It's easy to think of tax refunds as a free windfall of money that you can blow however you please. In truth, a tax refund isn't free money at all.
It's actually money that should've been in your bank account all along, but you chose to lend it to the government for free instead. That means that while Uncle Same held onto your cash for the past year, you missed out on the opportunity to put it to work for you by paying down debt, earning interest in savings accounts, or investing for retirement.
So please don't think about your tax refund as a free windfall of money. If you do, you'll be tempted to blow it on a new BBQ grill at Home Depot or an spontaneous vacation as soon as it's deposited in your account.
Think about it as your hard-earned savings, which are finally being returned to their rightful owner. That should help you make smarter choices about how to spend it. If you have any credit card debt, use those savings to pay it off right away.
No debt to worry about? That's great! Beef up the family emergency fund instead, or make sure your retirement accounts are maxed out for 2011.
