Well, with April 30th in the rear-view mirror, it’s time to turn our attention from receipts and filing compliance 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. Emergency Fund Never before have we been made so aware of the importance of having some money stashed away for a rainy day. Park it in a low-risk high-interest account, you will earn higher interest than in your regular ‘savings’ account and keep it liquid in case you need it.
2. 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 paycheck over the coming year.
3. RRSP loan paydown 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. TFSA 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. RESP 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. RDSP 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. FHSA The Tax-Free First Home Savings account is a new account that allows young Canadians to save for their first home. This is a great way to save for your first home & get the tax write off!
Have a great weekend,
Tracey & Paige
Sources:
https://www.invesco.com/ca-rest/documentDetail/TEDTEPE
https://coastalwealth.ca/ten-things-to-do-with-your-2023-tax-refund
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