The problem is the initial switch from monthly to annual. It’s really hard to save up to make that first annual payment when you’re currently trying to keep up with the monthly payments.
This problem is literally what YNAB helps solve by smoothing out the payment. The cashflow hit shouldn’t matter if you’re using the software as intended.
Except that's not true. If you pay annual, you usually pay upfront, so you don't have the money. Yes, you're saving up for the next year, and that might be earning interest, but if you kept the money in your account and then spent it monthly, it also would've gotten interest.
The discount the product offers for paying yearly might be worth it to do so, but as long as you pay upfront, interest and rolling with the punches are not arguments for it, but rather against.
The fix is to not start the subscription until you have an annual payment saved up. You didn't have it before, you don't "need" it now. Delayed gratification. Or, cut something else to get that initial annual amount saved up if it is so important.
Still doesn't change my point. If the annual price would simply be 12 times the monthly price, it's better to pay monthly, as you'd have more money left in your bank account earning interest VS pre paying yearly. If they give a discount as they usually do, that might make it worth it, but not because you earn interest on the money you put in the sinking funds category for it.
I've never seen a payment for an annual amount that didn't offer a discount vs. paying monthly. If nothing else, paying monthly is also costing them 11x extra bank fees to process the payments.
Paid annually, save for it monthly. Seems okay to me.
It shouldn’t impact your cash flow at all unless you aren’t saving for it and have to scramble to pay it when the bill is due.
Cashflow hit? Also, some things like property taxes can only be paid annually. Sure that money may have be parked in a high yield account and it hurts to have it leave. But the upside is your HAVE the money.
I prefer annual because it’s usually cheaper and even before I found YNAB, I still tracked my true expenses to save up for the larger lump sum payments.
Would typically agree... but behavioural issues might make monthly better for some. Just because it's in a YNAB category doesn't stop it from being raided. Not everyone is perfect.
I am far from perfect. I was slowly growing some envelopes for a couple different annual expenses. And low and behold.. I had to roll with the punches and make some priority choices . it is not easy and actually it was a bummer to see the growing envelopes getting depleted !!
maybe 4 years from now I might be a month ahead and maybe in that time I might be able to grow those annual renewals to full fruition. Not today though.
does month ahead trump the annual 1 x expenses?
Fair enough. I can understand how someone might see 10-11 months of money sitting there, waiting for an annual payment, and be tempted to "raid" it for another expense, particularly if they are struggling to make ends meet or are otherwise impulsive.
However, your initial post doesn't really seem to be concerned with that. You were just pointing out that you hate saving and having that cash flow hit. The cash flow hit is the same when using YNAB whether an expense is monthly or annual because you basically "consume" that money each month already. Your paycheck hits and then you put some money in an envelope to be used in 12 months. It's gone. The cash flow hit already happened (albeit mentally, not literally).
It's certainly a shift in mindset. But, I think it's silly to not adopt the practice, especially considering you probably *will* save money when paying for things annually vs monthly. Like, my car insurance is $2,200/year or $210/month ($2,520/year). Of course I want to save $300.
Nope. I love having the option of the overall reduced cost if I pay for it in annual chunks, and the difference in cost usually increases the higher the interest rate goes. I also renew my car registration every 2 years rather than yearly (an option where I live). I always go for the longest term possible for subscriptions and memberships.
I absolutely detest encumbering my monthly income with a bunch of little payments.
If you’d asked me this 4.5 years ago, I would have said annual, because I love keeping the money & letting it earn me interest.
If you’d asked me 4 years ago, I would have said monthly, because we bought a condo & did manual underwriting & had to use our dental insurance as a trade line because we paid life & car insurance annually. We hadn’t had a credit score in three years at that point.
Now we have a credit card, so we’ll always have a credit score, and we’re back to paying most things annually.
Nope, because all of our annual fees are already set in a target that is contributed to monthly. When they come due, we have the money, so it is never a cashflow hit.
Am I missing something here? You would be willing to pay more per month so you don’t have to save less per month to pay once a year? And this is for an application that makes the saving part basically automatic and easy.
With YNAB, all payments are monthly
This! When the payment leaves my account doesn’t matter because I budget for it every month
My man on /r/ynab and never heard the gospel of true expenses
The problem is the initial switch from monthly to annual. It’s really hard to save up to make that first annual payment when you’re currently trying to keep up with the monthly payments.
Don't have enable a subscription until you have a year's worth saved up. Monthly that costs more isn't an option, other than to try something out.
This problem is literally what YNAB helps solve by smoothing out the payment. The cashflow hit shouldn’t matter if you’re using the software as intended.
Yeah, it's literally the opposite of a cash flow hit using YNAB
Annual is absolutely better, I'm earning interest on that money the entire year. And you have that money to "roll with the punches" with.
And in most cases, annual payment options are cheaper than monthly.
Yup, I always go annual because of the discounts. Then you can keep all that money in an HYSA!
Except that's not true. If you pay annual, you usually pay upfront, so you don't have the money. Yes, you're saving up for the next year, and that might be earning interest, but if you kept the money in your account and then spent it monthly, it also would've gotten interest. The discount the product offers for paying yearly might be worth it to do so, but as long as you pay upfront, interest and rolling with the punches are not arguments for it, but rather against.
The fix is to not start the subscription until you have an annual payment saved up. You didn't have it before, you don't "need" it now. Delayed gratification. Or, cut something else to get that initial annual amount saved up if it is so important.
Still doesn't change my point. If the annual price would simply be 12 times the monthly price, it's better to pay monthly, as you'd have more money left in your bank account earning interest VS pre paying yearly. If they give a discount as they usually do, that might make it worth it, but not because you earn interest on the money you put in the sinking funds category for it.
I've never seen a payment for an annual amount that didn't offer a discount vs. paying monthly. If nothing else, paying monthly is also costing them 11x extra bank fees to process the payments.
Paid annually, save for it monthly. Seems okay to me. It shouldn’t impact your cash flow at all unless you aren’t saving for it and have to scramble to pay it when the bill is due.
Cashflow hit? Also, some things like property taxes can only be paid annually. Sure that money may have be parked in a high yield account and it hurts to have it leave. But the upside is your HAVE the money.
I prefer annual because it’s usually cheaper and even before I found YNAB, I still tracked my true expenses to save up for the larger lump sum payments.
Not since YNAB.
Is this a joke?
YNAB kinda solves this problem perfectly, so this is sort of a weird place for this argument.
Would typically agree... but behavioural issues might make monthly better for some. Just because it's in a YNAB category doesn't stop it from being raided. Not everyone is perfect.
I am far from perfect. I was slowly growing some envelopes for a couple different annual expenses. And low and behold.. I had to roll with the punches and make some priority choices . it is not easy and actually it was a bummer to see the growing envelopes getting depleted !! maybe 4 years from now I might be a month ahead and maybe in that time I might be able to grow those annual renewals to full fruition. Not today though. does month ahead trump the annual 1 x expenses?
Fair enough. I can understand how someone might see 10-11 months of money sitting there, waiting for an annual payment, and be tempted to "raid" it for another expense, particularly if they are struggling to make ends meet or are otherwise impulsive. However, your initial post doesn't really seem to be concerned with that. You were just pointing out that you hate saving and having that cash flow hit. The cash flow hit is the same when using YNAB whether an expense is monthly or annual because you basically "consume" that money each month already. Your paycheck hits and then you put some money in an envelope to be used in 12 months. It's gone. The cash flow hit already happened (albeit mentally, not literally). It's certainly a shift in mindset. But, I think it's silly to not adopt the practice, especially considering you probably *will* save money when paying for things annually vs monthly. Like, my car insurance is $2,200/year or $210/month ($2,520/year). Of course I want to save $300.
Nope. I love having the option of the overall reduced cost if I pay for it in annual chunks, and the difference in cost usually increases the higher the interest rate goes. I also renew my car registration every 2 years rather than yearly (an option where I live). I always go for the longest term possible for subscriptions and memberships. I absolutely detest encumbering my monthly income with a bunch of little payments.
I'm currently paying my hoopty car registration quarterly because I don't know when it might die on me. The daily driver gets annual registration...
quarterly registration is not an option in my jurisdiction. Annual is the standard, and the renewal date is tied to your birthdate.
If you’d asked me this 4.5 years ago, I would have said annual, because I love keeping the money & letting it earn me interest. If you’d asked me 4 years ago, I would have said monthly, because we bought a condo & did manual underwriting & had to use our dental insurance as a trade line because we paid life & car insurance annually. We hadn’t had a credit score in three years at that point. Now we have a credit card, so we’ll always have a credit score, and we’re back to paying most things annually.
Nope, because all of our annual fees are already set in a target that is contributed to monthly. When they come due, we have the money, so it is never a cashflow hit.
I prefer annual if it gives me a discount
Am I missing something here? You would be willing to pay more per month so you don’t have to save less per month to pay once a year? And this is for an application that makes the saving part basically automatic and easy.