The 4 Smartest Ways To Spend Your Tax Refund

It’s tax season!

And depending on if you’re on team “tax-refund” or team “tax-payment” it’s the same cycle every year. While I understand why some people really dread this season, for me it’s a pretty good time of the year because I am currently waiting on a refund.

Ordinarily, I receive about $1100 a year from my tax refund. However, in the last year, my tax bracket and life circumstances have changed (i.e. full-time job now instead of contract and living by myself instead of going to school), my tax refund last year was about half of that – $650. Considering most of my life circumstances are the same as last year, I’m expecting a similar amount this year.

And even though I am an avid budgeter, I purposely don’t account for my tax money in my budget.


Because it’s not money I can rely on. I never really know how much I’m getting back until my taxes are filed and I’m not looking forward to the day when I’m going to start having to pay taxes around April.

Instead, I like to think of my tax refund money has a way to boost and invest my long term goals. It helps fund the “nice-to-haves” in life that will be better in the long run, but I don’t use it for short term goals.

If I want a vacation, I need to save up for it.

If I want new shoes, I have to save up for it.

I do not let myself fall into the habit of using my tax refund money for short term purchases because

a) I want to maximize the benefit of the money
b) I don’t want to teach myself internally that I don’t have to save up for the things I really want.

The second part is a little bit more about my personal growth and less about the actual material item. I train myself to make the sacrifices and manage my money in smart ways to afford vacations, nice clothes, etc. It makes it that much more worthwhile and it teaches me to work for what I really want.

Yes, technically I worked for this money, but because it doesn’t come in the form of a paycheque, it doesn’t feel the same.
So while it is not an exorbitant amount of money, it’s a significant amount nonetheless. So here are 4 smart ways to spend your tax refund:


1) Putting It Towards Your Home


This can be a two-fold option depending on whether you rent or own your home.

Home Improvements

Investing to upgrade your home can be a great option for spending your tax money because it can increase the value of your home if you are planning on selling it. Or it just makes it better, functional, and happier place to live. So if you have any upgrade repairs that really need maintenance, consider putting your tax refund towards home improvements.

The great things about home improvements are that not only does it help increase the value of your home, it may also be helping you save money in the long run. If you have bad windows that let out a lot of heat, you could be paying for it in your heating bill. Or if you have something on the verge of expiry, like a hot water tank, it can be great to replace it now, rather than wait until you slowly run out of hot water or worse, it breaks altogether.


Your Mortgage

Another great option is to put it towards a mortgage if you own your home. Of course, this depends on your bank and mortgage terms, but most banks allow you to pay a lump sum up to a certain amount that you can put towards paying off the principle amount without an increase in interest. This will help your mortgage in the long run because it means you can pay it off sooner with less interest. If paying down your home is a part of your long term goals, then speak to your mortgage advisor or bank about the best options for you.


2) Purchasing a Course

I am a big believer in education.

I’m still working towards an additional certificate after my degree (which my work pays for) but I still try to find as many learning opportunities as possible.

This is actually one of my spending weaknesses. I tend to want to learn everything, and I do mean everything. But because I, like everyone else, only have a limited of time and brain capacity in a given day, have to really limit my extra education.
There are a few things that I still do pay for like keeping up with my French. I still do the French exam every year and I also pay for French tutoring in preparation for it so it can add up quickly to a few hundred dollars. But I really like studying French and because I work in government in Canada, it’s also beneficial for my career in the long run.

So if you’ve ever looked into an additional course or training program for your career, investing in a course can be very beneficial in the long run.

I may cost you money now, but if it helps you advance in your career, it will pay for itself many times over.

And this doesn’t just have to be for your current career. If you are looking to make a change in your career, this money could be a great step in investing in a course or software that will help you get there.

Finally, remember, you don’t have to go big all the time. There are many, many, online resources that have a very nominal fee for courses such as Skillshare and Udemy. And if you take my example of a $600 tax refund, it can buy you many months/courses and help you kick start any materials you may need for a side hustle or to pivot your career.


3) Boosting Your Emergency Fund

Just as quickly as this money comes, an unexpected event can occur just as quickly.

If you are still working towards your emergency fund or looking to get it just a bit higher, putting your tax refund into your emergency fund can only end well. Life happens. All the time, and while this money may seem like not a lot now, it could make a world of difference if you were ever to lose your job suddenly or if it’s just a bad day and your car breaks down.

An emergency fund amount is different for everyone so if you’re comfortable with your amount, it’s best to actually look at the next option. But if you’re in a transition time in your life whether that’s for your career or if you are looking at moving, this is definitely money you will not regret having in an emergency fund.


4) Investing It

Lastly, if you are in a good place in your life, consider using to make my future life better.

One of the reasons I try not to budget my tax refund into my everyday life is because it’s one of the ways I “trick” myself into living on less. And honestly, I’m fine.

I’m not rich, but I wouldn’t say I’m struggling.

So because my present-self is comfortable, I try to ensure that my future-self can also live comfortably. So here are two ways to invest your tax refund:

Mutual Funds/EFTs/Low-Risk Investments

I’m learning the hard way that stock investments are not the best option for a low-risk person like myself. And if you do not want to get into the world of stocks, there are many ways you can still invest. One of them being mutual funds and low-risk investments that can be invested in through your bank or credit union.

I personally haven’t tried a ton of app investments, but I hear great things about WealthSimple, Acorns, and a few others. Let me know in the comments if a comparison on different investing apps would be something you’re reading more about!


It may seem a long way away in your twenties and thirties but retirement comes up quicker than you think. So if you really don’t know where to put your tax refund money, you’re retirement fund can never be full enough. I’ve talked a lot about how I don’t believe in early retirement and how one of the biggest misconceptions in adulthood is thinking you don’t have to save for retirement, but
I will say though, that it’s really important to educate yourself on what retirement funds work best for you.

I contribute regularly to multiple pension plans with my work and with the government. It sucks up about 15% of my income, and I have an RRSP (Registered Retirement Savings Plan) as well. But lately, I’m reconsidering using my TFSA (Tax-Free Savings Account) as my retirement fund, because my RRSP account will be taxed when I withdraw the money. And if you have a large RRSP, that can make a huge difference.

I recently know of someone who had her father leave her and her brother $500,000 in RRSP money. However, when the notary executed the contract, they forgot to deduct the tax. Come tax time, she and her brother had to pay about $100,000 in tax money that they weren’t expecting.

That’s a lot of money in the long run. So I’m personally switching my TSFA account to my retirement fund because I have a high cap that I’m not using and aim to max out that before I contribute to my RRSP so I get taxed as least as possible.

When looking to invest in your retirement, just remember that you don’t always have to follow the conventional rules. Do the research of whether a TFSA, RRSP, company pension plan, 401K or Roth IRA is right for you. It’s great to be contributing to those funds, but don’t be scared to use your tax refund money to put into different retirement funds because I don’t know if I’ll stay with my current employer (government) forever. And I want the option to have different retirement options and not feel like I’m “locked” down to only one plan when it comes time to retire.



Whatever you choose to with your tax refund money, I hope you’ve seen the value in investing in the future. It may seem very ironic for someone who tracks every dollar she spends, to throw caution to the wind when it comes to her tax refund money, but I have a good reason for it.

There are a lot of long-term goals I’d like to accomplish, but can’t really foresee myself re-allocating all my resources towards. I’m a big advocate of living a balanced life. I don’t stress every single day about my mortgage and to become debt free by a certain age or to retire decades early, but they are things at the back of my mind.

That’s why I like to think of my tax refund as my “get ahead” money. I still contribute regularly to my retirement and pay my mortgage on time (because the bank won’t let that one go), but I could be doing a bit better.

There are also shorter-term things I’d like to get ahead in like my career and being prepared for the unexpected expenses ahead.
And that’s all growing up is, just doing a bit better.

Whatever you’re tax refund. Good luck and may the tax gods be in your favour.

Kimberly ✨

Interested in finding out more?

Consider joining the MLA Community Newsletter! Every month MLA sends out a newsletter about how to get your adult life together. This email not only includes a life admin task that we will all be tackling for the month, but it also contains tips and tricks on how to make it happen.

More importantly, I share my personal numbers. In the past, it has included my 2019 budget, what’s on my desktop, and this month, I shared 3 ways to get organized for tax season (and if you should diy your taxes or hire help).

Next month, I will be sharing what I’m doing with my tax money and exactly how much it’s costing me. If that’s something that you’re interested in – feel free to join!


Author: Kimberly

Hi there! My name is Kimberly and I created MLA as a personal development, career, and finance resource for millennials. MLA focuses on helping career-driven millennials create the personal development habits to achieve work-life balance and manage their money. Throughout this blog, you’ll find articles that give specific and detailed advice because I’m not into the fluffy advice. There’s plenty of that on the internet. Here you will find tangible advice on how to find a rewarding career (that you love!), where you can help others, and learn how to save and invest your money for the future. I hope you’ll follow along!

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