When an influx of cash comes in, ;either through a tax refund or bonus, it feels like free money. The urge to spend is high, and the desire to spend it frugally is pushed aside. I get it—really, I do—but before you do something crazy with your tax refund this year, put some thought into how it could be used to impact your budget.

If you’ve been running in the red, this is the perfect opportunity to catch up on some bills or set aside money for your regular spending categories. If your budget is in line, but you have no fall back for emergencies, throw the extra money into a savings account. From there, you will be able to use ‘sudden’ income for very specific items.

Start your holiday gift fund. Add to your vacation fund. Set money aside for a large annual payment (hello, HOA). Save on household expenses by paying insurance in advance, instead of monthly. This year, we’ll be applying every extra penny to our debt.

We were looking forward to getting started next month, with our tax refund. It’s usually not much, but last year we spent some money building our business and didn’t change our payments. Unfortunately, the 2011 tax changes are being implemented late so we aren’t able to file until later in February. It will be nice to use the lump sum to pay off a credit card, once it finally gets here.

Today’s assignment: look at your debts or savings categories and decide where you would apply extra income first. The next time any money arrives that isn’t needed for your regular monthly budget, you’ll know exactly what to do with it.

I’m not a financial planner or a budget expert. I’ll just be walking you through the steps I take each time my budget needs an adjustment. In fact, I’ll be participating myself!