Benjamin Franklin’s quote applies to many choices we make – including personal finances. If we don’t take his message to heart, then a lack of planning can be costly.

There are traditionally two paths one will take when purchasing a large expense. They will either build a plan ahead of time to achieve a financial goal, or—the more popular path—worry about it when the expense arises. It is important to consider the hidden cost when financing a large future expense.

NOT PLANNING AHEAD MAY COST YOU MORE THAN YOU THINK.

Let’s take the example of a future expense of $25,000 for any situation*.

*Fill in the blank: year of college for a child 👩‍🎓, down payment for a home🏠, wedding 👰🏻, car purchase 🚘, vacation 🌞, etc.

How do you pay for the $25,000 future expense?

In this hypothetical, an individual can choose to (A) make a monthly investment over the next 10 years or (B) borrow the $25,000 and make monthly payments to pay off debt for the next 10 years. See the cost break down here:

SO WHAT ARE YOU PLANNING FOR TOMORROW?

Building a savings plan and starting early provides 27% in savings over 10 years, with a total cost of only $18,240. Conversely, the cost of convenience by borrowing adds to the overall cost by more than 33%, raising the cost to $33,360. This example is at a 6% interest rate, but unfortunately, much consumer debt is often financed on a credit card with an average APR now above 16%. A 16% interest rate on a one-time expense would more than double the cost over 10 years.

This simple illustration provides a two-sided application. As illustrated above, building a financial plan can save someone thousands of dollars. Procrastinating and not building a plan can in turn cost someone thousands. Either way you look at it, it is important to consider the real cost of any financial endeavor in order to make a well-informed decision.

Our team at Human Investing is available if you have questions or would like help building a financial plan.

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