How to spend that tax refund

With the economy deep in recession, many people are banking on their tax refunds to provide a much needed bailout. What should you do with that windfall? CNBC Money expert Carmen Wong Ulrich has some tips on how to properly use the funds.

First and foremost says Ulrich: "Pay off those credit cards. If you carry a balance, and your interest rate is over 12 percent - we have people calling in with interest rates of 29 percent - that's where your money needs to go because it's too expensive to carry."

One place to avoid? Your house. Ulrich say's with interest rates already low and the market still going down, don't commit new money towards your mortgage.

Another possible option is putting your money into the market. "If you have the credit card debt paid off, if you have the emergency fund, look into the market, because it is true, everything is on sale," says Ulrich.

Even though your instinct may be to do the smart thing, Ulrich says don't be afraid to spend a little on what feels good too. "Take ten percent and get yourself some chocolates, little luxuries, especially as we're so stressed."

A sweet compromise in tough times.