Tax preparation is in full swing by February of each year especially as those anticipating tax refunds hasten to file taxes to collect the annual windfall. According to the Internal Revenue Service, more than 77 million taxpayers received an average tax refund of $2,705 in 2009. It is easy to understand why an amount like that easily generates thoughts of taking a nice vacation or perhaps purchasing one of those new, state-of-the-art flat screen televisions. Yet realistically there are some wiser uses for tax refunds that can produce some real long-term financial prosperity rather than just a short-lived shopping gratification experience. Here are three suggestions for getting the most out of this year’s IRS tax refund.

Creating an Emergency Fund

Internationally recognized personal finance advice expert and best selling author David Bach recommends that everyone should have savings equal to at least three months’ of living expenses for emergencies. Having adequate cash reserves set aside in a “rainy day” fund provides an alternative to being forced to use credit cards for paying for unexpected expenses like auto repairs and unplanned medical bills.

Having an emergency fund can also guard against a financial crisis resulting from a job loss by serving as a source for meeting financial obligations until a new job can be found. During a recession when many people are losing jobs and having to go longer before finding a new one, emergency funds become increasingly important.

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