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No spending sprees with your tax refund, please.in KD Professional Accounting Services News
It is tax time once again and for some of us, a tax refund is in the horizon. More than half of Canadians will be getting some type of refund with the average amount in the $1500 range. But before we get all excited with the prospect of this “extra” money and plan our shopping sprees, there are a few tips on how we can wisely use our tax refund to help us be in better shape financially.
There are many ways you can smartly spend your tax refund. You can opt to pay down debt which is on an all-time high among Canadians these days. You can also reinvest the money. Or you can also put in money on your retirement fund or your child’s education.
Whichever way you decide to reinvest, it must always be part of your overall financial plan. And remember it will always depend on your financial situation so talk to a professional to ensure that you have a proper financial plan in place.
However, you may be happy with a lump sum payment from the government but the really smart ones do not get a refund at all because getting money back means that you have been paying too much all year. Instead of having that money with you to use, you are freely giving that extra cash to the government. According to Aurele Courcelles, director of tax and estate planning at Investors Group, “While a lump sum payment can come in handy for Canadians, a large tax refund could be a result of poor tax planning throughout the year, and could be costing you more money than you think. There is actually a benefit to avoiding a large tax refund and investing the money for yourself, plus the longer you leave the money invested, the more the benefits will continue to add up."
Source: “Make tax refund ‘smart money’” by Gary Mar, May 4, 2012, http://business.financialpost.com/2012/05/04/make-tax-refund-smart-money/
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