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You have your tax refund this year. Don’t just go out and spend it like you have done in the past. Here are three things to do instead.
It’s normal to spend extra money when you get it. A lot of people will immediately go shopping with their tax refund in 2024. Don’t be one of those people.
There are better ways to make the most of that money. If you think of it as money that has already been spent, you’re less likely to resent yourself for using it in a better way. Plus, you can get on the path of financial freedom and security by using it sensibly.
I don’t get a tax refund. Being self-employed, I tend to owe some taxes, even when I pay some of them throughout the year. However, if I did get a refund, these are the things I’d consider doing.
Put the money toward your debt
Depending on the type of debt* that you have, you could use your tax refund toward that. I’d use it toward credit card payments, car loans, and maybe even student loans. You want to knock off the interest, and you want to get yourself out of these bad debts faster.
The only debt I wouldn’t put the money toward would be my mortgage. That’s on a specific plan, and I’d want to save for the future instead of paying down my mortgage. However, if I only had a little left on my mortgage, such as around $20,000, then I’d consider using a tax refund toward some of it.
You want to get out of debt as soon as possible. You’ll need to take steps to avoid getting into debt in the future, though.
Save your tax refund
One of the best things you can do with your tax refund is to save it. I recommend my clients put their tax refunds into their retirement accounts. This could be an RRSP or a TFSA up here depending on the type of account they want to save in. You’ll want to look at your options locally.
Saving your refund in an investment account is a great way to build your wealth*. You’ve already spent that money. Treat it that way so that you can avoid looking at it and put it straight into your investment accounts. Allow the amount to build up for retirement, a kid’s education, etc.
If you don’t have the contribution room for your investment accounts, then you’ll want to look at other savings accounts. I’d recommend at least putting it into your emergency fund so that you have it should the time come.
MORE: 5 budgeting myths holding you back
Put it toward home improvements
If you are going to spend it, spend it wisely. There are times that you’ll need to go out and buy new clothes, but usually, you can use your tax refund for something in the house. Put it toward something that you’ll gain from in the future, such as home improvements.
It doesn’t have to be a large improvement. Maybe you’re finally getting the garden done, or maybe it’s time to sand and repaint the cupboard doors in the kitchen. There are the options of kitchen and bathroom renovations, of course.
By putting the money into home renovations, you’ll benefit when it comes to selling your house. You tend to make back more than you put in, especially as housing prices rise.
MORE: You can only cut back on your budget so much
What are you doing with your tax refund? Let me know in the comments below.
If you want to discuss your options, drop me a line and let me help.
