Bills rarely come in nice clean whole numbers like $US100. They pile up on your desk with demands like $94.38, $294.38 and other decimal-toting figures. Rounding up your debt payments, even by a dollar, can yield surprising long-term savings.
Photo by Rombia.
Over at the financial blog The Simple Dollar they crunched some numbers to see just how much you would save if you started rounding up your debt payments. Using a hypothetical mortgage of $150,000 with a 5% rate of interest and a payment of $805.23 they played with rounding to the nearest dollar, 10 dollars and hundred dollars. Rounding up a mere 77 cents to $806 saves $363.64 over the life of the loan. You won't be buying a car with that kind of savings but for less than a buck extra month over the course of the loan it's a nice chunk of change. Rounding up to the next 10-dollar mark for a payment of $US810 saves you $2220.67 — a savings incurred by only $477 extra a month. If you round up to the nearest hundred mark and submit $900 payment per month — $9477 over your regular payment — you save a whopping $34,605.19 over the life of the loan which is indeed enough to buy a car.
Check out the full article for tips on automating your finances and how you can use automation to round up not just a single bill but your entire set of bills for the month. Have a money tip or trick? Let's hear about it in the comments.
Rounding Up Debt Payments: Does It Really Help? [The Simple Dollar]