Life is all about balance. Even when times get difficult, it's still important to relax and have fun. For many taxpayers, a refund comes as a pleasant surprise that may elicit one of two reactions. If you're like many taxpayers, you probably do one of the following:

a) Hide your money in a bank account for a rainy day - just in case; or
b) Blow the entire check on something excessively luxurious.

IN PICTURES: 9 Ways To Use A Tax Refund

Spring Cleaning Supplies That Help You Save
Why Spring Cleaning Helps Us Save: 3 More Reasons
Savings Strategies For Wedding Gifts

Either of these extremes has its downsides. On the one hand, being too stingy can be draining, while being impractical can make you feel guilty. Instead of splurging on something luxurious or saving every extra earned penny, take the middle ground: Spend your money on something fun and practical that will bring a little more balance to your emotional and financial health. Here are some ideas to get you started.

1. Have Fun - In Moderation
Embrace the fact that you're a human being and give yourself some flexibility. Sometimes, you just need to buy that completely impractical item, right? Instead of racking up credit card debt, plan in advance, spend in moderation and pace yourself. For those "gotta have it" moments, your "fun" budget will keep you covered. Think of it like an insurance policy.

2. Give to Others
November and December are the months that tend to hit bank accounts the hardest. This is because many people fail to plan ahead and anticipate the cost of holiday gifts. A gift fund will help you afford the best surprises for your friends and family - without leaving you with an unpleasant surprise on your credit card bill.

3. Take a Trip
You can't spend your entire life working, doing chores and running errands (although it might seem like it). At the same time, you shouldn't go into debt taking unrealistic and exotic trips. What you can do is give yourself some leeway to go somewhere, and let your tax refund help you reach your destination - whether it's a 40-minute drive or 4,000 mile flight away.

4. Fund Home Improvement
If you wait for something to break, you may end up spending extra money to get it fixed quickly. If your roof, furnace or refrigerator is nearing the end of its life, save your tax refund to replace it - and consider shopping for the best price before-hand to avoid getting taken advantage of when you're in a panic.

5. Save for School
If you have kids you are probably already (painfully) aware that college can cost up to $50,000 a year. With that kind of number to hit, it really isn't too early to start saving. In the world of education, the smallest amount of money can go a long way; if you stash your tax refund away while your kids are still in diapers, it'll have time to earn interest and grow right along with them.

IN PICTURES: 6 Tax Myths Everyone Should Know

6. Donate to Charity.
If you're lucky enough to feel financially stable, consider using your tax refund for a charitable contribution. But instead of blindly writing a check, take some time to research your organization of choice. Get your family involved, and use this donation as a learning and bonding opportunity. If you're lucky, you may even get to deduct your donation from your taxes next year.

7. Buy a (Cost Saving) Gadget
Your favorite gadgets can actually help you save money. For instance, you can use your digital camera to take photos for holiday cards and gifts, while an iPad or tablet can allow you cancel expensive magazine subscriptions. This is one way to creatively balance your budget and still have fun.

The Bottom Line
When it comes to your tax refund, think creatively and strategically to find a way to use that money to balance both your checkbook and your life. From a return on investment perspective, "fun" budgets are practical, valuable and important. Plus, your tax refund can enable you to have fun, guilt-free.

Related Articles
  1. Economics

    Explaining Cost Control

    For a business, cost control entails managing and reducing expenses.
  2. Insurance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  3. Budgeting

    The 7 Best Ways to Get Out of Debt

    Obtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
  4. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  5. Credit & Loans

    5 Mortgage Loans You Didn't Know About

    These lesser known mortgage loans are often overlooked by potential home buyers.
  6. Budgeting

    The 5 Most Expensive States for Child Care

    To get a better sense of how child care costs can fluctuate, here's a look at the costs of child care across the country.
  7. Home & Auto

    Looking To Invest In Home Improvements?

    Some home improvement projects could cost you more to complete than they’ll pay out in equity. So, here we show you the worst projects to avoid.
  8. Fundamental Analysis

    Understanding the Internal Rate of Return Rule

    The internal rate of return rule is a popular method used to compare investments or projects.
  9. Home & Auto

    Are Home Inspections Worth It? - Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.
  10. Budgeting

    How to Defray Long-Term Care Expenses

    Here's a handful of options on what you can do to defray long-term care expenses.
RELATED TERMS
  1. Cost Accounting

    A type of accounting process that aims to capture a company's ...
  2. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  3. Accessory Dwelling Unit (ADU)

    A legal and regulatory term for a secondary house or apartment ...
  4. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  5. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where ...
  6. Fudget

    A falsified statement of income and expenses. A fudget or "fudget ...
RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
  3. How do I know how much of my income should be discretionary?

    While there is no hard rule for how much of a person's income should be discretionary, Inc. magazine points out that it would ... Read Full Answer >>
  4. What proportion of my income should I put into my demand deposit account?

    Generally speaking, aim to keep between two months and six months worth of your fixed expenses in your demand deposit accounts. ... Read Full Answer >>
  5. How do I use the rule of 72 to estimate compounding periods?

    The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!