How to get the most out of your tax refund
Here are five ways to take the lead and administer your tax refund so that you can get the most out of it.
Once you have optimized your tax situation and filed your income tax return, are you wondering how you can use your refund intelligently? Let’s take the time to find the best ways to get the most out of you refund.
- Contribute to your TFSA: in case of unexpected expenses or a difficult financial situation, building or consolidating an emergency fund using your tax refund is a wise choice in order to be ready for the unexpected. As a general rule, it is advised to have access to the equivalent of three to six months’ salary. Use your TFSA for your emergency fund is the best option. In fact, it’s a flexible way to generate tax-free income while having access to the money at any time. Withdrawals are easy and non-taxable, and you can contribute the amount withdrawn the following year.
- Contribute to your RRSP: investing your tax refund in your RRSP will allow you to take the lead and add to your retirement fund while lowering the tax rate for the current year. It’s also time to benefit from your unused contribution room, especially since, by starting to contribute at the beginning of the year, your money has longer to grow.
- Contribute to an RESP: it is important to save for your children’s or grandchildren’s education so that they can pursue post-secondary education. By investing your tax refund in an RESP, each dollar invested will maximize the generous government grants of up to 30% depending on your province of residence.
- Pay off debt: for sound financial health, it’s a smart idea to think about using even just a part of your tax refund to pay off your debt and ease your financial burdens. You will quickly see how simply saving on interest will help you save. First, settle the debt with the highest interest rate, like your credit card, store credit cards, or line of credit. You can refer to our tips for sound debt management.
- Treat yourself: if you have received a tax refund, it means you are disciplined and save systematically all year and you keep your finances in good shape. Think about using a portion of your refund to treat yourself, as you’ve more than earned a reward for having maintained your healthy savings habits.
Everything in balance. Give yourself the satisfaction of saving, but treat yourself a little too!
Obviously, your situation is unique. A financial security advisor can guide you through the actions to take based on your personal and financial situation. Don’t have one? Find an advisor near you today.
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