I have a novel idea for you
First answer this question.
What do you plan to do with your tax refund?
Answer: Pay off my Credit Card
Splurge. It’s found money,
Naturally that has always been the recommended thing to do with your forced savings for the entire 2016.
This is how you generate a tax refund
Your employer took taxes based on the T1 you signed when you were first employed. You decided to put money into your RRSP. You had not informed your employer so he sent the required amount of taxes base on your T1. This creates a refund. Since the money you contributed to your RRSP is tax sheltered. There are other methods of decreasing your taxes, but the RRSP is the most advantageous for the regular person.
Group No. 1 – Pay off my credit card
These groups are the ones who do the same thing every year with their refund and expect a different outcome throughout the remainder of the year.
That group uses their tax refund and pay off their credit card year after year. Then they wonder why they cannot create a savings plan. They will tell you if you ask them in October what did you do with your tax refund. Paid off my credit cards and boy that felt so good. To that you answer great, so you are free of debt that must feel truly wonderful. Then with a sad look on their faces they reply. Well you remember when Joan got married that cost me a mint, then my car broke down, then I went on vacation that was a hefty cost. Now I am just waiting for my refund this year to pay off my card. You are left dumbfounded.
Group No. 2 – Splurge its found money.
These groups are people who wait to see what comes up to spend it on. They play the wait and see game. They wait and see gamers have no plan for the refund. You know for sure that, if you have no plan, things just go wherever the wind takes it. The same applies to your money, if it has no purpose it will certainly disappear. Then in a month if you ask the wait and see gamers what they did with their refund. The answer will surprise you. It might go something like that…you know I have no idea, oh wait, I bought me a lovely pair of boots they were on sale 50% off then I just spent the rest. This is the money story of a wait and see gamer.
Now its time to tell you about my novel idea
What I recommend you do with your tax refund no matter if its $50.00 or more is to stash it away. Save it. If its more than $50.00 divided into two of your savings accounts with a purpose. Some in Tax Free and the rest in a vacation account. You are now paying yourself first and have just sown the seed of investing in your future.
You were paying the credit card every month well continue paying it. Stop using it. Do not carry it with you. If you do this you are changing what you have done since you filed you very first Income Tax.
What I am asking you to do goes against the conventional thinking. Which is, why would I save money and have debt to pay. Well that method has not netted you a positive financial statement.
What do you have to loose. Try this for say one year and then let me know. I am sure six months into this new plan you will feel emotionally better and amazing in a year.
Hope this help.
If you have questions or if this has helped you let me know at: