The advance Child Tax Credit has helped to lift more than 3 million children out of poverty, reports say. In summer 2021 when the credit first became available, many families reported spending the funds on various expenses ranging from paying down debt to saving the funds, according to the U.S. Census Bureau.
As the school year approached, more parents spent money on school-related expenses like books, supplies and tuition — their own, and their children’s. When school opened in September, coinciding with businesses opening across the country and workers returning to the office, parents started putting the money toward day care. Across the board, the Census Bureau reported, many families spent at least part of the money on food, rent, mortgage or utilities.
The Census data shows that the money quickly became a necessity for many families. The enhanced Child Tax Credit looks likely to remain for the 2022 tax year. But with the legislation still subject to changes, Congress could stop the advance payments, forcing everyone to claim the funds on their tax returns next year instead. In the event the advance installments stop, American families should be prepared to re-work their budgets to account for the loss in income.
The last approved installment hits bank accounts on Dec. 15. Here are some tips to budget better if you lose that advance CTC in the New Year.
Review Your Budget To Reduce Non-essentials
The CTC allowed for some perks — for parents and children both — that families couldn’t have afforded without the funds. Keeping in mind that inflation has raised the prices of many items, losing the CTC advance payments now comes as a double whammy.
Evaluate your current income — without the CTC payments — and your expenses. Can you cut any non-essentials? That doesn’t mean you have to entirely stop treating yourself to a specialty coffee or grabbing McDonald’s for the kids between basketball games (especially since the fast-food chain is offering 12 days of freebies through Dec. 24). But if you’ve splurged on multiple streaming services or started eating out more thanks to the extra cash in your bank account each month, it may be time to scale back.
Consider Consolidating Debt
If you took the opportunity to pay off some of your debt with the CTC payments, your credit score could be looking pretty good right now. Can you eliminate the rest of your debt by consolidating to a 0% introductory interest rate credit card and paying off as much as you can each month during the promotional period? Ultimately, this will free up cash you can use for other expenses. Even if you can only afford to make the minimum payment, at least you won’t be accruing exorbitant interest charges.
Look For Ways To Reduce Fixed Expenses
You may think of fixed expenses such as utilities and rent or mortgage as impossible to change. But just because they are necessary expenditures doesn’t mean you can’t reduce their costs. Consider refinancing your mortgage while rates are still low to reduce your monthly payments — but weigh the savings against any closing costs your lender charges.
If you rent, speak with your landlord about negotiating a decrease. You might even offer to take on administrative or maintenance tasks a few hours a month in exchange for a rent reduction.
It also pays to call your cell phone provider to see if there’s a better deal available. And with winter coming, it’s a good idea to shop around for better prices on home heating oil — and check to see if you qualify for the Low Income Home Energy Assistance Program or a similar program offered by your utility provider.
Increase Your Income
Once you’ve written your budget, you can figure out how much you need to make to maintain the standard of living your CTC payments afforded your family. Can you make up for that money with a second job, a work-from-home gig or a part-time business?
Even if you’re short on time, you may be able to earn extra cash selling items you no longer want on Facebook Marketplace, taking online surveys or even downloading a cash back app like Rakuten to earn money on purchases you’re already making such as groceries.
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