In recent weeks, many Canadians received a federal income tax return. While some of these returns were fairly small, others were more significant — particularly if you put a lot of money into RRSPs last year or otherwise lowered your taxable income. Regardless of the specifics, an income tax return is good news that often leads to an important question: what’s the best way for me to use this money?
Extra funds in the bank means extra room in your budget and an opportunity to improve your financial health. Here are three ways to consider spending your income tax return. For more personalized financial advice, please reach out to an Interior Savings advisor in your region. We’d be pleased to work with you.
Tackle your debt
If you’re carrying any debt, consider using your income tax return to reduce the amount owing. Start by addressing high interest debts such as credit cards and unsecured personal loans, then consider paying down lower interest debts such as secured bank loans, student loans, home equity lines of credit or even your mortgage. You may be able to make an additional mortgage payment, depending on the agreement with your lender.
The lower your personal debt load is, the less you’ll be paying in interest each month. This can save you money both immediately and over time, and is a great way to help improve your credit score. And, if you get in the habit of doing this every year, you’ll see the results build over time. (Plus, it feels GREAT to pay off debt!)
Invest in your future
Consider using your income tax return to invest in your retirement or another element of your financial plan. You may want to speak to an investment advisor about your options or simply make a contribution to an existing RRSP, a child’s RESP or your TFSA. There are plenty of investment options at every stage of life and income level. That said, everyone’s financial situation is unique, so it may be beneficial to get personalized advice from an Interior Savings advisor.
Put it towards something special
If you’ve been saving for a family vacation, a new set of patio furniture, a home renovation or other discretionary expenses, consider using your income tax return to help fund a major purchase. This will help you avoid incurring debt while using the extra funds in a celebratory way. And after the challenging year we’ve all had, a celebration sounds pretty great! There’s no reason not to enjoy this money, particularly if you’ve already taken care of debt repayments and other financial obligations.
Here’s to making the most of your income tax return, however you spend it, and creating a strong financial future for your family. Interior Savings can help — remember, we’re just a call or email away.