How to Best Use Tax Refunds and Bonuses

It feels good to get a tax refund. You may think your problems are solved. They’re not. Most people spend their refund before the cash even hits the bank. In December, they say, “I’ll get my refund in March, and this year I’m claiming my other daughter, so count me in for that vacation!” And before they know it, they’ve spent the entire tax refund . . . and then some.

Instead, the first trick to being smart with a pending big check is to wait until you have it. Then, follow the 10/20/70 rule. Here’s how the rule works with a $1,000 tax refund.