With the RRSP tax deduction deadline having just passed us, those who have the ability to scrimp and save, putting money into a Registered Retirement Savings Plan (RRSP) over this past year may have a tax refund on the way (or have already received it) from the Canada Revenue Agency (CRA).
For those who did receive a refund, answering the question of how to invest said funds is an important one.
The reality is that every investor’s situation is different, but there are a few key ideas I’d like to share with those who are really struggling with optimizing their refund.
To start, paying down any high-interest debt like credit cards or high interest loans should be the top priority. It doesn’t make sense to invest money in the market and earn 7% if you’re paying 20% to a credit card company.
For those with the ability to do so, one great option is to use this money to make an extra lump sum payment toward your mortgage.
This can allow for either lower mortgage payments on a monthly basis or a faster paying down of one’s mortgage.
Another great option investors can consider is putting this money to work in a tax-sheltered account for next year, like an RRSP or TFSA.
Getting a jump on next year’s tax refund, and keeping the snowball rolling, is a great idea for most investors who truly have a long-term investing time horizon and are willing to be patient and watch returns stack up over time.
Invest wisely, my friends.
