Posted by Tim Stobbs on April 24, 2014
*click* “Oh wow, that’s my account balance?!? I’m pushing almost $10K. I must have got my tax refund.” That was me a few days ago on the computer.
I really do like that feeling of getting my money back from the government. There is something nice about getting a bit of extra cash that you previously weren’t planning on. In my case, I normally owe a small amount of tax each year so getting a refund over $4000 was unusual. Yet I had managed to put a lot of money in a spousal RRSP and thus got a extra big refund because of it.
So for about a few seconds I ideally wondered what I could spend the money on. A nicer summer vacation could be fun or perhaps a break from winter later this year. Or perhaps I could start that kitchen renovation that we keep talking about? Yet in the end I did what I had already planned. I moved every dime of the refund I got (plus a little extra) over to my TFSA and maxed out my contribution this year.
How did I managed to do that? It’s called planning ahead.
The day I filed our taxes I knew I had a bit of time until my refund was put in, so I started thinking about what to do about that money then…before I ever had it. That way I could go through every idea in my head and sleep on it before making a decision.
So yes I did consider spending my tax refund on other things like a vacation or kitchen reno, but ultimately I just loved the irony of using a tax refund to invest without paying any more tax on that money. I can’t say everyone should do that since if you have lots of debt you might want to pay that off first.
In the end the only really bad way to spend your tax refund…is on an impulse buy. After all what might seem like a good idea at the time could end up being a waste of money. I think everyone has gone through buyer’s remorse at some time or another. So right after you submit your taxes sit down and start dreaming. Then after a few days of sleeping on the idea you will really know if it is a good one or not.
What did you do with your tax refund this year? Or what do you plan to do?