According to the CRA, the average tax return is $1, 765 in Canada. According to the Motley Fool, the average return in the states is $2, 763.

I personally have not filed my taxes at the time of writing this post. I have been thinking of effective ways to spend my tax refund which is what compelled me to write this list.

In no order of importance here is a list.

Build Your Emergency Fund

Although I did say this list has no order of importance, this is the most important. It is recommended that you have 3-6 months worth of expenses in your emergency fund.

In a recent post, I challenged you to strive to build an emergency fund that last 12 months. It can be difficult to build an emergency fund so why not use “free” money to boost your emergency fund.

Life has a way of throwing a wrench in your plans, why not be ready for it?

Pay Off Debt

Debt can be plain nasty. Especially mismanaged credit card debt. Being debt free is not only great for your finances, it also gives you peace of mind and a sense of accomplishment.

The average amount of credit card debt in Canada is $2,627. In the states, the average credit card debt is approximately $5700.

There a few a approaches to paying off debt. check out this post on 2 ways of paying off debt.

Contribute To Your Retirement Plan

Most people I talk to do not think about retirement in their working years. I strongly believe in investing for the future and with good reason.

You will not always be able to work. Having money to spend in your later years will prevent you from having to work in order stay afloat.

Invest In Passive Income Ideas

Do you want to make money in your sleep? You can use the tax return to invest in passive income ideas.

The best part about passive income is amount of work required to make money. You do all the work upfront and then a little bit of work here and there to keep the cash flowing.

Invest in your yourself

Warren Buffett, one of the worlds greatest investors, once said, “The most important investment you can make is in yourself.”

You can take a course, buy some books, learn a new skill, etc. The point is to use that money to better yourself.

I will be using some of that money to buy books and learn a some new skills.

Invest in your children

College tuition is very expensive. If you have young children then maybe investing in their college tuition might be the route for you.

If you think a post secondary education is expensive today, imagine what it will be 15-18 years from now.

Saving for your kid’s future education can help ensure that they graduate debt-free.

If your kids decide to not go to college, then you can use that money elsewhere.

Go On Vacation

Sometimes you need to treat yourself. This could be going on vacation, buying a nice dinner, etc.

You’ve worked hard all year so reward yourself a little. That is assuming the rest of your finances are in check.

Conclusion

I will be using that money to continue building my emergency fund and investing in myself.

Comment below and let me know how you spent/will spend your tax refund.

4 Comments

  1. The question for me when an influx comes in always is: pay off debt or invest. After doing some reflection, if I were to get say a refund of $1000, I’d feel better being $1000 less in debt versus turning $1000 into $1070 if I had a 7% ROI in a year.

    Liked by 1 person

    1. This question is tricky and I think the answer is dependant on the circumstances surrounding the question.

      I will say however that compound interest can do as much damage as it can good.

      I would feel better investing that $1000 for a potential 7% return KNOWING that I don’t owe money that is charging me 20%.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s