I feel stupid for not realizing this earlier – I’m a math teacher after all. However, the more I thought about it, the more it makes sense. Creditors aren’t going to encourage you to make payments more frequently. That would mean their precious interest isn’t getting time to compound. It’s the same reason why if you make a payment in excess of your minimum, the student loan website treats it like an advanced payment of your next paying period and lets you know that your next due date has been conveniently moved back. They want you to take your time. That’s how daily compounded interest makes them money.
I do not conform my investment cycle to my income cycle. Instead, I have created a cashflow cycle that conforms with my goals which favors investment which is weekly. Consider that there are 12 monthly cycles in the year but 52 weeks, which does not equal 12 * 4 = 48. If you did nothing else but change your payment cycle to your time, you would end up making a full month’s payment extra on everything. This is why people sometimes pay bi-weekly on their mortgage and save tens of thousands of dollars in interest cost and payoff years in advance of their mortgage. This is the easiest tweak in the world that will put money in your pocket starting tomorrow.
Done. Consider money put in my pocket. Come this Sunday I’ll make my normal $850 loan payment. Then I’ll make a $212.50 payment the next Sunday and a $212.50 the following Sunday, etc.
I’ve coded up the recursive formulas in a spread sheet. While this is not exact since not all of my individual loans have the exact same interest rate, paying weekly versus monthly could result in my loan being paid off in 10 fewer weeks. Bam. Math’d. For simplicity’s sake, I will keep my budget on a monthly basis. This will inevitably lead to a month (well, several) where I make 5 loan payments. That might make my budget a little tight in those months, however since it is only an additional one fourth of what I would otherwise be paying, I bet I can make it work.
Side note: This will almost certainly be the basis of a lesson on recursive functions and exponential growth when I hit that topic in Algebra II next fall.