Best & worst things to do with your tax refund

Tax season is finally at its end.

That  means that if you are owed a refund, you probably have it by now, or are expecting it in the next couple of weeks.

Now comes the hard part:  What to do with it once it's in your hands. The average refund is now almost $3,000, according to the IRS, and you don't want to blow it

Save, But Spend a Little

Dreaming of a warm sunny beach?  A plane trip to an exotic city?    There are so many ways to spend that tax refund.

But before you regret it, Smartmoney.com has listed the following suggestions:

       1. Create an emergency fund, to help pay 6 months of bills if you lose your job.

       2. Pay off some of your debt, such as a credit card bill with a 20% interest rate

       3. Contribute to an IRA or a 529 college saving plan.

       4. Finally, splurge a little bit. Take a short vacation or buy that 50 inch HDTV you've been wanting.

Doesn't That Stink?

But from the "doesn't that stink" file, the worst thing to do with your tax refund.

Bankrate.com says the worst use of a refund is for a short term thrills like a big night out at the bars with friends, or a night at the casino, dropping cash like you are James Bond in Casino Royale.

Next morning you may say "doesn't that stink?"

The Bottom Line

Bottom line:  Pay yourself first.  Then pay your creditors.

But don't be such a miser that you refuse to reward yourself for a year of hard work.

Spend wisely, so you don't waste your money.
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