Sacrificing Money for Mental Capacity

by Kevin on November 17, 2009

This weekend I sacrificed some potential interest on a small bit of money in exchange for some mental breathing room.

That sounds like a nice trade, right? I’ll just keep trading money and the next thing you know I’ll be a genius!

I’ve been working on using a to-do list recently in an effort to waste less time. Success has come and gone, but I really think I am making progress in being more productive with my time.

Two of the things on my to-do list were to:

  1. figure out when my annual life insurance payment was due
  2. make the payment

I always start to panic about this time of year because I know we got our life insurance sometime in the fall. I can never remember exactly when. I worry that I’ll miss whatever notification they send us in the mail, we’ll go past the due date and grace period, and our life insurance will be canceled.

In fact one year we did go past the due date on my wife’s insurance… thankfully there was a grace period. Plus I think the life insurance company doesn’t want to have to go through the trouble of medically testing us again. There’s a lot of money tied up in that process.

Hesitant to Part Ways With Money

Just being honest here… but I am usually hesitant to part ways with money. I’m frugal and I don’t spend my spending money in the budget. It piles up and then I eventually do something with it. I try to pay bills as close to the due date as possible. I figure the longer the money is in my accounts the more interest I am earning on that money.

I especially don’t like to part ways with money before I really need to.

The life insurance payment was a perfect example of this. The premium wasn’t due until the middle of December.

But it was on my to-do list. It was sitting there. Another item to eventually mark off, but in the mean time it sits there staring back at me.

Freeing Up Mental Capacity

The online system didn’t offer an option to schedule the payment for the due date. I could either pay now or wait until a later date to log back in and make the payment.

I ended up paying the premium over a month ahead of schedule. I happily gave up the money now, and sacrificed the interest I could have earned on those dollars.

Calculating the Cost of Paying Early

In my mind it is always costly to pay things earlier than you need to. (I’m talking regular monthly bills here, not paying off a mortgage or credit card early. That always makes sense!)

What I hadn’t done in this case is to calculate exactly how much money I would be losing out on.

My life insurance is $255 per year. We save that amount on a monthly basis and stick it into an account that earns interest. When the bill comes due we pay it out of that account and start the saving cycle over again.

We have two accounts this money could technically be in: our rewards checking account (earning 3.61% currently) and our ING Direct Savings account (earning 1.30%).

I decided to run some quick calculations on what kind of interest I would be missing out on. I simply calculated what a year’s worth of interest would be and then divided by 12. It probably isn’t 100% accurate, but close enough.

Here are the results. Remember this is interest I would lose on that $255 for one month:

  • Rewards Checking: $0.77
  • ING Direct: $0.28

I’m never one to gladly give up interest… but in this case I could lose less than a dollar in interest and get the life insurance payment off of my list.

Other Examples of Sacrificing Money for Mind

Be careful. This is a slippery slope. There are a lot of examples where you give up money for mind. This type of spending isn’t something you should aim to do regularly.

Another example:

Have you ever come home and been so tired that you decide to not cook and take the family out to eat? Every once in a while that’s okay… but if you are on a tight budget you shouldn’t be eating out. (Plus eating out most likely isn’t going to be very healthy compared to a home cooked meal.)

But it gives you a breather and some time to focus on other things rather than preparing the food, cleaning up, etc.

Can you think of other examples you think of where you have given up some money in order to get some mental breathing room? Leave your example in the comments below!

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Adam November 17, 2009 at 2:47 pm

Wow, I thought you were going to say that your life insurance payment was $2,000 and you were giving up a TON of money. $0.77 is well worth not having to remember to log back in, actually logging back in, and sending the payment off. I even think $5 is worth that.

Personally, I always pay my bills as soon as they come in the mail (or email). I have the item fresh on my mind and it limits my chances of paying late and being charged enormous penalties. I guess that is how I get my mental breathing room. I just try and get the thing out of my mind as soon as possible. If I don’t, there will surely be a clog down the road!

Kevin November 23, 2009 at 9:13 am

Hahaha a $2,000 insurance premium would be ridiculous. I’d have millions in coverage for that!

I like paying things off as close to the deadline as possible, but that is also why I like automatic payments. Some companies let you just set it up to pay on the due date.

Megan November 17, 2009 at 4:24 pm

I know that I *could* learn how to change the oil in my car, but the time it would take me to set up my car, change the oil, etc., isn’t worth it. Instead, I drop off the car and run errands with DH. My car is ready by the time we’re finished! (Also, I have a habit of breaking things. Knowing my rotten luck, I’d somehow screw up my car by changing my own oil! It’s worth the money to pay a professional to do it – and do it well – in the fraction of the time it would take me to do the same task.)

Kevin November 23, 2009 at 9:14 am

Yea the oil change is something I “outsource” as well. I have the tools to do it, but the knowledge that it is done right plus the risk of getting underneath the car and having it fall on me makes the $25 worth it.

Credit Card Chaser November 17, 2009 at 5:58 pm

I am certainly with you in things similar to your example because I find it much more worthwhile to just free up my thoughts and clear my head of all of the to do’s floating around (I write everything down on to do lists which certainly helps but sometimes when it is something important I just can’t shake the feeling of having something to do).

Kevin November 23, 2009 at 9:17 am

Yea, sometimes it just helps to knock everything out all at once and take a little bit of financial hit for it.

Ken November 17, 2009 at 7:19 pm

On Fridays coming home from work I grab a pizza every so often to keep “kitchen time” down and family yime “up” Working hard all week…Friday nights need to be simple.

Kevin November 23, 2009 at 9:18 am

We do something similar some weeks — but instead of pizza it’s cheese, fruit, and wine. Nothing to really prepare, and helps you to relax.

Golfing Girl November 18, 2009 at 1:03 pm

I pretty much do this for all bills. When DH and I get paid the first of every month, I pay ALL bills. This saves me time of logging on multiple times and balancing the checkbook multiple times. I realize the mortgage payment isn’t due for 12 more days and my credit card statement isn’t due until the 25th, but the peace of mind I have knowing I will never pay a late fee and the sense of having checked off an item is worth the pittance I would receive in interest is worth it to me.

We actually pay off the credit card on a weekly (or so) basis so we use it more like a debit card, yet reap the rewards of Amex cashback. If I were to slip up and make a late payment and pay interest I would be sick to my stomach–the whole reason for the card is to get money back, not give it away. I guess this is the only bill I pay more frequently. All other bills are autodrafted but recorded the first of the month so that money is “gone” in my mind.

As for the “takeout” food time saving dilemma, we’ve gotten much better at making large casseroles on Sundays so that we have dinner waiting on us Monday – Wednesday. I also keep some cheap, quick options in the freezer like the $4.99 “Voila” meals (when I see them on sale, I grab 4 or 5). 10 minutes and dinner is ready with a little water added and minimal stirring involved.

Kevin November 23, 2009 at 9:20 am

I try to pay bills as they come in to. I’ll get the email notification from our DSL service, log in, and pay it just so I can delete the email and get it out of my inbox. (Plus the payment is on the credit card, so I won’t have to worry about “paying” it until when that statement is due.)

We don’t go as far as to pay off the credit card weekly — curious as to why you would do it weekly rather than monthly when the bill comes in.

JKrishna November 20, 2009 at 12:39 pm

Most people do not want to part with their money. However, keeping it with you without paying the dues early is worth of it, if the money does not remain idle and earns some more. Otherwise, it is better to pay early to avoid risk of paying later than due date with fines.

JP November 20, 2009 at 7:00 pm

I have fibromyalgia with a resultant spotty memory. I try to make it a practice to handle anything only once. A bill comes in, I pay it. A piece of paper crosses my path, I deal with it.

Cuts down on all sorts of clutter, mental and physical!

Kevin November 23, 2009 at 9:25 am

I try to do this as well — unfortunately I still have piles of paper and a full inbox! D’oh!

Golfing Girl November 23, 2009 at 9:37 am

We pay off the credit card weekly or bi-weekly partly so the balance doesn’t get out of control. Quite frankly, when the money runs out, we quit buying things. If we waited until the end of the month we might occasionally go over and not be able to pay in full. Instead, we see that we’ve only got $100 left until payday, so it prompts us to “clean out the pantry” or to hold off on un-necessary purchases. This works because we’ve already “paid ourselves first” by putting our savings aside on payday.

Tax Lawyer November 23, 2009 at 7:57 pm

I’ll take sanity over money any day. Sometimes you just have to go to cash and bypass the credits all together. That could be the solution to the problem.

Offer in Compromise November 25, 2009 at 4:27 pm

You need to consider the cost/benefit. Sometimes it makes sense to spend a little on a product or service that will save you time, make you more money or maintain your sanity. It is not just about dollars and sense all the time.

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