We’re in the money, honey!
The April 30th deadline to file your income tax is fast approaching. If you file before the deadline you have the luxury to sit back, relax and think about what you will do with your refund.
The Canada Revenue Agency reports the average refund for the 2011 tax year will be $1,506.
It’s normal for people to get excited when they receive a windfall of cash. Their first inclination is to spend it. There no shortage of ways to spend this newly found money; a new sofa, family vacation or 52 inch flat screen television.
What you really don’t want to do with your refund is pay down credit card debt or deposit money into a savings account.
However, a trained credit counsellor would advise clients to use the money more efficiently, such as to offset outstanding credit card balances. Other options for your tax refund might be:
• Put the money aside until you have an effective plan for its use.
• Assess your debts – are you paying high interest on any of them? If so, pay down the high interest debt first.
• No debt – Save it! Put the money towards your retirement plan; create an emergency fund or even a shopping account for the holiday season.
Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and President of the Credit Association of Greater Toronto (CAGT). Consolidated Credit is a national non-profit credit counselling organization that teaches consumers about personal finance through web-based budget and debt analysis tools, financial literacy community outreach programs and in-person or telephone counselling. CAGT is a non-profit association with a mission to provide a dynamic forum in which members can share information and expertise.