It represents a form of forced saving as far as I am concerned.
I always have plans to put mine to good use.
Unless you are entirely debt free, the best advice I can give is to use the money to clear some or all of your debt:
- Pay off as much as possible that you owe on credit or store cards
- Put it towards paying off your mortgage
- If you have limited savings, add your tax refund to them to create a financial backstop for when things go wrong, or unexpected expenses are incurred. Ideally try to have between $3,000- 5,000 in savings for unforseen circumstances. It is amazing how quickly savings can erode with a few major utility bills, or extended period of illness.
If you are in the fortunate position of being debt free, then and only then, plan to spend it on something you enjoy, from purchasing a new pair of fabulous shoes, to a trip to an exotic location.
Never plan to, let alone spend all of your tax return refund on frivolous things before you even get it!
In an ideal world, your tax return should come as a welcome financial bonus, rather than be consumed by necessities, such as bill paying. Careful budgeting to ensure you plan to live within your means really helps turn that tax refund, into an annual bonus and financial boost!
It is rare to receive a lovely lump sum of money, so put it to the best use you possibly can, that is likely to bring you the greatest long term benefit!