Last week, the IRS announced the “official” beginning of the 2023 tax season – January 23. That’s the date that they start accepting electronically filed returns. (Yes, some New Castle County people really do file their taxes this early.)
This is the start of the show here at National Income Tax Service, Inc, and we’re ready for it.
But … I get that you might not be.
It can be a big pain to rouse oneself to the task of gathering documentation in order to satisfy a government agency (the IRS) that doesn’t always seem to have its ducks in a row (which is putting it generously).
But, I’d like to argue that, in some ways, it’s a good thing to start the year focused on taking care of business (aka paying bills). It gets you in the right frame of mind about the rest of the year. And, though inflation is high and things are tight, there *is* a way you can order the bill payments and make it through. More about that in a minute.
If you implemented some of those tax-saving moves I wrote about over the past year, you should be set up better when it comes to Uncle Sam. (And, though you can’t do much to affect your 2022 filing, you can start making moves for 2023 now. Ask me how.)
Now, in the spirit of being prepared for the bill onslaught, let’s dive into how to approach paying bills when your income margins are thin. And even if you find yourself in a place of plenty, maybe it’s something you can share with a couple New Castle County someonesyou know who might be in a cashflow crunch…
Paying Bills in 2023: Teri Suddard’s Tips
“Why is there so much month left at the end of the money?” – John Barrymore
The holiday cards have stopped. Now come the bills. And they keep coming. Sometimes it feels like your New Castle County mailman lives to bring you nothing but those… and junk mail that tries to get you to spend more money …
And money is tight after the holidays. You’re swearing off old spending habits, focusing on paying off debts. And you want to deal with those bills because it just feels good to take care of business.
So… as you face paying bills, which ones do you pay first?
Top of your list
Some expenses have no wiggle room: Pay at the register and pay at the pump, for example. Gas and groceries you need to live and make a living, and if you pay in cash (or its plastic equivalent, the debit card) we won’t consider these “bills.” Clip coupons and join savers’ clubs — make sure to do your homework on spending minimums and other conditions first).
We’re looking here at delayed expenses, where you get a notice after a period of time (say a month) and in what order you should pay them.
A quick note here: This is not a strict order for paying bills. That will at times depend on the situation, like which one will have a more immediate negative effect if it’s left unpaid. Still, this order is a good rule of thumb.
Utilities: We’ve all heard of “keeping the lights on” (and the water and gas flowing), so put this bill near the top of your list. This takes on even more weight if you also pay for internet service and you work from home on your computer.
Mortgage/Rent: This is a close second these days when housing is scarce (why keep the lights on in a house you don’t live in anymore?). Miss enough mortgage payments and you risk foreclosure. Miss your rent too often, even with a good reason, and your landlord is within their rights to start eviction proceedings. These scenarios can morph into nightmares, so don’t take the chance by putting, say, your credit card ahead of these expenses.
Taxes: These can seem relentless (because they are) if you fall behind. Stay as current as you can in payments AND DO NOT IGNORE letters from the IRS and state and local authorities. (We can help with this right away.)
Past-due bills. The clock’s ticking for dealing with creditors who’ve already sent you more than one notice. Anybody who lets you know you’ve owed them for a few months or more has already been patient. Move them up on your priority list.
Credit cards: So easy to use – and so deep the hole can become. Make the smallest monthly payment allowed and you’ll never catch up. Turn to another card and the process starts all over again. Generally, pay the most you can every billing cycle from what’s left over from your previous essential bills.
Make a plan for paying bills
Handling debt both short- and long-term is like most problems: It goes a lot smoother with a plan. In the case of debt, this means a payment plan.
Keep in mind:
- Nobody likes talking to creditors – but creditors really don’t like when you don’t talk to them. Use email, phone – or even a good old-fashioned letter. Keep copies of all correspondence and notes on all calls.
- Debt-consolidation companies promise to make your pain disappear for low, low fees. They might – but the Federal Trade Commission has issued many warnings about the scare-tactics marketing and iffy results these operations use.
- Don’t chat on your own with collection agencies, either – their sole purpose in life is to get you to pay right now.
Now, one of your most obvious plan options is autopay. The money comes out of your bank account before you have a chance to touch it. This can work great – just make sure you’re auto-paying for stuff you still want. What about that streaming movie channel you never watch anymore?
If you find yourself short on money month after month, avoid using that credit card for every trip to the store or buy-it-now click of the mouse. The interest rate’s a killer – it tops a whopping 20% these days.
Believe it or not, credit card companies do have payment plans (aka hardship plans or “workout agreements”). These are subject to strict conditions but can help cut your interest rate and fees. Ask about these plans, then ask again and again. If you get a plan, get it in writing.
Ditto utilities, who will also often help you set a budget and spread occasionally high monthly bills (such as for summer or winter) over time.
And ditto taxes: The IRS and most other authorities will work with you to hammer out tax bills. Common names for these workarounds include installment plans, “temporarily delaying collection,” and, for big debts, offers in compromise.
A note too about medical debt. You have many tools to reduce these bills, including financial aid from hospitals. Always double-check with your insurance company to see if a bill’s valid. And new regulations address doctors’ tabs that come out of the blue (“surprise billing”).
Your best “payment plan” is a realistic budget you can stick with. Paying bills can feel daunting when you’ve got a lot to face, but we can help you make a plan for it –- and stay financially clear in the future.
On your team,