Some people are tempted to treat their tax refund as a consequence-free windfall to be spent on a special treat. This is like finding a $20 bill in the pocket of an old jacket and imagining yourself suddenly richer. As a savvy reader of this blog you will understand that a tax refund – or a re-discovered banknote – is not a windfall, but really your own hard-earned money grasped in your sensible hands.

So how should you use your refund? Treat it the same as any other money.

There are many good reasons to spend your refund. Do you have home improvements you’ve been delaying? Are you planning a trip? Is your or your kids’ education taking a priority?

Saving for the future can be just as rewarding as spending money today. You could top up your RRSP or TFSA, or add to education savings in an RESP.

Paying down non-deductible debt is equivalent to savings. Consider reducing your line of credit or accelerating your mortgage payments.

For a clear look at strategies to optimize the use of your tax refund, please read What to do with your tax refund.