25 Apr 2012 8 Comments
The tax return filing deadline for personal income tax is on or before April 30, 2012. So for all those procrastinators out there, you have 6 days left! Ahhhh! For all those keeners out there who have already received their tax refund, or anxiously waiting for the cheque in the mail, have you given any thought on what you are going to do with yours?
Here are a couple ideas (because I’m sure deciding what to spend money on is SO TOUGH!):
- Pay down credit card debt – if you are carrying any credit card debt, the best way to spend your tax refund is to pay this debt down! According to CRA, the average refund last year was $1,400. If you received the average refund and put it towards a credit card that has an interest rate of 30%, you will end up saving yourself over $400 in interest charges for the year! Pretty good bang for your buck!
- Invest in TFSA or RRSP – investing in either account is a great idea! If you decide to invest in a TFSA, all your earnings will be sheltered from the government forever! If you decide to invest in a RRSP, you are helping to ensure yourself another tax refund next year. Win win in my opinion! Check out my post about TFSA vs. RRSP if you are having a tough time deciding on which account to invest in. The market has been dropping for the past month, so it might be a good time to add to your positions! Buy buy buy!
- Put some extra money down on your mortgage – for most people, your mortgage will be one of the most expensive things you will buy in your lifetime. Extra money towards your mortgage will decrease the amount of interest you will pay overall, and may even shorten the amount of time you will need to pay it off completely!
- Boost your emergency savings – this is very important to have to protect yourself from financial emergencies. The tax refund can be used to boost this cushion for your financial situation.
- Anything fun! – I know, I know, a lot of you see it as extra money. It should be used for fun, right? If you have credit card debt, no, you already had your fun, and the credit card companies are the ones having fun now! But if you do not have credit card debt, and are on track for your investment goals for the year, I think you can have fun with some of the money. Let’s say, half. Although, if you have a decent spending plan, you should already have fun money to begin with! Just saying!
Personally, my refund is just going to go towards my living expenses. It wasn’t a big amount due to my work situation (or lack of ) from last year. I have already made my TFSA contribution for 2012, and I no longer have any RRSP room to contribute to. Boy, on the other hand, is going to put his refund towards his TFSA, as we have a bit of catch up to do.
Readers, what are you doing with your refund? Any other suggestions on how to spend the money?