Free money! While this is an oxymoron, it is a common view of tax refunds. It is money to blow, enjoy, or waste. A month after the refund check hits the mailbox, it is gone. Do something different this year. Multiply your refund by putting it to work.
Avoid the urge to party.
A couple of thousand dollars can buy a lot of fun. It may even do it more than once or twice. A couple of hangovers and friends who disappear when the money is gone is not much reward. Look at choices that offer long term benefits.
A bigger television may not be a wise choice.
After the party idea, something big and gaudy for the house and family might come to mind. While this is definitely a step in the right direction, you may find better options. Spending your refund on items that wear out and depreciate will not ultimately improve your situation or help your future.
Use it to improve your future and not current wants.
Think more about tomorrow and less about today. Put the money somewhere that it can work for you. Working money grows and gives returns for a long time to come.
Look at health related issues that might be improved.
This is probably not your idea of fun. If you need dental work or some type of minor corrective surgery, the tax refund may go a long way toward paying for this. These types of health issues may not change your financial future, but they can give you years of improved self-image and other benefits.
Add value to your house.
A little money can add real increases to the value of a house. New flooring in a heavily used room or a few replacement windows will surprise you at how much they can increase the selling price of a house. Replacing an old inefficient water heater, air conditioner, or furnace can make your home better to live in and give you a financial return if you sell it.
Help someone with a real financial need.
You may struggle to see how this one even makes this list. When you help others, you change your circumstances. Helping makes you feel better. It also can change the future of young family members of the ones that you help. Often, only a little money can make a huge difference to people who are struggling financially.
Pay for family travel.
Improve your family horizons. Travel is educational as well as recreational. If you have children, a trip that goes out of the country can change their whole perspective of the world. Consider travel to be an investment in your growth as a human being. Taking advanced education can also improve this area of your life.
Use it to start a business.
The ultimate use of a tax refund would be to start a successful business that would repay your money many times over. It is more difficult to take this route, but the potential rewards are by far the greatest. Along with the investment of your money, you must be willing to invest a lot of your time to make this happen.
Invest it toward retirement.
If you are young, this might be the very best plan for that tax refund. A couple of thousand dollars invested in a few good mutual funds can translate into hundreds of thousands of dollars at retirement time. Do this every year, and you should be able to retire comfortably in 30 years or so.