Tetra Images/Getty Images
Don't think of it as 'free money'
It's tempting to view your tax refund as an unexpected influx of cash -- like a bonus at work or a small lotto win that's not devoted to any particular goal like your paycheck would be. Your monthly income is devoted to bill payment, saving for unexpected expenses and entertainment, if there's enough left over.
The "free money" attitude can contribute to not thinking through the best use for it. In fact, it's a good way to blow it, says Bill Hammer Jr., a CFP professional and author of "The 7 Secrets of Extraordinary Investors."
"Don't treat it like a $20 bill you found in your jacket and think about silly ways to spend it right away," Hammer says.
He suggests using it first to pay down credit card debt. "This gives you an instant 15% to 20% return on your money," he says.
If you don't have credit card debt, start an emergency fund of savings for unexpected expenses or add money to your individual retirement account, or IRA.
RATE SEARCH: Shop today for the best in money market accounts.