Is Prepaying Bills a Good Financial Strategy?
Sometimes the idea circulates concerning money management that prepaying your bills is a good way to get your credit rating higher.
That’s a myth. And in reality it can take away some extra money you otherwise could earn if you practice prepayment.
The reason it’s not a great idea to prepay bills is it takes away earning power from your money on a monthly basis, or whatever payment structure you’re under.
Keep in mind that savings and building wealth is done over a period of years, and every time you remove an element of potential earnings from the picture, it can multiply many times over throughout your lifetime.
For example, if you prepay your bills every month, the interest that money could earn is taken away from you. Multiply that over the years, and you can see how significant the amount can become.
Of course this doesn’t mean you should allow bills to be late so you incur penalties, as that’s just as bad as the other.
The point is that managing your wealth building involves a variety of steps which practiced over a period of time can generate significant results.
The same is true in the reverse. Losing a little here and a little there from even interest rates takes thousands away over the years, so doing a lot of little things right and with discipline produces the results all of us hope for and want.
So while paying your bills early sounds responsible and right, it is one of those little things that can hurt you over the long term.
Keep your savings money in an interest-bearing account at minimum, and only use it close to when the bills are do.
I do this on a monthly basis, waiting for the 1st of the month to transfer money for bills into my checking account.
The idea that doing it early helps your credit isn’t true; just paying your bills on time is what is needed.
Here is just one little thing you can do and change to add to your money-management strategy to help you reach your financial goals.
Tags: saving strategies, Savings Tips
