Thirteen smart ways to spend your tax refund

While many folks are making plans to buy the newest iPhone, handbag or other splurge item with their tax refunds, there are smarter things you could (and should) be doing with the money. After all, the money isn't truly extra money the way we think of it. The government has simply borrowed it for the year and now you're getting it back. Here are 13 smart ways to spend your tax refund.

1. Pay off credit card debt. The average person carries more than $5,000 in credit card debt. With some interest rates as high as 18 percent or more, it may seem difficult to put a dent in your credit card balances. If your tax refund isn't enough to pay off the card entirely, paying as much as possible will reduce your balance and your monthly payment.
2. Add to or start an emergency fund. The recession has caused many Americans to dip into or deplete their savings. Having an emergency fund is necessary to avoid putting unexpected expenses like medical bills, a broken appliance or car repairs on high interest credit cards. Financial guru Dave Ramsey recommends having, at a minimum, a $1,000 baby emergency fund.
3. Start an IRA. Investing in an Individual Retirement Account (IRA) helps secure your financial future when you retire. The amount you can contribute is limited by federal guidelines. For 2013, the limits are $5,500 or $6,500 for those aged 50 or over.
4. Buy life insurance. Life insurance only becomes more expensive as you age. If you don't already have a policy, consider getting one. Life insurance is used to cover funeral expenses, medical bills and to pay off your debts after you're gone. You probably don't want to leave that responsibility to your family.
5. Start a college savings account for your child. Higher education is becoming more expensive with each passing year. How much will tuition be when your child reaches college age? It's anyone's guess, but socking money away in a 529 account now means you'll be paying that much less down the road. Withdrawing is tax-free if the money is used for college expenses.
6. Save for holiday gifts. If you're a last minute shopper, or if you just spend way too much on gifts during the holiday season, you may rack up a large balance on your credit card amidst all the festivities. Figure out how much you typically spend on holidays and put that money away until December.
7. Improve your home. Investing in your home usually pays off when reselling. While you may not be able to complete large projects with a tax refund, a small project is well within reach.
8. Invest in your own education. Take that class that you've always wanted to enroll in, or complete a certification to give your career (and hopefully your income) a boost.
9. Get an energy audit. Electricity consumption skyrockets in the winter and summer months for most. Get an expert to conduct an evaluation of your home to show you where you can make improvements, such as adding insulation or upgrading windows, to save money on utilities.
10. Put it aside for vehicle maintenance. Tires, oil changes, new brakes…it all adds up. Those expenses that we should expect often take us by surprise. It never hurts to have money put aside for those inevitable vehicle repairs, either.
11. Improve your health. If you've been putting off getting that crown, joining the gym, or seeing a chiropractor, now is the time to do it.
12. Catch up on bills. Perhaps, like many Americans in these tough times, you're behind on your bills. Use your tax refund to catch up. If there's money left over, sock it away to avoid falling behind again.
13. Donate to charity. If you're perfectly financially prepared and none of these suggestions pertain to you, congratulations! Consider donating some or all of your tax refund to a worthwhile cause. Be sure to check out the charity to see if it's registered with the IRS as a charitable organization.

Do you have a tax refund coming your way? What do you plan to spend it on? Let me know in the comments!

Pictures courtesy of morgueFile.