INDIANAPOLIS, Ind – As many Hoosiers are getting their tax returns or are about to, have you already thought about what you plan to do with it?

There are some common best practices and mistakes when it comes to using those annual refunds from the IRS, according to Forum Credit Union Chief Operating Officer, Andy Mattingly.

“I always like to tell people that the most important thing to do is make sure you’re doing something that’s going to improve your financial life,” Mattingly said.

Here are Mattingly’s Top 5 ways to use your tax return this year.

Number 5: save it for a special occasion you know is coming up.

“If you have a milestone birthday, or a planned vacation, use it to fund that so that you’re not borrowing to do that,” Mattingly explained.

Number 4: take care of a short-term financial need.

“Maybe you still have holiday bills to pay, or a credit card statement, something like that you need to pay off,” he suggested.

Number 3: save it for an upcoming need or large purchase.

“Maybe you’re going to buy a home, or maybe you have something else,” Mattingly stated.  “That’s a good opportunity.”

Number 2: boost your emergency fund.

“You have unexpected financial emergencies,” he said.  “So you may have a medical expense, you may have a car repair.  So that’s a good thing to do.”

Number 1: plan for the future.

“Either add something to an investment account that you haven’t started, or use it to add more to your retirement fund, because that’s going to help you in the future,” Mattingly recommended.

The most common mistake people make, according to Mattingly, is treating a tax return like a windfall of money and using it as an excuse to spend more money.  An example of that would be putting a $2,000 return toward a $5,000 vacation when you don’t really have the other $3,000 to spend.

“What we find a lot of times is people use tax refunds to spend even more money,” Mattingly cautioned.  “So instead of improving their financial life, they make it even worse.”

Another thing to avoid is spending your return before you actually have it.  

And, Mattingly said, keep in mind that the real goal is to not have any tax refund at all.  That means you’re not overpaying taxes to the government and you already have all that money throughout the year.