Taxes, taxes, taxes. I may not be an accountant but tax season is still the busiest time at work. And I’m not done talking about it yet! I’ve already talked about the best way to file your taxes in Canada and now I want to talk about your tax refund. You know, the good part! If you haven’t filed your taxes yet, you still have until April 30th to get it done. If you are on the ball and have already filed then your refund might be burning a hole in your pocket. Let’s talk about that, and figure out how to prioritize debt, saving or spending.

Obviously not everyone gets a refund, but if you do, it can feel like a windfall. I know for myself, if I come into some money unexpectedly, it can be super tempting to spend it all. A new spring wardrobe or a weekend getaway sound so much more fun than a deposit to your retirement account. Now, I am pro tax refund, but it can help to remember that it’s not exactly found money. It’s money you’ve earned. Say you get $900 back from the government, that’s not life-changing money, but it sure could go a long way in refreshing your wardrobe. What that actually means, though, is that your income should have been $75 higher each month. Doesn’t sound like such a big deal anymore right?

How would you have allotted that money into your monthly budget? That really depends on what your primary objectives are, but here are a few suggestions that might not be the most fun but will make the most difference to your financial health.

Debt Repayment

High-interest debt is the supervillain of personal finance. Too much of your money goes to paying off interest instead of reducing your debt load. If you are carrying any high-interest debt then your top priority should be eliminating it. Putting a lump sum (like your tax refund) on your most expensive debt will decrease the interest you pay over time and free up additional money in your budget down the road.

Multiple debts? Choose either the debt snowball or debt avalanche repayment method and then get a head start by using your refund.

In terms of debt, your mortgage is good debt. Find out why I think that and how you can use it to your advantage.

Top-Up your Emergency Fund

If you aren’t carrying any high-interest debt then your next priority should be avoiding debt in the future. An emergency fund provides accessible funds you can reach for in case a surprise expense comes up. Having funds available means you don’t need to reach for your credit card when your furnace dies or your dog needs surgery.

I recommend keeping three to six months of living expenses saved in an emergency fund. If you don’t already have that then this is the next best use of your tax refund. For my emergency fund, I use the EQ Bank Savings Plus Account.

Lump Sum Mortgage Payment

Low-interest debt isn’t as concerning as high-interest debt but it still eats up cash flow. The fewer bills you have to pay each month the more money you can allocate to savings.

I don’t hate my mortgage. With interest rates as low as they are right now I’m able to earn more on my investments than I pay for my mortgage. It’s still a risk. Paying off your mortgage is a sure thing, investing isn’t. It’s a risk I’m willing to take but it’s not the right tactic for everyone.

You double dip when it comes to saving and paying off your mortgage. You get a refund for making RRSP contributions, so you can contribute to your RRSP during the year and then put your refund towards your mortgage.

Invest In Your Future

There’s never a bad time to increase your savings rate so why not add your tax refund to your RRSP. This has the added benefit of putting you in a better position when you retire but will also help you get another tax return next year. We all know that the earlier you start saving for retirement, the better off you’ll be because of the wonder that is compounding interest. Take advantage of time and put that money to work.

Instead of an RRSP, you can also invest in your TFSA. You don’t get the refund from your TFSA but your money will grow tax-free as long as it’s in there. It’s a good option for those with lower incomes or if you are saving for something that’s not retirement.

Invest in Yourself

One thing that people don’t always think of is spending money on something to improve yourself. I’m not necessarily talking about cosmetic surgery, but hey, you do you girl!

Depending on your career path, getting more education may get you a raise. Is there a course you need to take or a conference you could attend to get you to the next level in your job? Pro tip, make sure your boss thinks your plan is as brilliant as you do. You don’t want to spend all the money and not get the raise!

Maybe you’re looking to increase your income outside of your day job. You could use your tax return to start your own business, set-up a side hustle or go to a networking event. Having multiple sources of income is a great way of increasing your income and providing security with multiple income streams.


I’m all about balance. There’s nothing wrong with spoiling yourself every once in a while. It’s important to a solid financial base, but you also need to enjoy life. Sticking to a restrictive debt repayment or savings plan can seem like a good idea but it often makes it more challenging than it needs to be. Give yourself permission to splurge on something you’ve been lusting over when your tax refund comes in.

If you feel guilty about splurging then choose your top priority from the list and split your refund between that and something on your want list.

So tell me, have you done your taxes already this year or are you still procrastinating like me? And if you got a refund, what are you going to spend it on?

Got yourself a tax refund and looking for the best way to put it to use? Check out my hierarchy of spending your refund.

This post was proofread by Grammarly.

Photo by Karen Culp from Burst


  1. Also pro-refund here…mostly because our refunds come as a result of claiming donations and loan interest, as opposed to losing too much to taxes.

    Originally, we went into tax season thinking we were going to put most of our return to debt…but then we changed our mind. The only debt we have right now is hubby’s student loan – and in the end, we put a total of zero dollars from our return toward it. Instead, we put aside some money into sinking funds (car maintenance and gifts, specifically), stuck some in an account to save for a vacation in the summer – and then split up the remainder between the two of us for a little personal spending money. We made a TON of progress paying back debt over the last year and a half, so we wanted to enjoy a bit of our money. I thought I would regret it, but I totally do not.

    • Sarah Reply

      That’s so great, way to go you guys! I’m all for being responsible but there needs to be a certain amount of balance.

Write A Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.