Many personal finance bloggers encourage readers to set up automatic monthly payments. This results in fewer missed payments, fees, and maybe most important, it ensures that we’re making progress on our debt payments. If we commit to paying extra on our student loans, an automatic payment is great because it happens without us being actively involved, so we are less likely to miss that money.
This year, we’ve been doing the exact opposite. Since January, we’ve made student loan payments of $7,000, $16,000, and $10,000. We’ve also contributed 4 payments of $5,000 to our Roth IRAs and my individual 401(k) accounts. That’s a lot of lump sum payments!
Our monthly bills like rent utilities are automated, but our retirement and debt repayments are not.
Why We Make Lump Sum Payments
I’ve gone through a ton of life events over the past year, which has made automating our bills seem like a bad idea: I am paid a salary but most of my compensation from work comes from commission, so scheduling payments monthly doesn’t make much sense.
I also am running a small business with blogging and other online ventures, so projecting my income is even more difficult. The amount I’m allowed to contribute depends on how much I make, so every time I hit a big milestone in income, I contribute more to our retirement accounts.
Why do we let our checking and saving accounts get so big before making payments? Part of it has been because we’ve been lazy, but a big part of it is because parting with our money is difficult. We worked hard for it and now we have to give it away?
Readers, do you make monthly payments towards your debt and retirement accounts or do you wait and make large payments?