A Look Back at Our Financial Stability Series

Financial management can be challenging, especially for individuals working in low-income jobs or people who have amassed unexpected expenses.

We have compiled a roundup of recent blog posts related to financial stability, credit card management, income taxes and more. Here’s some helpful information for staying ahead of your finances:

Credit card management

Troy Wulfemeyer, who works as a financial coach with Kansas City’s Metro Lutheran Ministries, has worked with countless clients who have gotten themselves into budgetary trouble with credit cards.

“People will get a credit card with the best intentions as to what they’re going to do with it, but don’t have the financial literacy to understand that it’s not just something you can throw out there and use any time you’re short of cash,” Wulfemeyer said.

For individuals who have overextended themselves on their credit cards and are struggling to make the monthly payments, he recommends getting in touch with the credit card company to set up a plan to take care of the debt, rather than ignoring it and letting the debt build up.

“The biggest thing I talk to people about is the budget. Because anything else is just going to be short-term,” he said. “If they do not have a budget in place, credit cards are awfully easy to jump into and get in trouble with.”

VITA income tax preparation

In Kansas City, the Volunteer Income Tax Assistance Program (VITA) works to help individuals and families make it through tax season with a minimum of stress.

VITA is sponsored by the University of Missouri Extension in partnership with agencies in the Kansas City Metro Tax Coalition, including the United Way of Greater Kansas City, which helps taxpayers schedule appointments through its 211 phone line. 

Individuals whose annual income is $60,000 or less qualify for free tax prep through VITA. The program is sponsored by an Internal Revenue Service grant. Seniors ages 60 and older are eligible for free tax preparation through the Tax Counseling for the Elderly (TCE) grant, and there’s no income limit for the TCE program.  

The $60,000 income limit is given by the IRS as a guideline rather than a firm cutoff, “so we have some flexibility in serving people that may need the services but are unable to pay for a paid preparer or do the return on their own,” said Lindsay Tarasovic, a program coordinator with University of Missouri’s VITA program.

There are 15 sites in Kansas City, Kansas, and Kansas City, Missouri where taxpayers can have their returns prepared through VITA.

Five tips for tax season

Jeff Sheets, Vice-President of Financial Coaching with the Community Services League, says taxpayers get off on the wrong foot by not getting prepared before the tax season arrives.

Here are his tips for tax season and beyond:

1. Be organized. Keep track of your forms and documents so that it’s easier to find everything to prepare your tax return. If you own a business or are self-employed, calculate your business expenses ahead of time to prevent the stress that can come from last minute calculations.

2. Understand that taxes are not savings. Depending on a tax refund check from the government is like having a “financial cushion” that ends up hurting those who see taxes as savings rather than ultimately helping their financial status. “Some people view it as their savings, and they use it to pay off things,” Sheets said. “What I’ve seen is that sometimes people take their tax money out and they can’t pay bills during the year. Then, during tax season, they take all that money and pay off all the bills that they should have been paying during the year. In a weird way, they hurt their credit reporting because these bills might be reported in their credit history.”

3. Seek credible tax advice. Friends and family members are probably not the best sources for tax advice, Sheets said. The Community Services League, among  other nonprofit organizations, have experts whose job is to provide financial guidance without judgment. The organization’s advisers seek to help people move forward and become more comfortable with their financial situation.

4. Use your tax refund, if any, positively. Extra money gained from a tax refund can be put toward one of your long-term goals, such as buying a new car. “If you are getting a refund, do something positive with it,” Sheets said. “Make sure that you’re not just putting it into a savings account and dwindling it down. Use it for goals. If you have a mass amount of money, let’s say $2,000, let’s take 50% of it and put it in an account to go towards an expense, like buying a new house.”

5. Do not fear the IRS. “Whenever you don’t file, there’s a cost that the IRS assesses based on the number of years that you don’t file,” Sheets explained. “If you’re going to get money back, then why didn’t you file? If it’s because you know you’re going to owe, we want to make sure that we’re staying current and that’s where the IRS would be more likely to come after you – if they find that you haven't been filing for years and years.”

Small steps toward financial stability

Financial stability doesn’t have to be an unattainable goal, but there’s not one magic number or formula to help you achieve it, said Kelli Hearn, LISC Greater Kansas City program officer.

“Instead of a number, it’s really about comfort and making sure that you’re making enough that your bills are paid and that you’re able to add a little bit to your savings,” Hearn said.

That could mean adding small amounts of money to your savings account as often as you can, with a goal of building an emergency fund.

Seeking out financial counseling is another helpful option. LISC in Kansas City, as well as in many other markets, has Financial Opportunity Centers where clients can meet with coaches who will help them look at finances and make positive changes.

That can be everything from credit checks to learning about government benefits that could be utilized.