Financial Timing: How Scheduling Important Events Benefits You Financially
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.
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.
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?