Today there are a lot of expenses for which we are charged large sums of money. For instant, let’s consider car insurance. In the majority of cases, your car insurer will send you a semi-annual or annual bill. If you choose to pay the whole amount at once, you could avoid paying some additional convenience fees. In other case, you could choose to pay a monthly amount which will for sure include the convenience fees. Absolutely the same things are happening with your home property taxes and life insurance.
People who consider themselves financially intelligent could think that paying unnecessary fees for enjoying the convenience of paying monthly fees is stupid thing. However, there are some compelling reasons to do so. In this article we will talk about advantages of paying large bills on a monthly basis.
The very first advantage is enjoying a higher yield on your savings and money market accounts than the rate if interest implied by the convenience fees. Let’s imagine that your car insurance bill is $1000 for a year of coverage. If you choose to pay this sum of money on the monthly basis you fee will be not more than $2. Let’s assume that your savings account has 4 per cent yield.
If you put the $1000 into your saving account and transfer the needed sum to your checking account every month, you would likely come out ahead. In fact, you could earn more through interest than what you would pay in extra fees.
The other advantage is about your budgeting. Many people place a high value on knowing what their expenses are every single month. By writing a monthly check to cover a great bill, they could track their budget easily, especially if the payments are sent automatically from the bank.
One of the facts about struggling to make a living is that finding the funds for paying off great bills in one great sum could be very difficult. Returning to above mentioned example, a lot of people could have some problems putting aside $1000. Unexpected car repairs or any other possible expenses could cause short term cash flow problems. By contrast, paying smaller portions every month could provide a little financial freedom even it means paying some additional fees.
It is necessary to understand that every circumstance is unique. Deciding to write a check every month for some great bills could not be appropriate for every situation. As well as it could be inappropriate for some people. You need to review your personal finances in the light of your recurring cash flow needs. If you choose sending monthly payments, you need to consider establishing an automatic payment plan with you bank. Having it you will have not thing less to worry about every month.
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