Tuesday, February 28, 2006

Forget April–February Is the Cruelest Month

Author: Nick
Category: Money
Topics: ,

I think February is the shortest month on purpose–it’s simply not as likeable as the other months. April is nice because spring is in full bloom. July and August are warm, sunny, and a great time to take a vacation. Even December outranks February on the awesomeness scale because it throws in Christmas to help keep away the winter blues. But February, it’s cold and miserable and the only holidays in it put the spotlight on groundhogs and greeting card companies. You’d think I would be thrilled that February usually ends after 28 days, but its abbreviated length just serves to make February the least favorite month not just for me but for my wallet as well.

To see why February earns the ire of my finances, consider how many monthly bills you pay. Things like gas, water, telephone, and electricity might come to mind. Of those four I just mentioned, which is most different from the others? You’ll probably choose telephone if you participate in a fixed-price plan where usage doesn’t impact the monthly charge. For all the others, your bill each month depends on how much gas, water, or electricity you crank into your home. These kinds of bills don’t really care how long the billing period is; you’ll pay the same amount per diem if you’re billed once a month that you’d pay if you were billed weekly, yearly, or even hourly!

Those fixed monthly charges, however, usually don’t take into account the length of a month. If your rent is due every month on the 1st, you’ll pay the same regardless of whether the month is 30 or 31 days long. You’ll obviously get the most benefit out of services that charge a flat monthly rate during months with 31 days. But February, geez! Not only do you miss out on the benefit of 31-day months, you lose another two days!

Let’s consider a semi-hypothetical situation based loosely on my own finances. Say we have a person whose basic living expenses look like this during the month of April (a 30-day month):

There are plenty of other expenses this person will incur, but these will do for our purposes. For expenses, I included the equivalent per-diem charges calculated simply by dividing the monthly cost by 30. For income, since this person only works Monday through Friday, I calculated his income per diem based on a 22-day work month. You can see that, after basic expenses, this person has about $81 left for other purposes each of those 30 days.

Now let’s consider a 28-day February with only 20 work days:

Assuming daily usage remains the same in February and April, this person will have slightly smaller gas, electric, water, and grocery bills. Since rent and telecommunication bills remain the same, their per-diem equivalent charge goes up almost four bucks over April’s. When you take into account the slight hit to monthly income from those two missing work days, this person’s discretionary income goes down $7.60 a day in February!

To keep this from becoming just another personal finance rant, I’ll throw in some advice for dealing with the cruelty of February. Instead of counting your pennies monthly like I’m doing here, consider your income and expenses on an annualized basis. That way, lengths of months don’t really matter to your income or expenses… unless you’ve got one of those crazy leap years. In that case, just take a cue from the groundhog and go back in your hole for six weeks.

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