It’s tax season again!
Do you usually get a refund? If so, it’s important to remember that it’s not “free money” you get from the government – it just means you overpaid last year and now you’re getting your money back.
The average refund is $1,620 and while it’s very tempting to use it to go on a vacation (especially with the weather outside), or splurge on that new big screen TV, using it towards your financial goals instead can pay huge returns in the long run.
Let’s look at a few ways you can maximize your refund.
PAY DOWN DEBT
Did you know that the average Canadian owes $1.71 for every $1.00 earned?
This means that a huge chunk of household income goes towards paying off debt each month. If you use your refund to pay down your highest interest debt first, you can reduce the amount of interest you owe and shorten the length of time you’ll be paying for.
Look at the difference even $10 a month makes:
INVEST IN YOUR RRSP
If you do contribute to an RRSP throughout the year to be able to get your tax refund, you can consider this a head start.
You will also be contributing more towards your retirement savings.
INVEST IN YOUR TFSA
As discussed in my last post, the TFSA is a great way to have your money grow tax-free while investing and be able to withdraw the money tax-free in the future.
You can build your emergency fund using a TFSA or also use it for retirement savings.
CONTRIBUTE TO AN RESP
If you have kids, this is one way you can ensure their education will be funded later on.
This allows you to maximize the government grants each child receives as well.
BUY LIFE OR DISABILITY INSURANCE
Life insurance gives your family peace of mind, knowing that they will not face financial difficulties if you are no longer around. Life insurance can also be used to build your own wealth and ensure this wealth is transferred to your children, grandchildren and future generations.
Disability insurance (which includes Critical Illness Insurance) gives you peace of mind, so that if you become ill or cannot work, your bills are taken care of.
Your tax refund can help pay for the cost of these insurance premiums and most companies have the option to pay once annually instead of monthly.
RE-INVEST IN YOUR BUSINESS
Most of us reading this post are business owners and I’m pretty sure you want your business to grow. We all need to invest into resources that can potentially expand our reach and profits.
Marketing tools, employees, software, infrastructure and office supplies are some of the things that you can allocate your refund towards.
What are your plans for your refund? I’d love to hear from you!
For more information on filing your 2017 taxes: https://www.canada.ca/en/revenue-agency/campaigns/taxes-get-ready.html
Kim Lowrie is an insurance agent and mutual fund representative with World Financial Group.
She and her husband have made it their lifelong mission to help families, individuals and business owners succeed financially.
To find a solution that best fits your needs and goals, connect with Kim: