There are a lot of things I can get at a discount if I buy them in bulk:
- If I pay my 6-month car insurance premium up front, I can get 10% off the rate.
- If I buy and store 100 rolls of toilet paper at my house, I can shave a good deal of money spent per roll.
- Almost any service I pay for online—website hosting, domain registration, Mvelopes, online backup—all offer a discount for long-term pre-payments.
Of course, the same goes for anything purchased on credit:
- If I buy a car for cash instead of financing it, I can save thousands of dollars in interest.
The thing is—in order to save money on these purchases—you have to save up money to pay the up-front rate first. It’s a case of catch-22.
The reason most people pay their car insurance bill monthly is because it’s tough to save up 6 months of premiums while already paying the bill every month. It requires extra effort; focused savings.
I see a handful of ways to get this accomplished:
Targeted Approach
Instead of maintaining general savings, put away for a few specific causes at a time. If you’re trying to save for a six-month car insurance premium, make two premium payments each month, one to the company and one to a special envelope or savings account.
In six months flat, you’ll have enough to make a 6-month payment. Then just go back to one-payments-worth per month going into your savings account for the next premium payment.
Once you tackle one area of your budget, work on the next. Get one month ahead on your rent. Save up a buffer for bulk grocery shopping. Even *gasp* save enough to buy your next car for cash!
The “Do Without” Approach
Instead of trying to save “over the top” of existing payments, get rid of the fundamental problem. I realize this may be hard for people in certain circumstances, but give it an honest look.
For those of you on tight budgets, this may actually be the more realistic approach because there isn’t much space to save extra payments from.
The basic premise is this–if you need to save for a car insurance premium for 6 months, cancel your car insurance for six months. But wait, Wojo, that’s illegal. Yes, that’s why you sell the car first. Hey, I didn’t say it gonna be was easy.
Have to pay a three month deposit on your next apartment? Live with your parents for three months. Trying to save to buy toilet paper in bulk? Uhhh…never mind that one.
Beat the Paradox By Changing Your Perspective
You may not have enough money to pre-pay right now, but you can do something about it. Once you realize that being cash-rich affords ultimate flexibility with this kind of stuff, your urge to save skyrockets. 🙂 Use that feeling.
Fiscal Fizzle 
The problem is the same for almost anything we buy on credit–instead of saving up first and buying later, we buy now and try to catch up.
Just shifting the whole timeline by 6-12 months could be the difference between a lot of interest earned and a lot of interest paid!