When helping clients decide how to best use their tax refunds, it doesn't have to be a decision of this or that - usually it can almost always be both. We advocate you think of the "money coming in" as a percentage - 100% - to be divided up so that you can have a little of this + a little of that.
A DEPARTURE FROM OUR USUAL ADVICE
The typical split is 80% for today (a fun trip, dinners out, ubers vs the subway, and other lifestyle stuff) and 20% for tomorrow (retirement a.k.a. I'm On A Boat). We encourage our clients to get into the habit of stashing 20% of the income, tax refund, bonuses, gift money from grandma, etc., but until you have a couple foundational things taken care of, we suggest a split closer to 50/50. By foundational, we mean:
1) Your Emergency Fund
Use your tax refund to start, build or complete your Emergency Fund (about 3 months worth of your fixed expenses like rent and groceries) AND keep it in an online bank account like CapitalOne360 (Why? Because they pay you .75% on your emergency stash versus BoA and Chase who pay closer to .01% - no brainer).
2) Paying off Credit Card Debt
Credit Card debt is THE WORST. Credit Card companies are the biggest crooks and they know it. Did you know if you don't carry a balance on your credit card, you're referred to as a "deadbeat" within the cc industry! That's because you're worthless to them. That's messed up! So, put 50% (or more) of your tax refund towards paying down your high interest loans (really anything with interest charges > 5-6% - think private student loans, too!!!).
3) Fund Your IRA or Roth IRA
Did you know that you have until April 15th to make contributions to your retirement account for the previous year. So maybe you've already done that for 2015, but why not get a head start on 2016. It sure as hell beats waiting until the last minute. Then again, there is something to be said for procrastination but that's not exactly the sound advice you came to Stash Wealth for, so suck it up and take 50% of your refund and stash it away in your IRA or Roth IRA (if eligible).