Tuesday, June 28, 2011

Pay As You Go Or Lumpsum?

So many things in life now have the option to make monthly installments, and many times it makes life more convenient.  Car insurance, heating bills, property taxes, house insurance and many more can be equalized over the year so you can pay one same amount every month.  Shawn and I have opted for this so many times, but lately we've been rethinking the practice.  We're noticing all the little ways it costs us more to do it!

Kid's activities are the first area we're addressing.  Take dance for example.  Yes, you can pay a set amount for 9 months of the year, and figure it into your monthly budget.  But, if you pay the whole amount at the start of the year, our school gives you 10% off.  We've decided that next year, we'd like to pay for the things the kids would like to sign up for outright.  Why not save 10% if you can?

Not all the activities our kids would like to try offer discounts, but knowing that it's completely paid for means I don't have to figure them into our budget.  I can't end up with any fees or charges for being late either.  But, I do have to come up with a larger amount of money in one month, which will require some saving over the summer.  We're not 100% sure which things the kids will want to sign up for this fall, but we are bouncing around some ideas with them, trying to offer them some choices.  Piano and ballet are for sure already.  Scouts and certain sports are still being considered. 

Over the summer, any extra budget money, overtime or proceeds  from some of the things we are selling will go to the kids activity fund first.  When we reach the goal we've set, we'll resume paying off debts and saving for the home repairs that keep popping up. 

While we don't have the extra budget room to address all the other things we could move off of monthly payments, I did take a second to check into what fees we pay for the service.  We pay our auto insurance monthly, and yep, they charge a bit extra for that.  Did you know you can save a percentage off your city tax bill if you pay the whole amount yourself at the start of the year?  We pay ours along with our mortgage and the bank submits it for us.  Eventually, we'd like to be in a place where we have enough saved up to pay out the tax bill and move away from the installments.  The problem is, once you start paying monthly amounts, it's hard to switch.  The first year feels like paying twice! We need to save the same amount we pay that month so that when the year is over, we have an entire year's payment saved and free to use.

While we'd like to get there eventually, for now, we'll start with what we can do, the kid's activities, and go from there.  Do you prefer the monthly payments? Or do you tend to pay for those big things annually?

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