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Getting a tax refund is just about the only good thing about tax season whether it’s $100 or $1000, any amount brightens up the dark cloud that is constantly hanging over our lives until we finally submit our taxes. So if you’re lucky enough to be one of the few people who get a substantial amount back have you decided what are you going to do with it yet? Do you have any priorities? Is there a huge debt that needs to be paid back as soon as possible? Do you want to invest? Or are you debt free and in need of a few great ideas for how to spend that extra money?

Below we’ve compiled a list of 5 questions that you should ask yourself before you commit your tax refund to an expensive vacation or shopping trip when you really can’t afford it.

Once you’ve asked yourself the questions and you’ve come to the conclusion that you’re financially safe but are still looking for some great ways to invest or spend your money then we’ve got 6 ideas for you.

How is your income?

What is your daily income and money flow like? If you are constantly between jobs and working only a few hours a week because you can’t find a full time stable job then you definitely need to save most if not all of your tax return. If on the other hand you have a stable full time job then saving all the extra money doesn’t need to be your priority.

Do you have any debts?

Take a look at all your debts, credit card debt, student loans, mortgages and any money you might owe friends or family. Figure out what debt is costing you the most including interest rates. This is important for when you finally decide what do to do with your tax refund.

Are your finances affecting any of your relationships?

If your finances are causing problems in any of your personal relationships then you need to fix them. Using your tax refund to pay off the debt this is affecting your relationships should be a priority for you. Fighting over finances should not be a constant part of your life, especially when your can take steps to repay your debts.

Are you financially stable?

Now ask yourself if you think you’re financially stable, if so then you don’t need to panic about using your entire tax refund to pay off debts. Instead allocate a certain percent and pay off the debt that is the most expensive (you figured that out before when you asked yourself “Do I have any debts?”).

Are you financially unstable?

If you have come to the conclusion that you are financially unstable then you need to pay of those debts and save some of the money, while this isn’t any fun you will thanks yourself in the future. Everyone’s situation is different but we suggest paying off loans and debts that are set in stone like mortgages and car payments. Once you’ve done that then take what’s left over and start to pay off the expensive debts, this means credit card bills.

Now if those 5 questions were easy to answer and you’ve figured out that you are debt free for the most part and as financially stable as a person can be then here are 6 great ways to spend that tax refund without feeling guilty after you’ve returned home from the mall with way too many shopping bags.

1. If you feel like being really responsible then save, save, save. Add as much as you can to your savings account or emergency account. You never know what the future holds and even the smallest amount in your savings account could make all the difference one day.

2. Spend some money on improving a skill or learning a new one. This is a great idea if you’re looking to work your way up in your job or are trying to take the first steps towards a career. There are many continuing education classes for adults a night and even online courses offered in countless subjects. While the costs of investing in your future many seem like a lot right now, the return will be even more later on.

3. Start a retirement fund or add to an existing one. This may not seem like the most exciting option to choose but it probably one of the best decisions you can make. There are many ways to save for your retirement so do your research go to the bank or ask at your job about the company’s pension plan and choose the best fit for your situation.

4. Get health insurance, this is a pretty straight forward option. Health insurance is one of those things that you might never need but it’s always a good thing to have in case of an emergency. Even if there never is an emergency most health insurance will cover at least part of dental cleanings, prescriptions and eye glasses, things that most everyone needs.

5. Be proactive about the future and allot some of your refund to prepay some of those pesky bills that are a pain to pay every month. Make a couple of car payments in advance so that you won’t have to worry about them for a few months. Put away some money to cover rent for the whole summer or one or two mortgage payments. Not having to make those payments from the money your earning at your job will feel great.

6. Finally reward yourself. Shopping, a vacation or new electronics are awesome ways to spend some of your refund especially if you’ve already saved part of it and are now rewarding yourself. Just make sure that you’re not in debt and that all important payments and financial issues are taken care of, going into debt or creating a problem just for a new T.V or sound system for your car is not a good idea.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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