Uses for your Tax Refund

With the time drawing near for us to receive our tax refund, we have to come to a decision as to how to spend it. There are several good uses for your tax refund, however it all depends on your personal situation.

You may want to consider putting it towards your RRSP loan, or make your 2010 RRSP contribution now. If by chance you took out an RRSP loan to maximize your RRSP contribution and generate a larger refund, use your tax refund to pay off the loan. However, if you did no such thing, then consider making your 2010 RRSP contribution today, rather than waiting till the deadline next year. You will be allowing yourself to benefit from almost an extra year of tax deferred growth with this choice.

The most widely used method of using your tax refund is paying off your credit card. Interest on most credit cards can slowly eat away at your savings. Reduce your credit card balances with your tax refund; it is also a good idea to target the highest rates first.

Another great use for your tax refund is to make a lump sum payment on your mortgage. By applying it directly to your principle, a lump sum payment will allow you to possibly save in interest costs over the life of your mortgage.

If you are among those who do not carry any extra debt, then consider contributing to your Tax Free Savings Account (TFSA), allowing you to grow your money tax free.

There are many different ways to properly use your tax refund, it all depends on your financial situation. My advice is take some time to think on what you want to do with it before you spend it; if you have a bit of trouble deciding, put it away in a TFSA account and use it when you figure out what to do with it.