still having access to your money at all times. Withdrawals are easy and non-taxable.
On a limited budget? Have a look at these money-saving tips.
Contribute with My Client Space Contribute with iA Mobile - Pay off your debts (and relax at month end)
Why not ease your financial burden by using your tax refund to pay off debts?
Think of the interest you will not have to pay on your credit cards or lines of credit, or even your car loan or mortgage! That is money you can use to pay for projects, grow your savings, or even give yourself a treat.
Tip: Pay off the debt with the highest interest rate first. If the rates are the same, pay off the smallest debt first.
Once you are free of that debt, you will be more motivated to tackle the others, and it is good for your credit rating!
Find out if you should pay down debt or save for retirement.
- Improve your home
If you are a homeowner, you can use your tax refund to renovate, refresh or repair your home. Not only will you get more enjoyment out of your home, you will also increase its value and potentially save money (by installing energy-efficient windows, for example). Think about it!
- Treat yourself
You can always mix and match these ideas to suit your situation, your needs, your financial priorities and the amount of your tax refund.
Finding the right balance is the key to success. Whatever you decide to do with your tax refund, do not forget to treat yourself once in a while.
It is all about balanceDreaming of a nice dinner out? A family trip? A spa day? Some new clothes? However you like to spoil yourself, spending even a little bit of your tax refund on yourself can only do you good.
1For RRSPs and VRSPs, make sure you do not exceed your annual contribution limit. You will find it on the Notice of Assessment you received from the Canada Revenue Agency following your last year’s income tax return. VRSPs are only available in Quebec.
2Annual TFSA limits from 2009 to today.