This Was the Average Tax Refund Issued as of Early April. How Does Yours Compare?

Now that the 2023 tax-filing deadline has officially passed, a lot of people are sitting back and waiting for their refunds to hit their bank accounts. If the refund you're expecting this year is smaller than last year's, you're not alone.

For the week ending April 7, the average tax refund issued by the IRS came to $2,878. That's down from $3,175 in 2022.

Of course, it's easy to see why tax refunds are down this year. In 2021, several popular tax credits were boosted to give Americans relief at a time when unemployment was up and the pandemic was making it difficult for people to work.

Those enhancements expired at the end of 2021. So this year, many tax-filers no doubt had smaller credit amounts to claim. But no matter what your 2023 tax refund looks like, it's important to make the most of it.

What to do with your tax refund

It's easy to look at a tax refund as free money from the IRS. But it's not free money -- it's your money. It's important to make the most of it rather than spend it on a whim.

The first thing you should do before spending your tax refund is see if you're current on all of your bills. If you're behind on your rent, mortgage, or utilities, use your refund to catch up.

If you're up to date on all of your bills, take a look at your savings account balance. Do you have enough money in there to cover a full three months of essential living expenses? If not, then it pays to put your tax refund into savings and bulk up your emergency fund.

We don't know if the U.S. economy will take a turn for the worse later on in 2023, or at some point next year. The more money you have in emergency savings, the more protection you buy yourself in the event of a layoff. And the reason you should make sure to have enough savings to cover three months of bills is that it might easily take you that long to find work after losing a job -- especially if you find yourself searching for an open role during a recession.

If your emergency fund is solid, your next best bet is to use your tax refund to pay off high-interest debt. That could mean chipping away at a credit card balance you've been carrying for quite some time.

When you're free to spend your tax refund

If you have no high-interest debt, a solid emergency fund, and are doing well on retirement savings and other long-term goals, then you may decide to go ahead and spend the money the IRS sends back to you this spring on something like a vacation. And that's perfectly fine.

But if you have a financial need to meet, like building savings or paying down debt, then try to refrain from spending your refund. At this point, it's pretty clear that lawmakers aren't looking to send out stimulus checks anytime soon. The money you receive in tax refund form may represent the only lump sum of cash you get for the rest of the year, so it's imperative that you make the most of it.