I stumbled upon this article after reading Rob Carrick’s best reads column recently. I found it interesting to learn what some personal finance experts felt was the best thing they ever bought with their tax refund.
Here are some of the things from the article:
- People bought a jeep or an older car in cash for a few thousand dollars.
- People purchased a Kindle.
- People took a trip to Vegas.
Other bloggers took a route I’m more familiar with, they reinvested most of their money back into their portfolio or made an extra mortgage payment. First of all…there is nothing wrong with having some fun with your tax refund. Just realize this is not a windfall. A tax refund is a mixed blessing really. On the good side, we get money back. On the downside, a tax refund means we just gave our government an interest-free loan over the last year. If you consider your tax refund from that perspective then getting a huge tax refund is undesirable for many Canadians – unless of course your sizeable refund was generated from a major Registered Retirement Savings Plan (RRSP) contribution. This is a good thing.
Here are my suggestions for good things to do with your tax refund. The best thing to do will vary.
Pay off credit card debt
Yes, maybe boring, but the sooner you rid yourself of consumer debt the sooner you can enjoy the money you make.
Save for retirement
Saving for tomorrow is not only smart but if you sock some or most of your tax refund into your RRSP, you’ll be well on your way to getting an even bigger tax refund next year like I mentioned above. You may also consider trying to maximize your Tax Free Savings Account (TFSA) every year. Contributing to your RRSP and then using the refund to fund your TFSA is a great one-two investing punch.
Start an emergency fund
When you least expect it, $hit happens. Instead of putting these emergencies on your credit card consider building up a small emergency fund to plan for the unplanned.
Make an extra mortgage payment
We’ve done this in the past because killing debt remains important to us.
Invest in you
Want to improve some skills for the workplace or turn your hobby into some side-income? Investing in yourself is always worthwhile since your human capital is really your greatest asset.
You might be wondering…what did we do this year? Did I eat my own cooking? Yes. We reinvested most of our tax refund back into our registered accounts and we used the rest for savings.
What do you do with your tax refund?