Foregone Interest

Many people at various discussions boards have claimed the only thing they lose by signing up for a utility budget plan is the interest. I can’t argue with that, but let’s do some math and see how much you lose over the long term. Based on my earlier post, the difference was $43 over 12 months. An annuity of $43 at 11% (my rate of return) for 30 years is $1477. Now lets take the “I only lose the interest” another step – improper tax withholding. Lets use $40 as your annual refund. An annuity of $40 at 11% for 30 years is $1374. Finally, lets take the “I only lose the interest” one last step – not sweeping idle cash balances into a money market. Assume an average cash balance of  $500 at 4% for 30 years. That comes to $600.

Grand total =  $3451. WOW!  :-))

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