Should I spend or invest my tax refund?
Another tax season has come and gone and many of us are feeling relieved to have completed the annual chore of filing income taxes. It’s even more of a relief for those who will be getting a refund on their taxes this year. While it is tempting to immediately spend this welcomed lump sum, choosing to invest that money can help you meet your financial goals for the future.
“It is easy to want that instant gratification of spending your tax refund on something you want right now,” said Karim Malas, ATBSI Financial Advisor, Digital. “But if you consider your financial goals for the future, it might be a wise decision to use that money to help you plan for tomorrow instead of spending it today.”
Putting that money into a Registered Retirement Savings Plan or a Tax-Free Savings Account can help you reach your long-term or short-term goals. Whether you want to bump up your retirement savings or save for a down payment on a house, new vehicle or a wedding, socking that extra money away can help you reach those goals.
“The first place to start is deciding what exactly your goals are and then make financial priorities to help you get there. Enlisting the help of a financial advisor can help you make a solid plan for reaching those goals and make good use of your tax refund this spring,” said Malas.
Should I use my tax return to pay off debt?
There are other things to consider when it comes to spending or investing your tax refund this year. If you have high interest debt, like a line of credit or a credit card debt, you might consider using your tax refund to pay that off. It’s likely that the interest on those debts is higher than any interest you will earn in an investment or savings account.
Should I let the CRA hold my refund?
The Canada Revenue Agency (CRA) also offers to hold your refund and apply it to your tax account for the next tax year. If you want to save that money incase you owe on your taxes next year, it’s a better idea to put it in a high interest savings account. That way your money has the opportunity to earn interest instead of losing value to inflation by allowing the CRA to hold it with no interest.
If you’re relatively new to investing, you can call ATB at 1-888-282-3863 and speak to an experienced financial advisor about any questions you may have about your goals. You can also find an ATB Financial Advisor in your area.