Tuesday, 1 May 2018

BEST WAY TO USE YOUR TAX REFUND

Tax season is over and you may be getting a refund.  Many of us might be tempted to spend that money on a vacation or a new wardrobe, but that would be the wrong decision. Remember the money you’re getting is tax you overpaid during the year to the government. It’s your own money back, as much as it feels like it, it’s not a gift. 

Here are some of the best ways you can use that cash.

Put it into your RRSP
This is the most ideal option. It does a few things. One it jump starts your retirement savings for next year and two it helps lower your 2018 income tax bill. This is especially important if you have not contributed anything to your RRSP this year.

Pay off high-interest debt
If credit card debt uses this money to pay that balance down. No investment you make is going to give you the guaranteed return paying your credit debt down will. Most credit cards charge around 19 per cent interest. By paying those off you are immediately putting those interest payments back into your pocket.

Make a lump sum mortgage payment
Many Canadian homeowners are concerned about rising interest rates. If you live in a big expensive city like Toronto or Vancouver you may have borrowed to your limit in order to afford a home. As rates rise your cost of borrowing rises too. Even for those homeowner’s with fixed-rate mortgages when they go to renew they may find their costs have increased. If you are worried about rising interest rates make a lump sum mortgage payment to ease some of your borrowing costs in the future.

Overdue bills
When money is tight you may have held off paying our household bills. Utility companies often charge late fees and interest on overdue bills, after a few months that bill is sent to collections. Avoid all those issues by using your refund to get your bills paid off. If you have simply forgotten to pay bills, set up automatic payments in order to avoid this situation again.

Your tax refund should not be used on anything consumable. Taking you bestie out for dinner is a nice thing to do, but don’t use the money you got back from the tax man to make that happen.



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