Spring brings more than just better weather for most people. According to the IRS, spring also brings an average of $2,800 to nearly eight in ten tax filers. That's a lot of money, and for some people it could be double that amount or more.

What is the best way to use such a windfall and what choices should be avoided?

First, the choices that will hurt:

Refund anticipation loan

The first decision you need to make after finding out you will get a refund is whether you take the money now or wait until the IRS sends it to you. There are many businesses that are willing to advance you the funds from your tax refund right away and then keep your refund. This service is not free. It could easily cost you up to $100 or more. Let's say you pay $100 on a $2,000 refund and the money comes 20 days later. The lender just made close to a hundred percent interest! That's a great profit for the business, but it is a great loss for you.

Get a refund check in the mail

If you request that your tax refund come as a check, you will have to wait longer and you may be tempted to spend it when you cash it. There is also a chance it could get lost or stolen. It is always safer and faster to have the IRS make a direct deposit of your refund to your checking or savings account.

The refund fight

Assuming you are able to pay your monthly bills from your monthly income, a big refund check is like free money. You and your spouse may have different priorities on how to spend the money. Hopefully, the spouse who earned the most money does not claim that he/she gets to decide how it is spent. Possession may be nine-tenths of the law, as the saying goes, but marriage is a partnership where you need to make important decisions together. Have an adult discussion that identifies the most important family needs. Leave the personal wants behind.

Spending spree

Be careful with the "You worked hard, you deserved it" mentality. A tax refund may be enough to buy the latest tablet or leather couch or vacation, but does that put wants before needs?

Now, the choices that will help:

Emergency savings

While some emergencies could cost thousands of dollars, many can be handled for $1,000 or less. Unfortunately, most Americans don't even have this much. Using a tax refund to set up an emergency savings fund of at least $1,000 will save you from future surprises that would otherwise cause you to get into debt.

Debt elimination

Having debt can be expensive. For those who carry a monthly balance, the amount you pay in annual interest may be more than the amount you get back as a tax refund! However, if you work on eliminating debt, the interest you pay will go down and you will be able to keep more of your money.

Retirement investment

Sadly, most Americans are not saving anywhere nearly enough for retirement. If you have an adequate emergency fund and are on track to pay off debts, why not add some money to your retirement savings? Often this can create additional tax breaks for you. The sooner you start saving for retirement, the more you will have when you retire.

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