Actually, the best strategy for your tax refund may be not to have a refund. If you receive money from the government after they assess your tax return, it probably means that you are overpaying along the way.
That money will serve you better by being in your hands all year and working for you in a Tax Free Savings account, Registered Retirement Savings Plan or saving you interest by paying down debt.
If you did get a refund, what will you choose? Your refund isn’t “found” money to be spent without consideration, it is actually your money the government is giving back to you, and what you do with it can make an impact on meeting your long term goals.
Those with children or grand-children could start or contribute to a Registered Education Savings Plan (RESP). You won’t get a tax receipt, but the money grows tax free for the children’s education. As a bonus, the government adds the Canada Education Savings Grant (CESG) of 20 per cent to a maximum of $400 or $500/year depending when the child was born.
Topping up or establishing an emergency fund gives you confidence that unforeseen expenditures will not result in RRSP or other investment withdrawals.
Using your tax refund to pay down debt will save you money and it will free up more cash for investments in the future. If you obtained an RRSP loan, paying down the loan make good financial sense.
You can use the tax refund to make an additional contribution to your RRSP, which in turn, will help to generate a possible tax refund for next year, while helping to increase your savings.
If you are one of those people that have a hard time deciding whether to contribute to an RRSP or pay down their mortgage, use the refund to pay down the mortgage.
And, also important, is to have some fun with a portion.
Rewarding yourself for good fiscal habits is an excellent way to stay motivated on your financial journey.
For further information, Carol Plaisier, CFPÆ, Investment Advisor with DWM Securities Inc. and Insurance Advisor with Dundee Insurance Agency Ltd., can be reached at the DundeeWealth office in Parksville (250) 248-2399, or by email: cplaisier@dundeewealth.com,
website: www.carolplaisier.com.
This article was prepared by Carol Plaisier, CFPÆ, FMA, AMP (Accredited Mortgage Professional) who is an Investment Advisor with DWM Securities Inc. This is not an official publication of DWM Securities Inc. and the views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of DWM Securities Inc. *Insurance products provided by Dundee Insurance Agency Ltd.
DWM Securities Inc.,†Member-Canadian Investor Protection Fund, is a DundeeWealth Inc. Company.
