Erin Renzas is a lifestyle expert and the Editor-in-Chief at Credit Sesame — helping you to make smarter financial decisions, save money and live richly. Before joining Credit Sesame, she was a home and lifestyle editor at Shape, California Home + Design and iVillage.

For many Americans, tax time can lead inspire fear and dread, but for others, it’s a joyous time that can be summed up in two words: tax return. Most personal finance experts will tell you the same thing year after year: Set up your deductions so that come tax time, you break even. Your money is better used in an interest-baring account than sitting with the IRS.

But, many of us have come to look forward to the extra cash that comes flowing our way in the form of a tax refund. In fact, according to the IRS, the average income tax refund last year war $2,700. You may be tempted to splurge on a much needed vacation or a new television, but before dropping the dough, give yourself a reality check.

We know. Spending your return on something fun is, well, more fun than making the financially responsible decision, but remember: That money isn’t a little gift from the IRS; it’s your hard-earned money. You need to treat it as such. So this year, forego the oh-so-cute new outfit or the cool electronic and make your money work for you.

Invest in Your Home

For homeowners, your home tends to be your most valuable asset. Preserve that value by spending your refund on small home improvements and repairs. A new coat of paint or upgraded flooring can do wonders for a home. Fix leaky plumping, clean dirty chimneys and unclog drier vents. Or, consider making energy-efficient improvements to your home. Thanks to the Residential Energy Credits, homeowners can receive a tax credit of up to $500 for qualified energy efficiency improvements.

Boost Your Emergency Fund

According to a June 2012 report, 28 percent of Americans have no money saved for emergencies. Life can hand you some tough or unexpected situations (read: a layoff or a medical emergency). Most personal finance experts say that you should have at least six months of expenses saved. While your tax refund may not get you all the way there, it’s a good place to start.

Nix that High-Interest Debt

If you’ve racked up a bunch of debt on a high-interest credit card, it’s time to face the music. Put your tax return against your debt. Not only will you pay less on interest in the long run, you’ll lower your credit card usage — a major factor in improving your credit score. A lower credit score means that you’ll qualify for lower interest credit cards, car loans and mortgages, saving you more money over time.

Hit the Books with a 529

Parents with children who will be attending college in the future should seriously consider contributing to a 529 educations savings plan. Save the money now and when tuition bills come calling, you can use the cash tax-free.

Fund the (Retirement) Fun

Sometimes it’s easier to think of the now rather than the later, but a tax refund is a great way to add to your retirement funds. Invest now and in 30 years, you could see big returns.

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