What Does Leap Year Mean for Your Finances?
Does an extra day in February affect your finances? Let's take a look.
Updated on Feb 26 2020
Alongside presidential elections, you can count on experiencing a leap year once every four years. During a leap year, the month of February gains an extra day in the 29th. But why do we even have the concept of a leap year? While a year is 365 days, a “solar year” is actually about 365 and one quarter days. So, every four years a day is added into the calendar year to account for this difference.
During the reign of the Roman Empire, Julius Caesar began searching for ways to create a standard calendar. Based upon the solar calendar of Egypt at the time, Caesar’s calendar didn’t contain February 29th as a date, but instead listed the date of February 23rd twice in a row. Over time, the inclusion of a February 29th became standard to account for the extra quarter day in the solar year. So, the repeated February 23rd date was removed, and over time Leap Day became a calendar standard. But, during a leap year, how does that extra day affect your finances? Read on to find out.
At a base level, adding another day to the year means adding another day of expenses to your budget. If you’re in the process of financial planning and creating a tight budget, even a single extra day could factor into your plan. And, this day can hold even more weight if you’ve already retired and are living on a fixed income. The average American spends around $160 a day. However, this number tends to be a bit lower for those 65 years or older. Still, an extra spend around this amount could be noticeable in your budget for February, the shortest month of the year.
Leap Day has some other effects that may not be immediately apparent. Some folks may be wondering: “if my salary is based on a 365-day schedule, aren’t I working for free on February 29th?” And, that may be one way of looking at it. But, another is that you’re simply making a fraction less each day during a leap year. Let’s say that you earn $60,000 a year. This would mean that during a typical year with 365 days, you would be earning about $164.38 each day of the year per your salary. During a leap year, that average drops to $163.93 per day. So, if you’re working a salaried position on leap day, you can either view it as a day you worked for free, or as a year where you made a fraction less per day.
Leap Day can also have some implications for your investments, if you believe in superstition that is. While few Leap Days have occured while the stock market was open, trends indicate that the 29th of February does not bode well for stocks. Like any market advice, this should be taken with a grain of salt, but you may want to keep an extra close eye on your investments this 29th.
This extra day can have a range of implications. If you rent your home, the price will not be adjusted for this extra leap day. So, in a sense, you’re getting an extra day rent-free. The same can be said of other rental agreements you’ve entered into. So, while you may be incurring an extra day of expenses, your gym pass or transit card could also have an extra day of “free” use during leap year. So, make the most of your Leap Day this year. If you aren’t working, kick back and enjoy some relaxation. You can even challenge yourself to not spend anything on Leap Day, which could be an effective practice in general for your financial goals. However you spend the day, we hope you enjoy it!
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