According to the Canada Revenue Agency, the average tax refund in the 2008 tax year was over $1400! So what to do with this new found bonus of wealth? Here are five smart options for you to think about to improve your financial situation and take advantage of your refund.
Contribute back into your RRSP: This will generate tax savings for the following tax year and at the same time enhance your retirement savings. For example if you earn $120,000 per year in B.C. and receive a $5000 tax refund and contribute this $5000 into your RRSP, this would generate you an additional $2035 in tax savings for next year.
Contribute to an RESP for a child, grandchild etc: Contributing to an RESP generates a 20% Canada Education Savings Grant from the government, and as well Canada Learning Bonds and additional grants depending on family income. Do you know of another investment that gives your child a guaranteed 20% return?
Contribute to a TFSA: As you are allowed to contribute up to $5000 per year and this program started in 2009, you have up to $15,000 of TFSA contribution room to maximize. This account is much more than just a savings account as you have the option to invest in mutual funds, stocks, bonds, GIC’s, cash etc inside of the TFSA. Any interest, dividends, capital gains and growth are tax free even when withdrawn.
Review and top up your insurance: Ensuring you and your family have the right type and right amount of coverage when it comes to life, disability, critical illness and long term care insurance is vital to your plan and well being.
Pay down high interest credit card debt: Typical credit card debt is around the 19% interest rate level. This is non-deductible consumer debt and should be paid down as quickly as possible to free up cash flow and reduce your interest payments.
For these and many other financial strategies please contact myself for your free no obligation personal financial and portfolio review.
Jason Blucke is a Certified Financial Planner with Investors Group Financial Inc. in Kelowna, BC.
Jason has called Kelowna home for 17 years now.
Jason helps his client in the following areas:
Investments, Insurance, Tax, Retirement, Education, Estate and Cash Flow Planning.