How to Payoff Debt With Your Tax Refund

You filed your tax return and got the news that every taxpayer dreams of… your refund is on its way.

While it’s easy to see this as some unexpected free money from the government, the truth is that the government is simply giving your own money back to you.

What you do with it now can make a huge difference in improving your household’s financial health and getting you one step closer to freedom from your debts. 

As tempting as it may be to use your refund to treat yourself, you’ll find that the gift of financial freedom is a much more generous thing to give yourself (and your family) than any material trinket. 

Here we’ll look at how to use your tax refund to its full effect and improve your financial health.

Wouldn’t it be better to invest my tax refund?

Many Canadians spend their tax refunds recklessly.

However, a popular choice for the savvy is to use their tax refund to invest in an RRSP, a TFSA, or another form of investment account.

While this is a good option for the debt-free, it may be less beneficial for you than using it to pay off your debts outright.

Many of your debts will have high rates of interest, especially if you have several credit cards and / or use payday loans.

Paying them off now, or at least as much as you can, will give you more financial freedom in the future. 

No rate of return, even on the hottest investment, is likely to amount to more than you would save by paying off your credit cards and high-interest short term loans now. 

Anything left over? Get into the habit of saving!

You may not necessarily need to use all of your tax refund to repay your debts.

Once your high-interest debts have been taken care of and any other debts are fairly negligible with low-to-no interest, your next best bet is to get into the habit of saving, using whatever’s left over to give you a boost.

Keep adding to it every month, and pay in your savings the day you get paid.

Over time, you’ll be able to build up enough of a safety net to prevent you from relying on credit when unforeseen expenses occur.

Having trouble paying your taxes?

When you owe money to the CRA, it can be notoriously difficult to apply conventional debt relief measures like Debt Consolidation Loans or Debt Management Plan.

However, when your CRA debts spiral out of control, a Licensed Insolvency Trustee can advise you on measures to take control of your tax debt.

You don’t even necessarily have to file for Bankruptcy.

In over 50% of cases, Canadians who are struggling with their debts can apply a Consumer Proposal that helps them get debt-free in 5 years.

Even for tax debt and other government debts. 

Want to know more?

Get in touch with us today on (877)879-4770, and we’ll happily schedule a risk-free, zero-obligation and completely confidential callback. 

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