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By Julia K. Pham, CFP®, AIF®, CDFA®, Wealth Advisor at Halbert Hargrove

If you’re “average,” you might get close to $3,000 from Uncle Sam this tax season. Don’t let it burn a hole in your pocket.

Cha-ching! Getting a tax refund may feel like a welcome surprise — and like a good time to treat yourself to a fun purchase. But that money wasn’t free: It was your hard-earned cash, to begin with. You merely gave an interest-free loan to the government and are now getting it back.

The average tax refund in 2020 as reported by the IRS was $2,748, and often is a crucial factor in many Americans’ financial well-being.

Bearing these things in mind, here are some suggestions on what to do with it.

1. Cover the basics

Take some time to distinguish your essential spending from your desired spending. Essential spending would include things like housing, food, medical and utility bills. These are all things that you should focus on covering before you spend your tax refund on desired or non-essential purchases.

2. Get that emergency fund in place

There’s nothing like a global pandemic to help remind you that it’s wise to have some cash saved for any surprise expenses that pop up. Target between three to six months’ worth of expenses in a liquid account for easy access. Be sure to keep these savings in an account that’s separate from where you hold funds for essential spending. Having emergency money set aside will help you bridge gaps, especially if you are furloughed or laid off.

3. Pay off that high-interest debt

The typical American household now carries an average debt of $138,722, with part of that figure being from credit cards — one of the costliest kinds of debt. Have an aggressive plan to get rid of your debt; consider paying the balances with the highest interest rates first. All other things being equal, this will save you money in interest payments over time. If you were one of the many millions who have been financially impacted by the pandemic, many credit card companies are willing to work with you on your repayment terms … if you ask.

4. Invest in a solid retirement strategy

The earlier and more often you start saving and investing, the faster you can get your investment gains to start compounding and growing. If you are in your 20s, start now if you can. You have time on your side and won’t have to stash away nearly as much as you would if you started in your 30s or 40s. Take some of your tax windfall to accelerate your savings, but don’t stop there. Automate your savings when you can, so it becomes a habit going forward you don’t even have to think twice about.

At first, it may feel like you’re running in place, but be patient. After awhile, you’ll see that account balance grow to a more impactful size — and you’ll realize you won’t even miss the cash.

5. Invest in yourself

Use some of your tax refund to take that online class or purchase that book. This may be the perfect time to brush up on some soft or technical skills, especially if you are searching for a new job, making a career switch, or restructuring your business as a result of the pandemic. After all, intellectual capital is much like financial capital: It compounds over time. There’s no greater return on investment than something that leads to your own personal growth and a better future.

Finally, be patient while you wait for that IRS check

If you are one of the many who are entitled to a refund and still waiting, don’t be surprised if it takes longer than usual. When much of the world shut down due to coronavirus, that included the IRS — which also had to manage the many stimulus payments that went out, even further backlogging processing centers and delaying tax refund payments. While you wait, you can track the process of your payment.to Kiplinger’s Personamarter, better informed investor.

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