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Four Things You Should Never Do With Your Tax Refund

April 5, 2019

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Unless you’ve been living under a rock these past few months, you’re well aware that we’re smack dab in the middle of tax season! Which, if you’re lucky, means a tax refund is headed your way.

Tax Refund Money

While the prospect of receiving a large tax refund can be exciting and may even send you into a whirlwind of frivolous day dreaming about what you’re going to do with all this extra cash, we’re here to bring you back down to reality (sorry). The unfortunate truth is your tax return isn’t free money or a gift from the government just because they were feeling generous.

Why am I receiving a tax refund then?

Tax refunds are granted because too much money was withheld from your paycheck, meaning you paid more in taxes than you actually owed – and getting some of this money back is the perfect opportunity to further your financial goals.

Even though our accountants are knee-deep in tax season, we managed to pull some of them aside to share the top four things they would never recommend you do with your tax refund.

1) Make big purchases on credit

Purchasing anything with a payment plan means you’re incurring new debt. Cars, furniture or even a new pool for the kids are all things that can wait. Although the money from your tax refund might make purchases like these seem realistic at the time, your new-found cash will soon disappear and all you’ll be left with is another bill! Do yourself a favour and think ahead now to protect yourself from buyer’s remorse later.

INSTEAD: Use your refund to pay off a lump sum of your current debt. This will reduce your interest charges and help you build better credit.

2) Nothing

Even if intuitively you think that allowing your tax refund to sit in your chequing account is a very responsible move, think again. If it’s just sitting there, you’ll likely be tempted to use it.

Even if you’re not planning to touch one cent of it and you have some seriously impressive self-restraint, this cash is an asset that can and should be managed. 

INSTEAD: Make a contribution to your Registered Retirement Savings Plan (RRSP), shoot some of the funds into your kid’s Registered Education Savings Plan (RESP) or put some of the money into a Tax-Free Savings Account (TFSA), where it will earn income tax-free.

3) Go on a shopping spree

One of the worst things you can do with your tax refund is to blow it on things you don’t really need. Using 100 per cent of your refund to treat yourself raises the risk you’ll end up spending some of your other money, as well. Because, let’s face it, what are the chances those designer sun glasses that you’ve been eyeing cost exactly the amount the CRA sent you? The temptation to go slightly over will be strong. Ditto on additional impulse buys. You’ve got the shades, why not go on vacation and show them off? Ok, that’s a little overkill, but you get what we mean. Before you know it, you’ll have completely blown your tax refund or even worse, dug yourself deeper into debt.

Like we mentioned earlier, the government is essentially returning money that you earned – hard-earned money we might add, that should be treated like the rest of your income.

If you have a budget (and you should), set aside whatever the portion of the refund you normally would for the fun stuff and put the rest toward savings.

INSTEAD: Build up your emergency fund. Rather than giving in to these indulgences, use your refund to plan for the unexpected. This is your chance to build up an emergency fund so that you won’t need to sort out finances on top of dealing with a serious life change or emergency.

4) Make frivolous investments

Don’t get caught up in the investment hype, especially if you’re a newcomer to the market. This isn’t something to just spontaneously do on a whim because you have some money burning a hole in your pocket.

INSTEAD: Take the time to identify your financial goals and learn about strategies that are best for your financial situation. Reaching out to a financial advisor for some guidance would be a great start.


Receiving your refund from the CRA is exciting, and the cash is yours to do with as you please. But if you want to make the most of your return this year, fight the urge to do the things we’ve outlined above - your future, financially-savvy self will thank you.

If you’d like to get a handle on your spending, or discuss one of the many ways to get out of debt, contact us today for your free, no-obligation consultation. Our Licensed Insolvency Trustees are trained to work with you to determine the underlying cause of your financial difficulties, as well as assist you in improving your financial management skills, and provide you with effective budgeting strategies to help you achieve your monetary goals.

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