What should you do with your tax refund?
Anyone who anticipates a big tax refund usually starts the year daydreaming about what they are going to do with all that money. Why not start the year off right, and put that money to good use? It's easy to spend that big chunk of cash like it was a gift from the government if you don't make plans for the money before you receive your tax refund.

First of all, I want to start out by telling you that a tax refund is bad for your overall financial picture. Any tax refund, whether due to income tax withholding, deductions, or credits, means you've overpaid your taxes. When you overpay your taxes, you are giving Uncle Sam an interest free loan all year long, until the next year when he refunds what was already yours to begin with.

With that being said, many consumers would never be able to save a dime if the government didn't do it for them by withholding taxes. If you live paycheck to paycheck, a big refund every year may be something you count on to pay for the things you put off all year. Prioritize your needs now, so that you have a game plan when you receive your refund. It's okay to do a little shopping and splurging, but allot enough of your tax refund to cover the things that can improve your life for the long haul.

Pay down your debts.
Pay off or pay down any loan or credit card balances. Even if you can only pay off one of your credit cards, the interest you'll save will make it well worth doing. Pay off your high interest accounts first to get the most bang for your buck. If you are one of the disciplined who doesn't carry a balance on your credit cards, pay down your car loan. Your mortgage should be the last debt you pay down, due to the fact that it probably has the lowest interest rate of all your debts, in addition to having the benefit of the mortgage interest deduction.

Start your Individual Retirement Account.
It's never too late or too early to start investing for your future. Time is your best friend when it comes to long term investing; you have the benefit of compounding working for you, plus the time it takes to ride out any bumps in the stock market. As long as you have ten to fifteen years before you plan on retiring, you have time to invest fairly aggressively in the stock market. If you have less than ten years to retirement, you can look into safer investments, like CDs, bonds, or the money market. Mutual funds are a great place to put your retirement money, and you can find funds that invest in stocks, bonds, the money market, or a combination of all three. Some mutual funds are made for IRAs, they invest aggressively in stocks in your early years and gradually shift to safer investments as you near retirement. Once you open your IRA, you can make automatic investments every month by having the money withdrawn from your checking account, on a date predetermined by you.

Take care of health needs.
Costly dental work may have been put off, but take advantage of your tax refund to finally deal with it. If it's not taken care of soon, it may end up causing you pain, lost work days, and more money. If you're in pain because you're on your feet at work all day, you may benefit from seeing a foot or back specialist. The extra money spent on custom insoles or chiropractic care will be an investment in your health and comfort. If you've been thinking about laser eye surgery, you now have an opportunity to be rid of glasses and contacts forever. It'll be amazing to be able to see when you first open your eyes in the morning, without scrounging for your glasses or poking your fingers into your eyes to put in contact lenses.

Maintain or improve your home.
Do you have any incomplete projects around the house that need just a little more money to finish? A big tax refund can provide the cash needed for these worthwhile expenditures. Your home is your castle, and it's great when you can relax in your highly-efficient, organized, and well-appointed abode. If you're a proud homeowner, you know that there's always something that would make it that much better. New appliances may make dinner preparation more convenient and enjoyable. A custom closet may be the ticket to organize the wardrobe that your fashion addiction provides. A landscape and garden project may offer the curb appeal that welcomes you home every time you pull into the driveway. Improving your home will make it more enjoyable for you, in addition to the possibility of increased market value that could benefit you if you someday decide to sell.

Take care of your automobile.
If you treat your car like I treat mine, you may have some neglected issues that should be taken care of. It's easy for me to put off maintaining a vehicle; personally, as long as it get me where I'm going, I don't often think much about what things look like under the hood or anywhere I can't see from the driver's seat. Little by little, things on my car don't work like they're supposed to; each thing individually isn't enough to warrant a trip to the dealership, but time passes and something else eventually stops working. Maybe it's about time to get everything fixed in one visit. A falling headliner, chipped paint and dings from car doors in parking lots, a lighter plug that doesn't work, and a sunroof that sticks are all seemingly little things that will, no doubt, add up to a pretty significant repair bill. Maybe once it's all done, I can enjoy my car like it was new again.

Take a vacation.
Strengthen your bond with the people in your life who wish they had more time with you. Work, work, work may provide a roof over their heads, but it does nothing for your relationships. Invest in those relationships; take some time off and go on a trip that won't be forgotten. You may realize that you don't spend as much time with the kids as you'd like; I can guarantee that they miss you, too. A family ski trip or a visit to the beach may be just what everybody needs. Or, you and your partner may make it to every little league game and school competition; the kid's lives have always been your number one priority. If that's your situation, then you might want to send the kids to Grandma's for the week and go on a "grown-ups only" trip. Take a vacation with the one you've committed your life to, and fall in love with them all over again without the daily stresses that life brings. Raising kids can take a lot out of any couple, and you'll be doing a favor for yourselves and your children; you'll enjoy some alone time and come back recharged, ready to take on the rewarding responsibility of taking care of your family.

Learn something new.
There may be something you've always wanted to try but haven't had the chance. Take a little time and money to enrich your life with a new skill, hobby, or sport. A continuing education class at your local community college might be the answer. The classes are very affordable, and the schedules are geared towards working adults. If you can't find what you're looking for at the college, you may be able to find a professional who's willing to teach you for a reasonable fee. If you want to be more handy around the house, try your favorite home and garden centers; they often have free classes for various projects, knowing that once they teach you, you are likely to buy the supplies from them. You can try something new or improve your skills with something that you already enjoy; you may wish you were a better cook, a better gardener, or a better golfer. If you learn something new, your new knowledge and skills will reward you for the rest of your life, unlike a material object that will depreciate, get lost or broken, or become obsolete. Investing in yourself is always a smart use of your money.

Treat yourself and splurge a little.
Improving your life's overall picture is great, but you've got to allow yourself a little luxury. After all, you've worked so hard all year; you deserve it. A visit to the spa may be just what you need; a massage and a pedicure will give your spirit a lift. Maybe your image needs a lift; a few new outfits or pairs of shoes might help you look as great on the outside as you are on the inside. If gadgets are your weakness, allow yourself a purchase that will make each of your days more convenient, more organized, or more entertaining. With a little planning and prioritizing, you can spend a reasonable amount on material items and still have some left over for the important stuff.

Don't make the same mistake next year.
You've tossed around some ideas about what to do with your tax refund this year. Why not take a big step, and do something that will improve your future years? It may be a drastic change from what you've become used to, but it will put you back in charge of your resources. Eliminate or extremely reduce your tax refund, and take charge of your savings plan. It shouldn't be hard to adjust to the change, as long as you look at your tax refund for what it really is, your own money that was gradually taken away from you by the government, until it was finally repaid in one lump sum.