Financial Timing: How Scheduling Important Events Benefits You Financially

By Xin Lu on 18 February 2010 (Updated 17 February 2011) 13 comments
Photo: Me in Time

Are you thinking of making a big change in your life such as quitting your job or getting married? Just as timing is crucial in purchasing investments, the moment you choose to make such a life change could have different financial outcomes. Here are some tips for the best times to act on some important decisions in your life.

Terminate a Job

If you are quitting a job where you have health insurance, then the best time to do this is on the first of a month. The reason is that you would usually get the health insurance until the end of the month even though you no longer work for your employer. If you plan to take some vacation time between jobs, you would not have to worry about paying for health insurance for a whole month.

Get Married

The best time to get married is at the beginning of the year. The reason is twofold. One is that your wedding would be in the winter, and that is considered the off season for weddings and many locations offer discounts. Another reason is to give you more time to prepare for next year's taxes, by adjusting your tax withholdings and getting used to managing finances as a couple.

Have a Baby

Financially it makes the most sense to have a baby near the end of the year. One big reason is that the IRS considers a baby to be a dependent for the full year even if he or she were born on December 31st. This means that some parents who have babies at the end of the year will get more money back in taxes than they spent on the baby. Also, there are a number of holidays near the end of the year, so you can get extra vacation days to use for the baby.

Close Escrow

Most people try to close escrow as close to the last day of the month as possible. The reason for this is that you have to pay interest on the loan for the days you have borrowed it in the month you are closing. For example, if you are closing on February 14th, 2010 then you would need to bring 15 days of interest to closing to cover the interest from February 14th to February 28th. However, if you close on February 28th then you would only need to pay for one day of interest because you would have borrowed the money for only one day in February. In both cases the next mortgage payment would be April 1st, 2010, but those who close at the end of the month have to bring less upfront cash to closing because they are taking the loan out later.

There are countless instances in life where timing can make a difference in the cost and outcome, and a little research and planning can go a long way. Have you timed a decision that made a huge financial impact in your life?

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Guest's picture
Clayton

We were planning on either getting married in december or january while we were fresh out of college. We picked december and it turned out that we got an extra 800 dollars back on our refund because we were considered married for the entire year. I didn't plan it for the money, but it was a really nice benefit.

Guest's picture
Khurt

Hmm ... so exactly how does that baby/pregnancy scheduling system work. You go to your spouse and say, "Honey, I know it's only February, but we need to get our groove on now to get that tax deduction".

Guest's picture
Hugh

@Khurt That is exactly what I was thinking. Is there anything wrong with that? I think it makes perfect sense!

Guest's picture
Robert

"Financially it makes the most sense to have a baby near the end of the year. One big reason is that the IRS considers a baby to be a dependent for the full year even if he or she were born on December 31st. This means that some parents who have babies at the end of the year will get more money back in taxes than they spent on the baby. Also, there are a number of holidays near the end of the year, so you can get extra vacation days to use for the baby."

That's VERY hard to do, though. And maybe not worth the money you'll save. It IS a human being, after all.

Guest's picture
Nikki

Timing it for Dec 31 would be very hard. Timing it for mid-December with a week or two of leeway wouldn't be that hard at all!

Xin Lu's picture
Xin Lu

Of course it is very hard to have a baby come out exactly on December 31st, but you can definitely plan to have a baby later in the year by trying to get pregnant in Jan to March.  There is quite a bit of time to plan that.  If it happens it's great, and if it doesn't it's fine, too. 

Guest's picture

The benefits you may gain that first year in a tax deduction may make life tough in the future. The child will expect the double whammy of Christmas and Birthday gifts in the same month. How many more times will you need to do things like clean the carpet for at least one additional party each season.

Sis and I have December and June birthdays. I always thought I ended up with the better end of the deal with birthdays that revolved around cookouts and pool parties. Gifts were outdoor equipment and swimsuits. No one canceled out on a party due to snow.

Just something else to consider. After all you could have the December baby in Miami and solve most of the problems. Have a great day!

Guest's picture
J.

I have a friend who had her baby late at night on Dec. 31 (naturally). She has a degree in finance, and all of us joked she pushed that baby out just in time for the tax deduction. Knowing her, this might actually have an element of truth to it.

Guest's picture
JerryMirro

Your article is really very interesting. This is the information, I’ve been looking for… Thanks
JerryMirro

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Guest

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Guest

I'd guess the dear author has no children. In my experience, children are less expensive on a lifetime basis when they are born in late spring or summer.

Yes, you have to actually pay for the child for an extra few months during their first year as a tax deduction. In the long run however, you have to pay for daycare or preschool for an extra year if the child is born in the fall which dwarfs the savings associated with care of a newborn. In most areas, the child cannot start kindergarten unless they are 5 years old before September 1. If your child is born in the fall and misses the cut-off, you end up having to pay for another full year of childcare or preschool. This costs anywhere from $300 per month for an inexpensive part time preschool program to $15,000+ for full time day care in an accredited child care center.

(I suggest late spring as a cut-off date, because sometimes summer babies are not mature enough to start school immediately after their fifth birthday. The parents keep them out of school for an extra year so that they are in a better position to compete with peers.)

Further, parents have to support the children for an extra year, since the child is a year older when they finish college or other career prep program and finally flee the family nest.

Guest's picture
apple eater

Closing at the end of the month is great for residential BUT if this is a rent bearing purchase it is better at the first of the month as you will walk away with cash in your pocket. Since the rent is unearned the seller will have to pony up the rent due for the month and that will far surpass any interest you might have to pay. So the closing date to choose depends on the kind of property it is.

Guest's picture

We've found people have a hard enough time timing the more manageable events. A good start maybe checking on renewal rates for car insurance, staying on track of mortgage deals, and keeping savings accounts up to date. However, it is good knowing these other opportunities exist!