A new year always brings new opportunities and new challenges. As we settle into 2022, it’s a good time to begin thinking about the ups and downs that may lie ahead. This is especially true with your personal finances, as planning now can save you money, time and energy later. There are a few key developments to keep in mind that are likely to impact your personal finances and budget this year. Here are the details.
The Expanded Child Tax Credit is Ending
The Child Tax Credit was expanded in 2021. Families were eligible to receive $3,600 for each child under age 6 (up from $2,000), $3,000 for each child age 6 to 16 (up from $2,000), and the maximum age was changed to 17, up from 16 (anyone who was 17 or younger at the end of the year was eligible). Half of the Child Tax Credit was paid in advance by the IRS in monthly payments to eligible families.
There was an effort to continue the expanded credit into 2022, as part of President Biden’s Build Back Better Framework. However, legislators did not reach a deal, and the expanded credit will not continue (at least for now). This means that approximately 36 million American families that have been receiving an extra monthly payment of an average of $444 suddenly won’t be.
If you’ve been receiving the credit each month, it’s important to adjust your budget accordingly. You may have been relying on the extra money to make ends meet or may have added items to your budget because of the extra payments. In that case, you may need to begin thinking of ways to meet all of your financial obligations without this extra money coming in. For starters, take a close look at your budget and see if there is any low-hanging fruit that you can cut out from your expenses.
Some additional relief will come during tax season. Remember that the second half of the Child Tax Credit will be accounted for when you file your taxes. And, remember not to confuse the Child Tax Credit with the Child and Dependent Care Credit, which was also expanded for 2021 and may provide some additional relief.
Renter Protections are Phasing Out
Since the beginning of the COVID-19 pandemic, there have been efforts to protect renters at the federal, state and local levels. The federal eviction moratorium, issued by the CDC, expired in August 2021. Some state and local moratoriums and other tenant protections remain in place but may expire soon. If you are concerned about being able to make your rent payments, and worry you may face eviction, it is important to take action and plan ahead.
Since housing is a localized issue, and the national moratorium has expired, you should become familiar with the laws and protections applicable to your situation. We recommend consulting with your local legal aid organization or other local tenant resource center to confirm your rights and when any relevant protections may expire. If you are concerned about your ability to maintain rental payments moving forward, be sure to ask about any financial assistance that may be available, and also take a fresh look at your budget to see what changes could made that may make your rent payments more feasible.
Restarting Student Loan Payments
The CARES Act froze student loan payments, reduced the interest rate to zero, and halted collection efforts (for qualifying federal loans). These protections have been extended numerous times, but many believe they will not be extended again. As of now, they are set to expire May 1, 2022. With an average monthly student loan payment of $393, this will be a major change for many borrowers.
Be sure to read our full article about restarting student loan payments. The most important things are to make sure you update your information with your servicers and that you prepare your budget for these obligations to restart.
Plan Ahead for Multiple Impacts
As you can see, 2022 will be full of changes that can impact your financial situation. Just one of these changes can have a major effect, but some people will be affected by two or three of these new developments, leading to a financial crunch. For example, imagine a family who no longer receives a Child Tax Credit payment, but starts receiving a student loan bill, all while keeping up with the rent!
Now is a great time to take a detailed and critical look at your budget to plan ahead, so that you can adapt to these changes and continue to meet your financial obligations. You don’t have to do this alone. An NFCC-certified credit counselor can help review your budget and make a plan for the changes you may face in 2022. Get started here.