Hello and welcome to the Spring edition of Haider’s Hits – a seasonal blog post with timely insights to help you Invest with Clarity and Live with Purpose.
Real quick, here’s what we’re watching in the markets right now:
- The market hit a short-term bottom in February and we’re assessing whether that may have been the low for the year. Time will tell and we should expect continued volatility.
- News of the yield curve inversion, that is when shorter term interest rates go higher than long term rates, has been dominating the headlines lately. Many economists use that as a predictive indicator for a recession. Now there are many other economic factors at play, not just interest rates, but that is something we’re watching closely as the Fed navigates the fight against inflation.
- Please feel free to schedule a call with me if you would like to discuss this in more detail.
Now it’s that time of year again where all of us are either writing a big check to our favorite Uncle Sam or finding that Uncle Sam owes us money!
According to the IRS filing statistics through March 25, 2022, the IRS has received over 81 million returns and have processed just under 79 million. So far, the IRS has sent out almost 58 million refunds totaling over $188 Billion dollars with the average refund being about $3,200.
While we would counsel against an interest-free loan to the federal government, some folks like having a “forced” way to save. And even if you don’t receive a refund this year, there are still some smart things you can do if you receive a gift, bonus or unexpected windfall this tax season.
So what are the 4 Smartest things you can do with your tax refund?
First – Do you have a rainy-day fund? And if so, is it fully funded? It’s important to have a cash reserve. Most of America is only a $1,000 bill away from a financial crisis. Whether it’s a home or car repair, recession or a medical event, having 3-6 months of ready cash is a must. Don’t procrastinate, start it today.
Second- Pay off debt. I heard somebody say recently that there are two types of people in this world – those who make interest and those who pay interest. To be the former, try paying off high-rate credit cards starting with the lowest balance. Clearing credit card debt is a big win. And how about those student loans – eliminate that burden as quickly as possible.
Third – You can’t reap what you don’t sow. If you don’t sow into a retirement plan, there will be no harvest come retirement. Every dollar you spend today and don’t invest or save for retirement is multiple dollars in the future that you won’t have for groceries, gas or going out. Try saving and growing some of that windfall for tomorrow.
Lastly and maybe the most important – Remember to make an impact in the world around you. We all have our own pressing needs, but if we were to truly take stock of our own situation, we would probably count ourselves fortunate and blessed. I’m sure we all know of somebody who is in dire straits. Whether it’s your elderly neighbor struggling to pay a medical bill or the single mom scrounging at the food bank to feed her babies, there is always an opportunity for us to give something that won’t cost us much but mean the world to them. Don’t be afraid to use a little bit of your wealth to make a huge impact in somebody else’s life today.
I mentioned the average refund so far has been about $3,200. You can earmark most of it for these smart goals but know that it’s ok to save some for yourself. Go out on a fancy date or weekend trip. Just be strategic and remember to think long-term.
A well-developed financial plan can help you make the best decisions with any windfall. Without one, you could be subject to impulsive decisions that could be costly to your future.
Thanks for joining me today. Please remember to pass this along to your friends and family and I look forward to sharing more in the next edition of Haider’s Hits.