It's officially tax season and many Canadians are going to be getting returns. So what are you doing with your return? You work hard for your money, so I want your money to work hard for you! Below are three things you should consider when it comes to your tax return.
Apply it to the baby steps
Okay, before you spend your tax return on a new toy or vacation, I want you to ask yourself a question; Where am I in the baby steps? Let’s recap… Baby Step 1. $1k emergency fund. Baby Step 2. Pay off all your debt using the Debt Snowball. Baby Step 3. Continue to fully fund your emergency fund with 3-6 months of expenses. Baby Step 4. Start investing 15% of your income. Baby Step 5. Start your kids' College fund. Baby Step 6. Pay off your home early. Baby Step 7. Live and give like never before!
If you’re in baby step 1-3 I want you to apply your whole tax return.. Baby step 4-7, plan to put some of your return, if not all of it, there.
A tax return really isn’t extra cash
I want you to understand that a tax return really isn’t extra cash. In fact, you should look at it more like it was just left in a really bad savings account called the government. It was your money to begin with. You’d be better to put that cash into a money market account. At least you would make something. But having the government hold onto it, you’ve made absolutely nothing! If you factor in inflation, you actually lost money. Oh, good ol' inflation… If you’re not careful it can come from behind you and kick you in the butt! Going forward I want you take home more of your money each month.
Have payroll adjust your T1213
If you get a tax return every year it means the government is taking too much money off your paycheck. Instead, have your employer adjust your T1213 (Request to reduce taxes at the source) to have less taken off. You get to take home more each month and keep control of where your money goes! Let’s be honest, you don’t want the government in charge, considering how well known it is for it's ability to handle money!