Think Long Term

When you hear “Think long term,” what comes to mind? Probably investing and retirement, right? Good examples of when to have a long term mindset. If you want to get the best return from your retirement account just leave it alone when it takes a dip. It will come back over time. But there is more you can do to secure your financial future than just letting your IRA ride out the ups and downs of the stock market. But you must start now!

First, let’s look at how you pay for things such as car insurance and credit cards (I could do a whole separate blog on credit cards!). You would be surprised how many people think all they owe on their credit card is the line that says Payment Due. Wrong! Most times if you’re making only minimum payments you are barely paying the interest and the principal balance is not going down. It is easy to pay as little as possible now, but you end up paying five times the price for whatever it is you put on the credit card in the first place. You probably already knew this.

So, you’re a wise consumer and you pay the total balance on your credit card every month. Better yet, you are using only a debit card and you have an account with no overdraft. But how do you pay for your car insurance? Probably monthly, right? If so, you are paying anywhere from $3-$10 extra each time you make a payment. Insurance salesmen are smart and when they quote you rates they give you a nice low, monthly rate. This works for two reasons. First, if they give you the whole six month figure you are more likely to be scared away. “Only $100 per month” sounds much more affordable than “a low six month premium of $540.” And second, the insurance company makes more money when you pay monthly. Suppose the figures I just gave you are actual car insurance rates. Here’s the math:
Monthly payment = $90 premium + $10 convenience charge
Six month premium = $540
Extra cost annually = $120
Extra you pay after ten years of paying monthly = $1,200!

“Yes, but ten years is a long time,” you say. And I will tell you that $1,200 is still a good bit of money. Let’s assume you’ll be driving for several more decades. Multiply that twelve hundred by four or five and that could be a nice little chunk of change with which to spoil the grandkids!

I could go into many more examples of how paying more now will save you long term, but I’ll stop there for the time being. Plan ahead. Think long term. Start now!

Today’s tip:
File your taxes yourself this year. If you are filing a simple individual return there is no need to pay someone to do it for you. Get out last year’s return and if you have all the same types of income and write-offs, use the old return as a guide. File online for free @ http://www.irs.gov .