What should you do with your tax-refund?

It’s tax season and we’re all hoping for a big cheque in our bank account. The question is:

what to do with it once we get it? As much as we’d like to go and buy ourselves an authentic Persian rug or that gorgeous diamond ring taunting us through the store window, we have to keep in mind: necessity before luxury.

Pay off outstanding debts - If this was your plan all along then kudos to you for being so responsible! The simple act of using your refund to pay off an extra $1000 of debt can save you from paying more than you have to. Depending on your interest rate, you will able to wipe out anywhere from 10% to 29% of interest rate charges.

Top up your RRSPs and RESPs - The cost of daily living is only getting higher and higher. Canada's inflation rate has averaged around 3 percent per year since 1915. So while you may not need a truck full of a cash to shop for groceries during retirement, the purchasing power of your money will continue to erode away.

The cost of your children’s education is no different. With everyone getting a degree the competition is fierce. Projections indicate that in 16 years a four year degree will cost $114,063. Remember money put away today is your security tomorrow.

Add an extra payment to your mortgage - On a $250,000 30-year mortgage with a 5% interest rate, paying down an extra mortgage payment a year will shorten your mortgage by 5 years, and save you almost $41,000 in interest!

Invest in you! - If your career needs a boost take the steps you need for extra training to get that promotion. Extra courses, additional training, or another degree are all good choices in getting a head start and making a difference in your career.

Donate to your favorite charity - People tend to give during the holiday’s but charities need money all year long. You can use the tax-deduction for next year’s return.

Secure your future -  Open an emergency fund and set aside at least 6 months of your monthly income. Ensure that the money is liquid, so you can get to it in an emergency.

Do something you haven’t done before -  Take a painting class or if you’re more adventurous go sky-diving! There’s no reason why you can?’t treat yourself. After all it’s your tax-return.

 

110 Ideas for Your Tax Refund (+ 1 treat!).  Golden Girl Finance. February 23, 2011

 

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