Well, with April 30th in the rear-view mirror, it’s time to turn our attention from receipts and filing to what to do with our refunds. Understanding the urge to spend it on travel, shopping or dining, here are a few suggestions that will help keep everyone’s financial affairs firmly on the ground.

  1. Your RRSP. By investing into your RRSP you will probably generate another refund next year, or you could reduce your taxes deducted at source; by filing with CRA to reduce the tax being deducted off your pay cheque over the coming year.
  2. Spousal RRSP. Rest assured that the spousal RRSP remains a useful income-splitting tool even with the advent of the pension-splitting rules, particularly if you want to start redeeming prior to age 65.
  3. RRSP loan pay down. If you took out a loan for your RRSP contribution, a prudent use of the refund is to now eliminate or significantly reduce the loan balance.
  4. Mortgage reduction. The sooner your mortgage is paid off, the sooner there will be more in the monthly budget to devote to retirement savings and other lifestyle goals.
  5. Paying down non-deductible debt. Regardless of why we have debt, this kind of debt often compounds against us faster than we can accumulate savings. Eliminating credit card and/or other such debt; will ease up the cash flow making your finances more manageable.
  6. Not since the entry of the RRSP in 1957 has tax-sheltered investing been made so broadly and easily available. Consider also that a cash gift to a spouse that makes its way into a TFSA will not be subject to spousal income attribution rules.
  7. Especially for deposits that attract government grants, an RESP is great for education saving and income splitting. As well, investing a little each year will reduce sticker shock down the road when you see the amount due on your child’s acceptance letter.
  8. Significant government support and tax benefits are available through these plans for families with disability issues.
  9. Non-registered investments. Whether investing directly or using leverage, tax efficiency is the key issue when managing non-registered investments. Make sure to have a plan and dovetail it with other savings.
  10. Live it up… a bit. After all, saving is just spending-in-waiting – try to maintain a good balance, save half and spend half.

Have a great weekend,

Tracey

 

 

Source: Invesco Tax & Estate matters, MT 05-21-15

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