The pandemic has brought many unforeseen difficulties and complicated life for many of us. Those who work and have loved ones to care for have not had consistent and reliable care for their dependents, including daycare and school, for over a year now. Childcare costs per month and savings possibilities have changed drastically during the pandemic.
When schools have closed multiple times for parents with school-aged children even after reopening, it forced families to make unexpected decisions and caused new costs in the family budget.
Some parents left a job even if they didn’t lose it to stay home and teach their children. Others had to find ways to pay for full-time daycare when their children usually would have been in school.
Fear of getting out or bringing dangerous germs home to loved ones added grocery and restaurant food delivery costs.
5 Tips to maximize your budget with new child care costs per month
There are several ways to optimize your budget to account for the extra expenses the pandemic has brought or any time you have unexpected costs added to your costs.
Examine your spending and cut back where you can to allow for more in the area of need.
Get creative to reduce some spending. Some ideas are, limit eating out and coffee out and make it at home.
Stop paying for a service that you can resume doing yourself. Like, if you are now working at home and have more time since you don’t have to commute, continue caring for the yard to stop paying the gardener.
Check for monthly and annual subscription charges that you no longer need or use. Review all your credit card and debit card statements, scan for subscriptions that you no longer use, and then cancel them to avoid recurring charges.
Trade for childcare instead of paying outright
Trade childcare time with a friend, family member, or neighbor who works a different schedule than you, then you can both benefit without additional money out of pocket.
Trade services for childcare. Anything you are good at could become a great trade. Offer to tutor if you are good at math. If you are great at social media, help a small business owner with theirs.
Clean their house, pull their weeds or teach them a skill you know better than them in trade for watching your kids.
Use online shopping to cut grocery costs
Use online shopping to cut grocery costs to help cover the additional child care costs per month.
Many online grocery stores will use an electronic coupon system to add the coupons and discounts as you are shopping, saving money while adding to your cart. You can also check the weekly ad and go directly to the discounted items on the site.
Online shopping carts can also help you limit your grocery spending by allowing you to see the price of your cart as you add items, no more shocks at the register.
Use the dependent care tax credit to its fullest
The child and dependent care tax credit (CDCTC) can help offset working families’ child care expenses. There has been a temporary increase to the CDCTC for 2021.
The cap on expenses a family can claim has increased from $3000 to $8000 if a taxpayer has one qualifying dependent and $6000 to $16000 if the taxpayer has two or more qualifying individuals. The credit is also refundable this year, meaning it is also not limited by the taxpayer’s liability for the year.
Keep track of all qualifying costs to maximize the benefit of these changes. Costs include paying for the care of a child under 13 or another IRS qualifying individual to allow the taxpayer to work or look for work.
There are several things you may not think about including. Even a specific activity such as computers or soccer and specialized after-school programs, summer day camps that allow you to continue working count.
Be sure to include online camps and programs to keep your kids occupied while you telework too. Even preschool tuition and fees for individual babysitters or nannies for care during work hours qualify.
Check if you are withholding taxes appropriately
Check if you are withholding taxes appropriately, especially with all the tax changes this year.
The vast majority of Americans fail to withhold taxes appropriately and therefore have smaller paychecks and more significant tax returns, often taking on debt to pay for extra or unexpected expenses because their checks are too small.
Use the IRS tool, IRS Withholding Estimator, to see if you can make adjustments. Aim to get as low a refund as possible, only paying what you need to the IRS out of each paycheck. Withholding less can free up extra funds to pay for these much-needed expenses.
Also, check your state’s withholding to see if there is any extra you can keep in your pocket each month instead of overpaying.
You should be able to fill out a new withholding form for either federal, state, or both with your employer at any time. Check with your HR department to find out how.
Check if you may receive a Child Tax Credit increase
Check if you may receive a Child Tax Credit increase and possible advance payments and plan accordingly.
The Child Tax Credit for 2021 has increased from $2000 to $3000 per child and $600 additional for children under age 6. The IRS will also extend the credit to children through age 18 instead of stopping at 17.
Advance payments of up to half the credit may be distributed in equal periodic payments by the IRS during the second half of 2021. The taxpayer will claim the remainder on your tax return.
Have a plan for these extra payments before they come in. Pay for additional dependent care expenses first, increase your emergency fund to cover at least your insurance deductible, finally, pay off high-interest debt as your priorities.
Eight other areas of spending to reduce expenses
Below you will find eight other areas of spending you can cut some costs in to cover any new expenses you may have.
All in all, keep your chin up. Life always has a way of throwing us curve balls. You can adjust and move forward one step at a time.