It's Your Money  

Income-tax windfall ideas

If you’re like most Canadians out there, you probably waited until the last minute to file this year’s tax return.

If so, it was sent off sometime last week and many of you are checking the mailbox each day in anticipation of your tax refund.

So now the big question – what to do with the sudden windfall when it arrives in your mailbox or bank account?

Many of you have already planned out how you want to blow your money (yes, this is a refund of your money and not free money from someone else). A weekend getaway or a new TV will certainly be in the cards for many Canadians.

Some of you however, want to be more responsible with your money. A quick search on Google of “how to spend my tax refund” produced almost 28 million results.

The majority of these results will provide level-headed advice such as paying down debt or saving for your future.

Very sound advice for sure but it’s advice that’s been around for years and most don’t seem to bother following it anyway.

Instead of reciting the same old ideas, I thought I’d give you a few new ones to consider for this year’s tax refund:

  • Withhold less tax – If you’re getting a refund, it means that you paid more taxes last year than you should have. Consider your refund as proof that you made some mistakes in your tax plans (or lack thereof) and fix them for next year so that things balance out.
  • Make home repairs – While not quite as effective as paying down debt, investing in your home can potentially still help your overall financial situation. This does not mean you should go out and buy a new hot tub; but you could put in more efficient insulation or energy saving devices to lower your monthly bills.
  • Donate money – Donating some or all of your tax refund to a cause that you believe in can go along way to improving the financial status of the organization you donate to as well as your own happiness and well being. And you can benefit from a donation tax receipt too!
  • Think small – If your tax refund is $1,000 this year, you shouldn’t only consider items or ideas that cost that amount. Instead you could start by listing ideas in the $50 to $100 range and spread the refund out among several of them.
  • Invest in yourself – If you don’t want to invest in your retirement savings, consider an investment in you. This could be something like a class or gym membership to get back in shape or a course or certification to further your knowledge and get ahead at work.
  • Do nothing at all – There is absolutely no reason that you must spend your tax refund right away. Sometimes the best plan of all is to stick the money somewhere safe and wait a few months before you decide what to do with it. This will allow the more rational part of your brain to overcome the impulsive ideas you may have.

The traditional advice of spending your refund by paying down debt or investing in your retirement savings is still often the best plan of action. The idea of my above list is to give you some additional ideas if you are looking for something new.

If you don’t like these ideas either though, feel free to sort through the other 28 million suggestions on Google – there must be one in there that you’ll like.


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and will take over as board chairman in June. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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