Getting a tax refund?

I’m getting a big, fat tax refund this year. Not because I willingly chose to pay more in tax, as some people do, using the tax man as forced-savings. No, it’s because I had a whack of medical and school deductions that I could claim. (My massages are tax deductible!) If you’re getting a tax refund, have you thought about what you’re going to do with it?

Boost next year’s RRSP contribution. It would be nice to have a leg-up on your next year’s RRSP contribution, wouldn’t it? And using your tax refund to get an even bigger tax refund just feels so much like you’re sticking it to the tax man.

Start an RESP for the kids. If you put $2,500 into an RESP, not only will it grow on a tax-deferred basis, but the government will give you $500 in grant money. That’s an immediate 20% return on your money, locked and loaded. Where else can you get that kind of guaranteed return?

Pay down your debt. You knew this was coming. If you owe $3,500 on a credit card at 18%, that’s costing you $630 a year in interest. Pay that puppy off, then take the money you would have spent on interest and repayment and use that to fund next year’s TFSA.

Get a leg-up on your emergency fund. Yah, I know, if you can hardly make ends meet right now, how are you supposed to come up with six months’ worth of essential expenses for an EF? Well, you could use that tax refund. That’d be a start. Then figure out how much of your day-to-day spending is going to “wants.” Trim that by one-third and send the difference to your emergency fund on a regular basis.

Create a curve-ball account. You know those expenses that seem to pop up out of nowhere and throw your budget off balance? They aren’t technically emergencies. But they sure can feel like it when they jump up and bite your budget in the butt. Isn’t it time you set aside a little somethin’ somethin’ so you’re ready to fend them off?

Get one month ahead on your budget. This is particularly important for those people who have a variable income. If you’re always trying to figure out if you’re going to make it to the end of the month before the end of the money, it may be that you need to get a month ahead. I budget this way. The money I put in my chequing account in April will pay May’s bills. Not only does being a month ahead remove all doubt about how you’ll manage your money, but you’ll meet the minimum requirement for free chequing on a lot of accounts. There’ more money saved!