Tuesday Tip of the Week: April 25, 2017
Tax Returns (Continued)
Good morning friends! Yesterday I spoke about tax returns and how we need to start thinking of about them a little differently. Now that you heard me out it would only make sense if I told you what you should do with that tax return. You have many options and they are all good, as long as it’s not a shopping spree. Let me go over a few of them so you know exactly what you should do with all that extra money.
1) Debt…..I know it’s not sexy, but still
Back when I had student debt my tax returns got automatically absorbed into my OSAP debt. I remember the first year that it happened. I was definitely pissed off. Looking back I am happy it went that way. What was I going to do with that money? A TV? Nice clothes? The debt got paid off a little bit quicker because of those juicy tax returns. If you have credit card debt you HAVE to get rid of it and if it takes using your tax return so be it.
2) Emergency Fund
Does your chequing account have $32 in it? Does your savings account have $7 in it? A recent survey stated that more than 50% of 30-year-olds have less than $1,000 in their bank account. That is on the verge of disaster. Make a new zero balance of $5,000. Start by using that tax return.
3) Tax-Free Savings Account (TFSA)
I talk about it all the time. It is the greatest thing since sliced bread. Every single Canadian should have a Tax-Free Savings Account. It also should be every Canadians goal to max this baby out. $5,500 a year is very achievable with the proper budget and discipline. Don’t think, just do it. Now!
4) Registered Retirement Savings Plan (RRSP)
Many people wait for their tax return to contribute to their RRSP. I personally think it is better to contribute all year round. If you did not, then use that return to do your yearly contribution. Doing so means instant tax savings plus a nest egg for the future. Makes sense doesn’t it?
A common response for people, when asked what they are doing with their tax return, is “Treating myself.” I do believe that we all need to treat ourselves now and then. Life can’t be all work and no play. I also believe that in order to deserve a treat you have to earn it. You earn your treats by making sure you have your bases covered. Planning for your future and protecting your present isn’t as sexy as going to Cuba. Well, I find it sexy, but I’m not normal. Biting the bullet now and using that return for something constructive can mean trips to Cuba every year.
Thanks for reading my Tip of the Week. Tune in tomorrow for Wednesday WTF. Have a great day!!!
“Make sure to save for the future and keep making money!” – Jam Master Jay
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.