Smaller tax refund this year? You're not alone. Expert breaks down how to stretch it
Tax season is upon us, and experts are urging you to be aware of the possibility of a smaller refund. Metropolitan State University of Denver Affiliate Professor of Accounting Robert Persichitte is passionate about helping people manage those funds.
"The reason I care about money and finances is they really have an impact on people's lives," he explained. Persichitte is also a personal accountant, so he's seen the impacts of this year's change in refunds.
"All the previous information and tax breaks and credits that came from COVID? They're gone. It's making it feel like your taxes are much higher, when in reality it's the benefits are gone so a lot of people are seeing smaller refunds. It's the change in the tax codes," he said. "The biggest change for those refunds is going to be mainly for people with kids. So, you have the child tax credit. It's smaller than it was last year. It's also nonrefundable, which basically means if you don't have taxes to offset you don't get as much back. For the child tax credit, only a portion of it was refundable this year that means if you don't have taxes to offset the full $2,000 you may be leaving a little on the table."
So, he says having a money managing strategy is key.
"You don't want to go at it blind. I know with so many people, myself included, you see it hit the bank account and I get excited and I go out and buy something that I probably don't need and it's gone. Plan for it, spread it out, and find out what your problem areas are and apply your refund toward those problems."
"If you have a budget and you spend it on food -- that's gone up a lot this year -- you can know exactly how much it's gone up if you're tracking and paying attention to it. Even if you're looking at the receipt, is that changing and how much is that changing by? Another thing that you can do is substitute. So if one thing that you buy a lot of is going up in price, maybe find something that's similar and cheaper. I know I did that recently. We switched from beef to pork when we're cooking family dinners because it adds up so quickly. I know it feels pedantic, $2 or $4 difference, but when you do that every single day, 2-3 times a week, it really adds up and by the time you retire that could have thousands of dollars."
Persichitte also says take a look at where you're frequently spending.
"If it's frequent, it's important. Even if it's a very, very small amount. Don't write off $1 or 50 cents, pay attention, especially if it's happening all the time. Just think about it logically if you save a dollar a day, that's going to be $365 -- you can compound that out."
He promises those actionable steps will help get you to your goal.
"Just get started, just do something, and it will move the needle. Just getting in the habit of saving little by little."
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