While a tax refund isn’t a boost to your income, per se, it is an extra contribution to your cash flow. Many people use the extra funds for frivolous purchases, but there are ways to spend your tax refund that make much better financial sense.

Pay off debt

Reducing or paying off debt is one of the smartest ways to spend a tax refund (or any other source of “extra” money). This is especially true of high-interest debt from credit cards. You’ll not only save money in the long run by paying less in interest, but reducing debt can also help improve your credit score. Eliminating debt also means fewer bills and a surplus of funds in your monthly budget that you can save or contribute toward paying off other debt.

Boost emergency savings

We all know that financial experts recommend having three to six months worth of expenses stowed away in savings. Unfortunately, many of us come short of this goal and are lucky to even have one or two months covered. Eliminate unnecessary worry and do your future self a favor by depositing your refund into savings.

Invest in your nest

According to the IRS, the average American receives a tax refund of nearly $3,000. You might be surprised to learn that this amount of money can go a long way in terms of home improvements. Whether you’re able to redo a bathroom, install a new fence, or cover a complete kitchen makeover, you can expect a return on your investment when it comes time to sell your home.

Think of the future

Whether you’ve already received your refund or have yet to file (make sure you choose direct deposit!), you have nearly countless options for how you can spend the extra money. Rather than purchase a new wardrobe or go on a lavish vacation, spend your tax refund wisely and reap the benefits long into the future.