It’s tax filing season and many Detroiters have decisions to make on how they will spend their refund check. Amid inflation and some uncertainty in the economy, some people are trying to figure out the best ways to make their money stretch.
“The first thing one must do is adjust their thinking and then adjust their behavior,” said Lisa Howze, CPA, owner of The Lisa Howze Experience LLC, author and a professional strategist.
Howze says people must be mindful we’re in an inflationary period, a temporary one she reminds people, yet unfortunately a period that is hard to predict how long it will last. It’s a reality that affects a lot of people’s spending habits and a cautionary tale for many as government checks and other pandemic related benefits began to expire. As a result, the taxpayer may want to adjust their decisions accordingly.
“Not only should you save your money, but one should know where your money is going. People really have more money than they think they do,” Howze says. This is all about money management and she states people often know they have money coming in, yet their money is leaving back out faster than they can recoup.
“If you carry credit card debt and you’ve got outstanding balances with a high interest rate, you’re losing a lot of money due to the interest rate.”
Howze says in this area, there is money to be saved.
“If you would rather they take your payment over the phone, but it will cost a $10 transaction, that’s where people are losing money as opposed to connecting their checking account to come out automatically.”
And for people looking to get every coin they can squeeze out of their upcoming tax refund check and not leave any money on the table, Howze points to some tips one should consider.
“Depending on what one’s income level is, generally about $55,000 a year for individuals, they could be eligible for the Earned Income Tax Credit. These credits have actually increased over the past couple of years at the federal level and particularly at the state level.”
“For the person who has not lost their job, they should be preparing for the potential of a downfall such as a job loss, pay cut, layoff. The better you can prepare yourself for them, the better you can position yourself.”
She also advises people who may only have worked a portion of the year or only made a minimum amount to be aware of the opportunities to still file their taxes and apply for benefits, because there could still be “refundable money out there people — money back in one’s pocketbook.”
Howze also says to look for ways to make additional money and strongly advises in taking part in an area of the tax code many people often don’t take advantage of – starting a business.
“If you have a skill — maybe you can cook well, people love how you detail a car — whatever you do that is honest, ethical and legal [use it] and develop that entrepreneurial spirit.”
“Take time to understand where there is a need in the market, and if you are able to fulfil that need by providing a solution whether it be a product or service then people would be willing to pay you.”
When it comes to people thinking about what they’ll do with that much anticipated tax refund check, how to stretch their money and what to spend it on, another expert advice is to use it to repair your credit.
“This is one of the most important times to be educated about credit so you’ll know how to wisely use it,” said Shemeka Bishop, owner of The Bishop of Credit, a credit repair and consulting business.
“I always suggest using your credit when paying for items. If you’re using your credit you’ll be able to maximize the dollars that you’re spending.”
Bishop says when you’re using credit to purchase groceries, you’re getting three times the benefit such as cashback, points and increasing one’s credit score as you pay it back over time and on time.
“Not only can you make $50 at the grocery store, for example, work for you once but work for you twice.” Bishop emphasizes credit cards aren’t made to completely live off of but in this economic climate, you might need it, and how to use and make it work for you could be financially helpful for many households.