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Whoo hoo! Ready for a nice, fat refund check from Uncle Sam? Taxpayers received, on average, $2,696 in refunds last year, the Treasury Inspector General for Tax Administration reports.

All too often that extra money makes people splurge, even while they imagine they’re saving it, says CNBC. How do you make sure this year’s windfall makes your life better long term? Read on for nine ideas for using your refund to improve your life and four ideas to avoid.

Put it in Your Paycheck

First, remember that your refund isn’t a gift. You earned it but chose to bank with the Treasury Department instead of taking it in your paychecks.

This year, wouldn’t an extra $225 a month make your life a bit saner? If so, do this:

  • Gather your pay stubs and last year’s income tax return.
  • Use the IRS withholding calculator to learn if you should change the tax amount withheld from your paychecks. Read the instructions carefully to see if adjusting is a good idea for you.
  • Fill out IRS Form W-4, adjusting your withholding amount.
  • Bring the completed form to your employer’s payroll department.

Now for nine ways to make life better with that refund money:

1. Pay Down High-Interest Debt

High interest rates can lead to devastating debt. Eventually you can end up with payments so large that it becomes difficult to do more than pay the minimum required each month. That’s a losing proposition, Stacy Johnson says:

Suppose you’ve got a $10,000 credit card debt and pay 15 percent interest. If you pay $250/month, you’ll pay the card off in five years and pay about $4,000 in interest. But lower the interest to 10 percent, and the same $250 will pay the card off in only four years, with an interest tab of $2,215. The lower rate saves you nearly $2,000 and a year of debt.

Here’s the No. 1 rational thing to do with a windfall: Use it to pay down, or pay off, if you can, your debts with the highest rates.

Think of this way: Paying off a debt with a 15 percent interest rate is like earning 15 percent, risk-free and tax free; something virtually impossible to find these days.

When you’ve paid down your debt, don’t stop. Your goal should always be to improve your life. Charging and borrowing leads you in the opposite direction. If credit-card debt, payday loans or other high-rate debts have been a problem for you, use this moment to escape the cycle. Choose from the trustworthy sources of free credit counseling and get help so your 2014 refund improves your life permanently.

2. Pay Off Small Debts

Paying off high rate debt first makes sense, but it may not work for you. Some people get more motivation from demolishing smaller debts first.

US News explains why this strategy can make good financial sense: “[I]f you can focus enough to pay off your debts in a relatively short amount of time, the higher interest rates on other accounts may not add up to much extra money.”

Of course be careful here, too, not to run up new debt and dig yourself back into the same hole.

3. Fatten Your Emergency Fund

You are debt-free? Bravo! In that case, strengthening your financial safety net may be the next best use of a tax refund.

Opinions differ on how much to save for emergencies. Many experts advise keeping enough money to cover your expenses for six months. But maybe the question is: If you lost your job, how long could you expect to be unemployed?

FiveThirtyEight, an economics blog, says how long people are unemployed depends on what the economy is like when they lose their jobs.

That’s obvious, I suppose, but it tells you the goal for your emergency fund may vary: smaller in fat times, larger in lean ones. The size of your fund also may vary depending on how hard it is to find work in your field, or how stable your current job is. And your savings should be greater if you’re older because it often takes older workers longer to find work.

MarketWatch quotes AARP’s 2014 analysis of data from the Bureau of Labor Statistics on the average length of unemployment for workers:

  • Age 54 and younger: 34.7 weeks (almost nine months).
  • Age 55 and older: 45.6 weeks (nearly a year).

I know someone who lived on savings for a couple of years while hunting for work during the recession. He’d set aside a big bonus so he did OK, but the experience made such an impression that he now tries to keep a year’s worth of savings for an emergency.

4. Save for Retirement

Retirement savers are a lot like professional football players, says Money Talks News writer Maryalene LaPonsie. They keep their eye on the clock, for instance. And they accept that you can make progress a few yards at a time. Read her six tips from the gridiron for retirement savers.

5. Save for College

Whether it’s your education or that of your kids, apply your refund check to a college savings plan or 529 plan that offers tax benefits in addition to saving for college.

6. Invest in Your Productivity

Leverage your refund to grow your earnings:

  1. Get more education. Sign up for a workshop or course or go to a conference or webinar, whether to upgrade your skills or try out a new field.
  2. Subscribe. Sign up for professional publications, or the Wall Street Journal and New York Times, or cable TV or satellite radio channels that help your work acumen. Buy software you need to get ahead. Buy a premium LinkedIn subscription to network or find work.
  3. Invest in the right clothes. Get a tasteful, understated but impressive outfit for work or job interviews, one that makes you feel like a million bucks. Include good shoes.
  4. Buy the equipment you need. Get the new laptop, tool or piece of electronic equipment you need to move ahead in your field.
  5. Get therapy. Career advancement isn’t only about the right tools, skills and credentials. A chip on your shoulder, depression, anxiety, a fear of success or problems at home can prevent you from reaching your earning potential.

7. Hire a Career Coach

Career coaching can help you learn your strengths, identify where you could use help, set goals and strategize. There are many ways coaching can help further your career.

“Some people want to be coached through their job search, but others want help with their current work performance,” Hallie Crawford, certified career coach and founder of the Atlanta-based company Create Your Career Path, tells US News.

Next Avenue says:

After an initial free consultation, most coaches charge hourly fees, ranging from $50 to $500 (the priciest tend to be coaching sessions with executives). The average cost is $161 an hour, according to the International Coach Federation.

8. Contribute to Charity

Do good for others while helping yourself earn a healthy tax deduction on your 2015 taxes by supporting a charitable cause. Make sure to get a receipt for your contribution, and be sure the organization you support is a legitimate 501(c)(3) charity.

9. Start a Business

Make your money your grubstake. Start the business you’ve been dreaming of, whether consulting, opening a coffee cart or retail outlet, selling your crafts or patenting an invention.

Bonus: 4 Idiotic Ways to Blow Your Refund

Because tax refunds inspire some of the dumbest splurging possible, we feel duty bound to warn you against:

  1. Frittering it away. Won’t you feel like a dope if your money’s gone and you can’t say where it went? If you must spend it on consumption, use it for something memorable — maybe an experience with family or friends that you’ll remember forever.
  2. Going on a spree at the mall. Impulse buys are like drinking too much: You feel icky in the morning. When spending your refund check, aim for something that gives a feeling of increased safety and security.
  3. Creating more debt. Don’t use that refund as a down payment on a car that puts you deeper in debt. Put that money instead in a bank account dedicated to saving enough to pay cash for a used car.
  4. Letting it gather moss. There’s no standing still with money. Either it’s growing in value or inflation (even the modest inflation today) is eating it away.

This post originally appeared on Money Talks News.

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