A new couch! Airline tickets! A flat-screen TV! As soon as you get that refund check from Uncle Sam, it’s hard to stop your mind from racing. Surveys say you’re not alone. Only 4 percent of Americans invest their tax refunds, while two-thirds spend them right away. To help you make smart choices this tax season, we’ve tapped the experts. Their loud-and-clear message? Steel yourself against frittering away the money on stuff and more stuff. You’ll be glad you did.

1. Get Back in the Black
Sure, it’s tempting to take that check and buy some new toys, but take a deep breath and consider your priorities. Are your creditors nipping at your heels? Do visions of your credit card balance dance in your head?

“Getting out of debt is the wisest thing to do with your tax refund,” says David Roslansky, a senior financial consultant with Thrivent Financial for Lutherans in Worthington, Minnesota. “Keep all things in perspective and keep all things in balance. If you are in debt, you may need to pay that off first.” Once you’ve made inroads in this area, think about saving next.

2. Save for the Future
Use your tax refund to give your savings a boost—and then make it your goal from now on to put away 10 percent of each paycheck toward your future. “The key is to set your dollars aside in several different types of investment accounts and give them time to grow,” says Roslansky. “In the 22 years I have been working with people, those who chose this principle early on have those dollars in retirement.”

3. Put Your Money to Work
Roth IRAs work hard for your money, so it’s savvy to consider putting your tax refund to work in one. The maximum contribution is $4,000 for 2005.

“Roth IRAs are phenomenal,” says Rick Edinger, a sales desk manager for Thrivent Financial. “Put dollars in, and once you hit retirement, you can take the money out totally tax-free.” A Roth also can serve more than one need. “If you’re trying to decide between saving for the future and your child’s education, put your refund in a Roth,” says Edinger. “You can pull out your original contribution without taxes or penalty, but surrender charges may apply. If you don’t need it, the Roth continues to grow in a tax-preferred way.” Another good choice is to use your tax refund to help you boost 401(k) contributions to meet your employer match. “Increase your salary deferrals to the extent of your refund,” says Edinger.

4. Get Smart
Harvard or Yale? If you want to sock away larger sums for your child’s college education, consider using that refund check to open a 529 college savings plan. “It’s a smart way to save,” says Jon Rusten, a regional sales consultant for Thrivent Financial. “The contributions aren’t tax-deductible but distributions are tax-free and can be used for tuition, fees, room and board, special-needs services, books, supplies and equipment.” You can also put up to $2,000 in a Coverdell Education Savings Account to save for high school or college education needs. Contributions aren’t tax-deductible, but earnings are tax-free if used for qualifying education expenses.

5. Think Insurance
Go to the head of the class if you buy cash-value life insurance with your refund bucks. (Just keep in mind that premiums will be due every year.) “Many Americans are underinsured,” says Edinger. “Life insurance with accumulated cash value is a nice vehicle to put dollars into on a tax-advantaged basis since it’s tax-preferred. It is a tremendously versatile financial tool.” Whatever you decide to do to get more bang for your buck, Edinger advises you to concentrate on one area first to avoid numerous fees and minimums. “Stay focused and think in large blocks.”

6. Create a Cash Cushion
Use your tax refund to build up your emergency fund to cover unexpected and unplanned events. “Today, some people are living very close to the financial edge,” says Edinger. The first step is make sure you have money in your checking account. “Make sure your emergency fund can be liquidated quickly,” says Rusten. “Your Thrivent Financial representative can show you solutions.”

When it comes to how much to save in your emergency fund, base it on how long you estimate it will take you to find new employment. “Thirty to 90 days is a general rule of thumb,” says Rusten. “The higher your salary, the longer it usually takes. Figure 60 days for every $50,000 of income.”

7. Rethink the Refund
Instead of using Uncle Sam as your bank, adjust your withholding so you break even instead. “Instead of receiving a tax refund, it’s better to save on a regular basis,” says Roslansky. Your Thrivent Financial representative can help you formulate a plan to put your money to work for you.

Chrystle Fiedler is a New York-based freelance writer.

Don’t Miss These Deductions

Traditional IRA Contributions—$3,000 for 2004; $4,000 for 2005. If you don’t qualify for a retirement plan at work, you may be able to deduct your IRA contributions no matter what your income is. Work for yourself? Set up a SEP IRA and your company can take the deduction.

A Health Savings Account (HSA)—An HSA is like a medical IRA for expenses such as deductibles on health insurance and prescriptions. What you don’t use stays in the HSA and continues to grow. You can find forms and additional information at www.thriventbank.com.

Education Tax Credit—Each year you can take a credit of up to 20 percent of your first $10,000 of qualifying education expenses. The Lifetime Learning Credit can be taken for any year of post-secondary education. For 2004, the full credit is available to married taxpayers with modified adjusted gross incomes of $85,000 or below, and unmarried taxpayers with modified adjusted gross incomes of $42,000 or below.

Job-hunting expenses—You can deduct mileage, the cost of preparing a résumé, phone calls and postage. You can also deduct moving costs as long as they’re job-related and for a relocation of at least 50 miles.

Child Tax Credit—$1,000 per qualifying child under age 17 in 2004.

Child Care Credit—Employment-related care expenses that you incur, of up to $3,000 for one dependent child, or up to $6,000 for two or more dependent children, can be used toward a credit.

—C.F.

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