Valley News – Upper Valley Families and Financial Experts Prepare for Child Tax Credit Payments

Take care of your bills and debts. Save what you can. Don’t roll the dice.

This is the opinion of financial experts on how households should handle the advance payments of the federal child tax credit that will begin to arrive to many families with young children and teens this month. and every month for the rest of the year.

“I wouldn’t take the money and I would feel like it’s free and something you can experience,” said Cathy Lemire, a White River Junction financial coach who helps clients, many of whom take on money. heavy credit card debt and other expenses, on how to manage their budgets. “It’s a real opportunity for people to move forward and help break the paycheck-to-paycheck cycle. ”

The newly improved child tax credit, enacted earlier this year by President Joe Biden as part of the American Rescue Plan Act, aims to provide financial assistance to households during the pandemic by increasing the existing child tax benefit families up to $ 3,600 for each child under 6 and up to $ 3,000 for each child 6 to 17. Half of the money is available as a monthly installment this year as an advance on 2021 income taxes, and half will be paid when filing tax returns next year.

(Taxpayers, if they choose, can refuse to claim the early payment of the child tax credit and choose to receive the money when they file their 2021 federal income tax return next April.)

While the amounts that households will receive will vary widely depending on the number of children, income, and deposit status, payments can total thousands of dollars per family and, in many cases, can exceed stimulus payments made. last year and this year. The Internal Revenue Service estimates that 39 million US households are eligible to receive advance cash payments, which represents 90% of families with children in the country.

Richard Paul, a certified public accountant whose practice at White River Junction focuses on families and small businesses, said he had never before seen a government program designed to advance credit card cash payments. child tax, but “President Biden’s goal in March was to make sure families get the money now to help them get through the pandemic.” ”

Take care of immediate needs

Financial experts point out that there is no cookie-cutter approach to what an individual household should do with money, as a plan is governed by that household’s particular financial situation; a household with minimal debt and a stable income is very different from a home with little or no income and unpaid bills and expenses.

“For a lot of people who might still be catching up on rent or car payments, the first thing I would suggest is (use the money) to prioritize your four walls: housing, transportation, food, utilities, ”Lemire said. The next step is to tackle debt, especially credit card debt, with its expensive double-digit interest rates.

Paying off debt and reducing the money you give to lenders in principal and interest, Lemire said, “is like giving yourself a raise.”

Many families in the Upper Valley who are financially stressed because of the pandemic do not hesitate to use the money from their child tax credit: they will cover the bases.

“The first thing I’m going to use it for is to pay the bills. Taking care of the necessities is the # 1 responsibility, ”said Jillian Shoulla, a 32-year-old mother of four in Claremont who stopped working evenings at McDonald’s when the pandemic began. “I had to turn on the air conditioning because it was very hot, and that drives up the electricity bill. ”

Shoulla, whose fiancé works as a team leader at Subway, said she might splurge on some smart splurge as well.

“Maybe buy something I can’t normally afford, like a buoy at Walmart or take the kids to Wade’s and tell them, ‘Get the biggest ice cream you want,'” said Shoulla, referring to at Wade’s Place, a popular frozen ice cream. yogurt stand on the Sugar River in Claremont. “People are going to take it and go on vacation, but that’s not what it should be for.”

Planning for the future

Paul, the accountant, recommends the tax credit as an opportunity to “build up an emergency fund” to tap into in the event of unforeseen expenses or disruption of income. Insufficient savings are a major problem among American families, although Paul recognizes the obstacles many households face in trying to set aside even the bare minimum.

“Most pros want three to six months of living expenses in savings” but “in reality” two months of living expenses in savings would be a more realistic – and achievable – goal, “especially in the Upper Valley where rents are so high “.

Jessica and Daniel Rothbart, of Newport, NH, said the tax credit would make a huge difference to their families this year and next. The Rothbarts have six children, ages 5 to 14, and Daniel estimates they will receive “in order” of $ 1,000 per month until the end of the year.

Rothbart said the money would mean his wife won’t have to return to work as a substitute teacher and instead can stay home to house school the three of their children who have requested it. (The Rothbarts said they give their children the option of attending a local school or homeschooling each year.)

“Now we can focus on the kids without having to worry so much about money,” said Rothbart, who said he made about $ 40,000 a year in the gunmaker’s IT department. by Newport Sturm, Ruger & Co.

And don’t wait for government checks to arrive before deciding how to use prepayment, advises Lebanese financial coach Katy Almstrom.

“Know exactly what the plan is before the money comes in,” Almstrom said, adding that the “temporary bump” in payments should be seen as a one-time event like a bonus or giveaway. “For every family it will be different, but plan it ahead.”

Almstrom said the money would be wisely spent “to start with a little more savings or to reduce those insignificant debts that create anxiety.”

“Especially in UV with housing and winter ahead – put it in savings,” Almstrom said. “There are always big expenses to come that are not on our radar because they are not frequent: snow tires, car repairs, propane, taking the dog to the vet – things that make us turn around and use credit card and cause stress. ”

Don’t leave it to chance

One thing almost all financial experts agree on is that unless a family’s finances are strong and in the enviable position of not facing an urgent need, the payments of the tax credit for children should not be funneled into risky investments.

With online platforms that trade fractional shares, it’s easier than ever to buy trendy stocks like GameStop and AMC Theaters or cryptocurrencies like Bitcoin or Dogecoin. but that doesn’t mean it’s a good idea.

Given the volatility of bitcoin, it’s not a good way to get rich, according to financial planner Tim Fisher, founder of Fisher Financial Advisors in Hanover.

“You might as well go to a convenience store and buy a Megabucks ticket,” Fisher said.

Fisher sees the use of the tax credit for expenses other than necessary as an abuse of the program’s objective.

“Overall, some families are going to need the (child tax credit) to pay their rent because they are late or to pay for their food because they are food insecure,” he said. he declared.

Indeed, Daniel Rothbart has said he sees tax credits as just fair treatment for families often overlooked in economic policy, and he makes no apologies for accepting the money.

“Anything that gives low-income families money is A-OK in my book,” Rothbart said. “If the rich can get their tax cuts or if the big corporations get their bailouts, then the American people should be able to get their bailout for their personal lives if they need it.”

Contact John Lippman at [email protected]

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