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Car Insurance Due and How We Pay it in Full

September 21st, 2018 at 02:39 pm

I got my bill recently for the next six months of car insurance. I have been setting aside $100 a month every month in the Car Insurance Fund. The bill is $567.14 if paid in full. I save $67.66 by not paying it month to month, because they charge a convenience fee each month to do it that way.

Now, it still feels like I am paying month to month, because I have a line item on the budget for it each month and it still disappears from my checking account, but I would much rather do it like this and save that extra money. In order to get ahead like this, a couple of years ago we used some money from our tax return to pay the six months in full and then started saving each month after that. I know some budgets are tight so it would be hard to pay each month and save for the fund, but by doing it like this we didn't have to. We were able to immediately start saving into the fund that month.

So not only do I save that $67.66 off my bill, I also end up with a cushion of $32.86 sitting in the fund to start off with since I am slightly oversaving. Of course I don't know what the six months after this will cost, so if it goes up, we have that cushion, plus the next one if necessary to add to our in full payment. A little insurance on our insurance, if you will.

I do the same thing with other funds. Like right now I am saving $100 a month in the Computer Fund. I could get 12 months same as cash or I could save for several months ahead of time and have the money sitting there ready to go when the next computer or camera or phone other electronic device goes belly up. If the money is there, I can still choose to do the same as cash option, knowing I can pay it off at any time, or I can just pay it off.

Some people aren't so good at paying it off in the allotted time, but we have always been. I figure we might need it to jolly our credit report along at some point, since we are using so little credit these days. If we ever finish the debt payoff and save up enough to put a down payment on a house again, we will need a good credit score. So even if we do the deal and pay it off after three months, it activates the credit report. But the point is, I don't want to have to do it that way. I want to use it as a tool, not have it use me.

I think it is good to have sinking funds like this. It keeps you from being walloped by an unexpected, but really what should be expected, expense. We all know our cars will have insurance due every six months, but to many it is just a big surprise every time it happens because they don't budget for it. We all know computers break down, that Christmas comes every year, that the kids will need clothes and shoes. Budgeting as we go, so we don't get smacked with the expense, just makes sense. And it helps prevent using credit cards and getting further into debt, which is the most important thing, at least for us.

6 Responses to “Car Insurance Due and How We Pay it in Full”

  1. creditcardfree Says:

    Yes, we do this with our auto and renters insurance and car tags, too. So helpful to have the money ready when the bill is due.

  2. MonkeyMama Says:

    I think this is one of those things that is really key if you want to live without debt. If you don't plan for it, you will always be scrambling to pay the non-monthly expenses. & also, cut out all the nickel and dime-ing that you can, so you have more money to save for those expenses. I guess it's a bit of a double whammy.

  3. crazyliblady Says:

    I totally agree with your way of doing these larger kind of bills. This is the same way I do bills like the car tax and tags every year, our payment to the mortgage company when the escrow is a little low, and extra savings for medical bills. Congrats on finding another way to save money and make your life less stressful and hectic.

  4. rob62521 Says:

    That is smart of you to take advantage of saving so much and paying it all at once. And the cushion doesn't hurt either. Better you have it, than the insurance company.

  5. frugaltexan75 Says:

    Yep, this is how I've done it - ever since 2002? when I found Mary Hunt, and later YNAAB. I wouldn't feel comfortable doing it any other way.

  6. klarose Says:

    We do it the same way too for our car insurance, home insurance and taxes. We need about $250 a month for all three and we put back $300 just to add a little to our EF every month. It's nice to not have to worry about the due dates.

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