How should you spend your tax refund?

Every tax season, financial writers everywhere attempt to answer this perennial question with turgid and often unhelpful financial planning guidance. Instead, here are some practical, user-friendly tips tempered by pure frivolity.

Many people think of a tax refund as found money, an unexpected bonus that the government sends your way. The government, of course, is simply returning to you what is already yours. In fact, you loaned it to Uncle Sam, interest free.

So now that you will soon be reconnected with your hard-earned cash, how should you spend it? Let’s assume you have a hypothetical tax refund of $2,500 coming to you.

Your best bets boil down to this: bank the money; pay off your credit card; make an extra payment on your mortgage; save for your kid’s college education; or buy a large flat screen television.

Here’s the skinny on each choice:

PUT AWAY FOR COLLEGE. So junior pines away for dormitory living at an expensive out-of-town party school. How do you pay for it? You can start with your tax refund. But $2,500 won’t even begin to make a dent in the $45,000 annual costs for tuition, room and board (I learned this painful fact first-hand). That’s why student loans were invented. Take advantage of a cost deferral technique perfected by the Social Security system: pass along today’s costs to future generations, and it is not your problem.

BANK IT. You can save a number of ways. Stash the money in the bank, and you’ll earn, say, 3% interest a year. At the end of the year, you will be a whopping $75 wealthier. After you pay taxes on that earnings, you’ll have about $40 left, enough to buy dinner for one, not including drinks, tax or tip, or a nice bottle of wine.

PAY DOWN YOUR CREDIT CARD. Financial planning gurus will tout the benefits of using your tax refund to pay off debt. With interest rates rising, you’ll pay annual interest rates of 15%, 19% or more on your monthly balance. By sending your $2,500 refund to Master-Card, you will save as much as $500, after tax, in one year. There are benefits, however, to not paying off your balance. For example, you will maintain your good credit rating by making timely monthly payments, and you will help the earnings of credit card companies that have suffered during the extended period of low interest rates that is coming to an end. Besides, you won’t miss the $40 or so each month.

PAY DOWN YOUR MORTGAGE. Financial planners also tell you to make an extra payment on your mortgage. One extra $2,500 payment may save you thousands of dollars. But, you will be 25 years older when you realize that savings. If delayed gratification is not your thing, take a pass on this option.

BUY A LARGE FLAT-SCREEN TV. To hell with rising oil prices, fears of inflation, the weak dollar and the growing trade imbalance. In these tumultuous times of economic uncertainty, it may the most sense to invest your newfound $2,500 in technology, particularly a large, flat screen television. Why not watch CNBC news reports about rising oil prices, inflation, the weak dollar, and the growing trade imbalance in style and grace?

We assume that you will go with a thin flat screen, rather than a projection television. Thus, decision boils down to this: LCD or plasma screen? Just like the decision of whether or not to pay off your credit card or make an extra mortgage payment, there are advantages and disadvantages to each. The popular LCD screens are thin, bright, elegant, and easy to hang on the wall. They don’t consume too much juice. On the downside, they don’t show true black, and many sets cannot process HDTV signals.

As an alternative, try a plasma television. Plasma refers not to your blood, but to the gas inside the tiny pixels that make up the screen. Plasma sets are available in large sizes, accommodate wider viewing angles, and produce truer blacks. On the downside, the life of a plasma set may be less than that of an LCD, and the CNBC or CNN ticker that runs across the bottom the screen may “burn in.”

To be sure, spending your tax refund on a flat screen set may seem a bit impulsive, even irresponsible. But it will be much more fun than the alternatives that financial gurus advocate.

Mr. Baris, a partner in the New York firm of Kramer Levin Naftalis & Frankel LLP, is a financial services lawyer who plans to spend his tax refund on a flat screen television.