Making Your Income Tax Refund Count

I heard just a few weeks ago about a family here in my town who received an income tax refund for over $10,000. I had never heard of a refund of that size so, as you can probably imagine, I was truly amazed. But the story of this low income family with small children didn't end as happily as I had imagined. The money did not help improve their depressing situation. Instead, the money was wasted and within two weeks the family was requesting financial assistance from local organizations to help pay their utility bills.

What did they do with all their money? Well that's the same question my colleagues and I asked as we reviewed their application for financial assistance.

Here's the bottom line. If the money had been used wisely, this family and many in similar situations could have made a big difference in their finances for at least months - not days - to come.

If you're getting a big tax refund, plan how you will use your money. Don't waste it frivolously on expensive dinners or unnecessary material objects. Don't get me wrong if your kids need new shoes, by all means, buy them new shoes. But don't take a vacation when you're drowning in debt or you're barely making ends meet each month. You will regret it.

Try some of these things below to see your tax refund working for you in the months to come.

Pay down debt. If your tax money can be used to free pay down debt and free up some of your monthly income, that's a smart way to use your money. But don't just write a check. Be smart and proactive by contacting your creditors to negotiate lower interest rates or waived fees. You might even be able to negotiate a settlement amount if you're willing to pay in full.

Open a high interest savings account. Putting some or all of your money into savings can give your family an emergency fund and relieve potential financial stressors in the months ahead. Go for the savings account, but do your research first. Check with your local bank or credit union to see which options will yield the highest return for your money. Letting your money multiply is always a good idea. Be sure, however, to get details about withdrawal policies just in case you need to tap into that cash cushion.

Renovate your home. This does not mean you should go out and buy new furniture. If you're planning on selling your house in the near future, start sprucing it up now. In today's real estate market, you'll need every advantage to get your house sold at the price you need. So boost your home's value by making needed updates or fixing anything that's broken.

Try your hand at investing. Experts say the market is making a comeback. So with some professional guidance and support, this might just be your way to make some money. I am always a fan of letting your money work for you.

Start a small business. If you've got some special skill or hobby that can be lucrative, use your money and invest in yourself. With a good plan in place, you could double your investment in no time. But don't go chasing rabbit trails, do your homework and even get professional advice.

Whatever you decide to do with your money, don't waste it frivolously. Next year's tax season is still a year away.