What should I do with my Tax Refund?



Got a refund coming? Awesome! This is a stellar opportunity to leap-frog ahead in your financial planning. Up your financial literacy and use some strategic thinking. 

1. Debt Reduction Strategy: Credit cards, department store cards, and “payday loans” are some of the worst offenders. You will never ever find a risk-free, 18-21% return in the stock market or in any other kind of investment: but by paying down your credit cards, risk-free 18-21% return is exactly what you get.

2. Build up your emergency fund. Jobs  sometimes disappear, people get sick and need special care, or can’t work for a time. Do you have enough to live for eight (8) months, stashed in a risk-free savings account  option? If not, aim for two months, two weeks, whatever you can start with. Pop your refund into your emergency account and sleep better at night.

3. Gain a tax advantage for the future: contribute for the coming year’s RRSP (for Canadians) or IRA (Americans), or equivalent tax-favored retirement investment.

4. Does your employer match retirement savings investment contributions? This is increasingly rare, but if that is the case, definitely make a contribution to take advantage of the match. One caveat — diversify your assets. If your company requires you to invest exclusively in company shares, think very carefully about how to balance your investments into other areas.

4. Another option: Consider paying down all or part of your mortgage. If your bank allows it, make a lump-sum payment. This is especially a good idea if you have a high-interest mortgage.

5. Invest in yourself — or your children. Education, more schooling, a business launch — consider what you can do to increase your own or your children’s ability to make money — or, to gain a quality education.

6. Invest in yourself — or your children — again! Have you covered all the bases? Can you honestly say your investments, savings, debt-picture is uniformly positive? If so, why not spend money on something the whole family can enjoy! That’s the ultimate point of financial planning, after all. 

Best wishes for a great year,

Christine H. Williams
Money Tutor

Visit us here to know more

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