Spring. It means warmer weather is right around the corner… And so are tax refunds. Are you among the lucky few taxpayers who will receive a government cheque? What will you do with it? Here are a few ideas to consider.
You can spend your tax refund however you want: on a shopping spree, a weekend at a spa, a pair of $300 shoes. Why not treat yourself?
…before you get carried away, remember to keep a cool head. If you are still carrying an unpaid balance on a credit card or have outstanding payments on a leather sofa you bought two years ago, it doesn't make much sense to keep paying high interest when you have money in the bank. Pay off any bad debts as soon as possible. After that, there’s no reason you can’t spoil yourself a bit.
That said, although you shouldn't view a tax refund as money earned, it isn’t totally unreasonable to see it as a surplus in your budget. You simply need to find the right balance between managing your money responsibly and treating yourself to a little luxury.
Why not, for example, divide your tax refund in two? You could use one part for savings, either to contribute to your RRSP, a TFSA or to set up an emergency fund. The rest could be invested into a project you've been dreaming about but never had the funds to bring to life. Here are a few examples.
Wealth doesn’t always have to be measured in dollars. Seeing and experiencing different parts of the world can make you rich in other ways. In exposing yourself to new cultures you’ll find inspiration, learn new things and discover parts of yourself you never knew existed, all while creating wonderful memories.
By accumulating your tax refunds in a TFSA for example, within a few years you might be able to save up enough for the trip of a lifetime, whether it's taking a few months off to trek the 3,500 kilometres of the Appalachian Trail, going to the all-inclusive resort of your dreams or spending three months in Paris alone!
A tax refund can also serve to take care of the most important person in the world: you! Buy yourself a membership to a gym or some guitar lessons, buy an ergonomic chair for your home office, get that tattoo you've always wanted. It's up to you. Whatever makes you happy!
Another idea: if there’s a cause is close to your heart but you can’t usually afford to give money away to charity, your tax refund is the perfect opportunity. Here too, you can choose to use only part of it. And the beauty of a charitable donation is that it entitles you to a tax credit the following year. Just make sure you get a tax receipt.
If you’re a home-owner, investing in renovating your property is not only a way to increase your enjoyment of your house or condo, it's also a way to increase its resale value. But when dipping into your tax refund, try to prioritize the most profitable renovations such as the kitchen, bathroom, or even a simple paintjob.
At the end of the day, if the refund amount allows, the ideal solution would be to buy yourself that much-coveted bicycle while allocating a share to savings. In any case, whether it is small or large, a tax refund provides a sizeable benefit: you are free to decide what to do with it. You're in control, so make the most of it!
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