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Tax time: That interesting time of year when ordinarily smart people begin to make really dumb financial decisions. Isn’t it amazing to watch what a little extra cash (well for some, maybe a lot of extra cash) lining the pockets can do? The average tax refund so far this year may be $1,865 and I suspect there are at least that many dumb ways to spend it. Here are my top five:

Act like it’s “FREE” money

The operative word in the term “tax refund” is REFUND! Common synonyms for refund are “repayment,” “reimbursement,” and “return of over payment.” This means that tax refunds are not free money. The government is not giving you a bonus every year just to thank you for being an American. This is money that you’ve allowed them to “borrow” from you all year long. And now, unlike most of your friends or family members, they are actually paying you back.

Never mind the fact that you made the loan with NO interest even though you pay them back with interest on your student loans or installment payments.

Smart Move: If you routinely get a big tax refund, change your withholding (use this calculator to determine the amount you should be having withheld along with instructions on how to change it). Your goal is to neither owe or to be owed at the end of the year. If you can come within $100 of that goal, you’re good. Read more