I got $475 back this year. In our book, we divide income into two categories expected (or predictable) and unexpected income.

Expected income is income you regularly receive every week or month. Unexpected income is any money that you don’t expect on a regular monthly basis. Because your tax refund comes but once a year and you don't know what it will be until you sit down to figure out your taxes it falls in the category of unexpected income.

We encourage you to make a budget/plan for your unexpect income using these priorities:

Priority 1: Needs

Priority 2: Small Debts

Priority 3: Emergency Fund

Priority 4: Large Debts

Priority 5: Big Dreams and Entertainment
 

At the moment, my basic needs are met, and I don't owe anyone money.  However, I really need to get my Emergency fund built up, so the entire amount is going straight to building up my emergency fund.

Since we're in a recession, I know Suze Orman has been suggesting increasing your Emergency Fund to 8 months of living expenses.  It's not a bad idea.  At least 6 months is your goal.  More is nice, but you don't want all your eggs in one basket...I'd say absolute max on an emergency fund is a year of living expenses.  If you've got that much saved up, it's time to look into diversifying with longer term investments that could give you a higher return (or at least break your money into different accounts).

One of the concepts they discussed in my small business class is that businesses should try to keep an emergency fund/accessible cash too.  Though they called it something else and used different math to figure it.  Their math involved taking the cost of daily operations and multiplying that by the number of days in your cash flow cycle.  For instance, if your cost of doing business is $100 a day and your cash flow cycle is 30 days, you'd want to keep at least $3,000 in cash around to keep things going and more than that isn't a bad idea.  The cash flow cycle math was a little confusing, but I grab onto the concept of building up cash for my business.  So seperate from my personal income, I'm also starting to slowly build up an emergency fund for my business.  I thought I'd throw that out there in case one of you is also operating a business either full time or on the side.

Priority 1: Needs

Priority 2: Small Debts (Anything that can be paid off in a single payment)

Priority 3: Emergency Fund (Easily accessible savings account with 6 months living expenses.)

Priority 4: Large Debts (Anything that requires multiple payments, the regular payment falls under your regular bills)
Priority 5: Big Dreams and Entertainment (Big Dreams = Short and Long Term Savings)

I addressed a few Needs with my rebate.  I bought Theresa a lunch box (fabric mini-cooler for $2.50 at Target) and paid the $10 co-pay for my physical.

I don't have any debts at the moment, so most of that money I'm leaving in my savings/emergency fund to bring it up to $3100.  This means I can adjust my savings schedule to reach my end of the year goal of $3500.  Instead of needing to put $84 into my Emergency Fund each month, I can put $50 instead.  Another option I could have had would be to just raise my end of the year goal, but with rising gas prices I think I'll need that $34 to cover driving costs.

If you don't have an emergency fund, I'd strongly recommend using your tax rebate to get one started.