Another Way

I am sure you have read or heard that there are only two ways to improve your finances: make more money or reduce expenses. And many blogs will tell you how to do one or the other, or even both. But there is also another way. Timing.

Let me explain. If you owe  $1000, you usually can either pay it right away or you make payments (usually with interest). But sometimes there is a way to pay it later with no interest owed – and you can make interest on the amount in the mean time.

Example. Many people allow their mortgage company to add an escrow to their monthly mortgage payment to pay for something like real estate taxes. Each month the mortgage  company, in addition to your house payment, takes an amount, say $100, to escrow against your taxes, which they will then pay for you. But why allow them to make money off of you (interest) when you can delay this payment yourself and save the money and pay your own taxes – in the mean time collecting interest off the amount you are saving?

It’s just timing. But by paying your taxes yourself you are using timing to your advantage- letting your money accrue and earn interest. You can do this with your federal or state taxes: why get a big refund with no interest when you can weekly or monthly be putting that money aside and earn interest?

This can be done with “same as cash promotions”. You’ve seen the 1-year same as cash financing deals (although they are getting harder to find right now). As long as you are disciplined, get the item, keep your cash, and make interest. Then make the payment on time. Even a credit card (the grace period) is a small way to do this on a monthly basis, although the amount of interest earned might not be worth the headache. But if you can automate the payments and the savings, over the course of a year you might make a few dollars.

Discipline is the key. You must not touch the money! But if you have (or can develop it) discipline, you can use timing to slowly improve your financial situation. I have done this in several areas (mostly taxes, but also with some larger monthly bills) and have seen my interest build up over time – a very rewarding endeavor!