Here you have produced your tax return. For those who are waiting for a refund, the big question is: how to use it?
The financial planner offers you some suggestions.
Pay off your credit cards or high-interest debt: to ease your end of the month
Get out of debt faster and pay less interest.Do you have high interest rate loans? You may want to consider a loan to consolidate your debts. You only have to make one payment to repay everything with, quite possibly, a lower interest rate on the loan.
Build an emergency fund: to avoid resorting to credit when an unforeseen event arises
An emergency fund is an amount of money set aside to deal with the unexpected without incurring the costs associated with credit cards and lines of credit. The best practice is to save the equivalent of 3 to 6 months of your usual expenses. The tax refund calculator comes up with the best results there.
- Starting with your tax refund and then saving a small amount on a regular basis will make a big difference in the long run.
- The TFSA is an attractive vehicle for accumulating an emergency fund thanks to the flexibility it offers with regard to withdrawals, if it is invested in a cashable investment at all times.
- Open an account to help your children or grandchildren continue their post-secondary education
You thus enhance your education savings strategy by taking advantage of government grants.The sooner you open a Registered Education Savings Plan (RESP), the sooner the government will reward you for planning ahead and the money will grow tax-free for longer.
Use your RRSP as leverage: to get another tax refund
Contributing to an RRSP lowers your taxable income is a great way to take advantage of the benefits of income-based social credits and programs.
This is particularly the case for the Canada child benefit, child care expenses, the goods and services tax (GST / HST) credit.
Boost your RRSP: to supplement your retirement savings even more
Reinvesting your tax refund in your RRSP further enhances your retirement savings. You use up unassessed sums more quickly in recent years.Also keep in mind that the earlier you invest in the year, the more you benefit from the growth of your investments tax-free.
Repay the mortgage capital: to pay off your home faster
You speed up your repayment by paying up to 15% of your property’s initial mortgage each year.How to maximize? Kill two birds with one stone by contributing to the RRSP and applying the tax refund it provides to the mortgage.
If you are nearing retirement, this is a very interesting strategy to adopt in order to eliminate your financial commitments.
Set aside money in your TFSA: to finance a vacation, renovation or major purchase project
A TFSA offers great flexibility when it comes to using your savings to carry out projects.
Features of interest to you:
- Tax-free investment income: accumulate the money you need faster.
- Tax-free withdrawals at any time, depending on the type of investment chosen.
- They are added to the contribution room for the following year. You can therefore re-contribute the equivalent of the amount withdrawn.