Use your tax refund to your advantage
Are you looking forward to receiving your income tax return?
Isn't it a fantastic opportunity to plan and budget for a year, if not longer?
Here are some suggestions for how to best invest any money you receive:
Use your refund to help you achieve your objectives.
Are you saving for home improvements, a down payment, or a vacation? If you want to invest your tax return, talk to your bank or financial advisor about options that will help you reach your goals.
You can also use the free online financial goal calculator provided by the Financial Consumer Agency of Canada. You only need to answer a few questions, and the tool will assist you in developing a realistic savings plan.
Pay off your debts
Credit card and loan debts, for example, may have high interest rates. Examine those with higher rates and decide which ones to begin with. These will have the greatest impact on debt reduction and allow you to save the most money in the long run.
Another strategy is to start with the smallest debt and work your way up. Maybe your tax return will pay it all off at once. For some of us, the thought of paying off one debt at a time can be very motivating.
Create an emergency fund
Your tax return can help you get a head start on creating an emergency fund, so you don't have to start from scratch. From there, even a few dollars set aside each week can add up.
Setting money aside for unexpected expenses or lost income is critical, as we saw during the pandemic.
Unexpected vet bills, car repairs, or a leaking roof can catch anyone off guard.
Paying for these with an emergency fund rather than a credit card means you won't have to pay interest.
Another suggestion is to keep your emergency savings account separate from the account you use for daily transactions.
You can find bank accounts that have no or low transaction fees, allowing you to easily withdraw your money when you need it.