In this week’s Sunday edition of The Wall Street Journal, Brett Arends wrote a short article about saving $5,000, fast. Before we begin saving any money, though, we have to make a choice. Making a choice means taking responsibility.
There are three uses of money: we give it, save it, and spend it (the average American was brought into this world already knowing how to do the latter). In order to give or save any money, we must create a margin in our lives. Creating a margin requires that we live on less money than we make; this is the choice we make. Novel idea, I know, but when 70% of the country lives paycheck-to-paycheck, we have to lay this foundation first.
So what can you do to save some money? First, create a spending plan – or budget – you must know where every dollar is going in order to allocate more toward savings. Likewise, with a budget you’ll know exactly where each of those saved dollars is going so they don’t vanish. The vast majority of those who create a spending plan – and execute on it – feel like they get a raise because each dollar is accounted for and has a purpose.
Look at your grocery and eating out spending categories. Our rule-of-thumb is budgeting $150 per person per month in the household. Consider great resources like Angel Food Ministries to get groceries for more than 50% off. Pass on one restaurant meal each month and you’ll save around $600 a year.
If you’ve gone for more than two years without having your insurance policies re-quoted, it’s time to make some phone calls. If you have a solid emergency fund in place, increase your deductibles. Auto, homeowner’s, and life premiums are constantly being evaluated and updated. Just because you’ve been loyal to one provider doesn’t mean you’re getting the best rates. Consider contacting an independent agent who can find the best rates at a variety of providers. Don’t be surprised if doing this saves you anywhere from $300 to $1,500 in premiums this year.
Once you get the ball rolling, you’ll find plenty of other categories in your budget to generate savings. Look at your cable and cell phone packages, estimate savings by packing a lunch, and try brewing your own coffee at home instead of buying it on the run. Craigslist and eBay are your friends; sell what you know you don’t need and generate some cash.
All of these lifestyle and financial changes require a choice. Having a few thousand extra dollars in the bank would be sweet affirmation of a choice well made.
Wednesday, June 17, 2009
Thursday, June 11, 2009
Accomplishing a Goal: Being Interviewed
At the start of 2009, I sat down a put together my goals for the year - both personal and professional.
Here are my three professional goals for the year:
I wasn't too sure how I'd get around to accomplishing the first and the third goals at the start of the year, but fortunately a few things have fallen into place for me.
Robert Finch with SPOEG.com contacted me two weeks ago to discuss interviewing me for a show he puts together for financial professionals. Last week Robert interviewed me from California (it was 6:00 AM on the west coast, so I give him kudos for getting up early!). Over the next four weeks a five-minute segment of the interview will be released, and the full show will be available in a month.
We talked about what led me into helping people take control of their money and their lives, what it means to be viewed as an expert in your field, and how I help other professionals by helping their clients.
Here are my three professional goals for the year:
- Speak to an audience of 300 people, helping them laugh while learning there is hope for their finances and their lives.
- Publish an article.
- Be a guest on a show or interviewed for an article.
I wasn't too sure how I'd get around to accomplishing the first and the third goals at the start of the year, but fortunately a few things have fallen into place for me.
Robert Finch with SPOEG.com contacted me two weeks ago to discuss interviewing me for a show he puts together for financial professionals. Last week Robert interviewed me from California (it was 6:00 AM on the west coast, so I give him kudos for getting up early!). Over the next four weeks a five-minute segment of the interview will be released, and the full show will be available in a month.
We talked about what led me into helping people take control of their money and their lives, what it means to be viewed as an expert in your field, and how I help other professionals by helping their clients.
Wednesday, June 10, 2009
The Best Car Money Can Buy
Remember your dream car when you turned 16? I remember thinking a candy apple red Ford Mustang would do the trick. I even went through a Chevrolet Corvette phase. As I grew older and wiser to the wide world of automobiles, I began exploring the offerings of our friends across the pond: the BMW 3-series and Mercedes E-class.
In recent years, our friends across the other pond have been producing cars heavily sought after by Americans: Toyota Camry and Honda Accord. Neither of those automakers can even shake a stick at the most popular car in the United States: The Little Tikes Cozy Coupe.
Yes indeed, the Cozy Coupe is being inducted into the Crawford Auto-Aviation Museum in Cleveland, Ohio this month. In 2008, the Cozy Coupe outsold all other cars in the U.S. with 457,000 units. In its storied 30-year history 10 million units have been sold and it ranks as one of the top-20 best-selling models of all time.
The Cozy Coupe has been (and always will be) the eco-friendly vehicle of choice, as it runs entirely on foot power. Likewise, maintenance costs are kept low due to the minimal number of moving parts on the vehicle. I’m told the insurance premiums are very affordable, too, and would be even more so if the Coupe had side-impact airbags. The MSRP on the Cozy Coupe is $49.99, but be on the lookout for dealer rebates and incentives.
All kidding aside, I can’t help but smile and shake my head. We spend a lot of money on our cars. As a matter of fact, the average monthly car payment in North America is about $470. We’ll even attempt to impress others at stoplights we’ll never meet by leasing luxury cars (70% of luxury vehicles are leased). Given the state of the auto industry, it sure is encouraging to see an American-made vehicle topping the popularity charts.
Who knows: maybe Little Tikes will start making larger versions of the Cozy Coupe for the kid in all of us operating on an adult budget.
In recent years, our friends across the other pond have been producing cars heavily sought after by Americans: Toyota Camry and Honda Accord. Neither of those automakers can even shake a stick at the most popular car in the United States: The Little Tikes Cozy Coupe.
Yes indeed, the Cozy Coupe is being inducted into the Crawford Auto-Aviation Museum in Cleveland, Ohio this month. In 2008, the Cozy Coupe outsold all other cars in the U.S. with 457,000 units. In its storied 30-year history 10 million units have been sold and it ranks as one of the top-20 best-selling models of all time.
The Cozy Coupe has been (and always will be) the eco-friendly vehicle of choice, as it runs entirely on foot power. Likewise, maintenance costs are kept low due to the minimal number of moving parts on the vehicle. I’m told the insurance premiums are very affordable, too, and would be even more so if the Coupe had side-impact airbags. The MSRP on the Cozy Coupe is $49.99, but be on the lookout for dealer rebates and incentives.
All kidding aside, I can’t help but smile and shake my head. We spend a lot of money on our cars. As a matter of fact, the average monthly car payment in North America is about $470. We’ll even attempt to impress others at stoplights we’ll never meet by leasing luxury cars (70% of luxury vehicles are leased). Given the state of the auto industry, it sure is encouraging to see an American-made vehicle topping the popularity charts.
Who knows: maybe Little Tikes will start making larger versions of the Cozy Coupe for the kid in all of us operating on an adult budget.
When Dominos Fall and Snakes are Charmed
Dominos have a way of mesmerizing us, don’t they? The whole point of dominos is to watch how one seemingly insignificant piece of plastic can impact literally thousands of others, simply by falling over.
For banks, the first domino to fall was their mortgage portfolios. Now all eyes are turning to credit cards.
Historically, credit card default rates have followed unemployment rates nearly step-for-step. At the end of the fourth quarter of 2008, credit card defaults were at 7.73% on nearly $1 trillion of outstanding credit.
In an effort to cut (their losses) and run, the credit card issuers have been offering some of their customers some unprecedented incentives for – of all things – discontinuing their business. Left and right customers are receiving settlement offers for anywhere from 25% to 60% of outstanding balances. The rationale is that banks will take 25% of what they let you borrow in order to avoiding getting 0% of what they let you borrow.
Unfortunately, not all customers are faring as well. For those who don’t pose a serious default risk, the credit card issuers are looking to make up their lost ground…by raising interest rates and slashing credit limits. In mailboxes all across the country, loyal credit card holders are being notified that interest rates are going from 4% to 24%. For others, they’ll find their credit card limit has been reduced. In one instance, a customer with a credit card balance of $2,345 found that her credit limit was reduced from $5,000 to $2,350 – just enough for one last hamburger.
With their portfolios on very shaky ground, these credit card issuers are recoiling and finding themselves charmed. The same folks, who’ve been shown to purposely delay applying payments to generate a late fee, reduce limits to increase overlimit fee activity, raise interest rates when they find it convenient, and mail applications for their products to three-year olds and dogs have been charmed.
As consumers, we have to ask ourselves: are these the kind of people I want to do business with? And if so: how long can I play with snakes before I am bitten?
For banks, the first domino to fall was their mortgage portfolios. Now all eyes are turning to credit cards.
Historically, credit card default rates have followed unemployment rates nearly step-for-step. At the end of the fourth quarter of 2008, credit card defaults were at 7.73% on nearly $1 trillion of outstanding credit.
In an effort to cut (their losses) and run, the credit card issuers have been offering some of their customers some unprecedented incentives for – of all things – discontinuing their business. Left and right customers are receiving settlement offers for anywhere from 25% to 60% of outstanding balances. The rationale is that banks will take 25% of what they let you borrow in order to avoiding getting 0% of what they let you borrow.
Unfortunately, not all customers are faring as well. For those who don’t pose a serious default risk, the credit card issuers are looking to make up their lost ground…by raising interest rates and slashing credit limits. In mailboxes all across the country, loyal credit card holders are being notified that interest rates are going from 4% to 24%. For others, they’ll find their credit card limit has been reduced. In one instance, a customer with a credit card balance of $2,345 found that her credit limit was reduced from $5,000 to $2,350 – just enough for one last hamburger.
With their portfolios on very shaky ground, these credit card issuers are recoiling and finding themselves charmed. The same folks, who’ve been shown to purposely delay applying payments to generate a late fee, reduce limits to increase overlimit fee activity, raise interest rates when they find it convenient, and mail applications for their products to three-year olds and dogs have been charmed.
As consumers, we have to ask ourselves: are these the kind of people I want to do business with? And if so: how long can I play with snakes before I am bitten?
Okay, okay...I know, I know...
It has been forever since I last posted anything to this blog. Well, here we go again. Although, I'll give you fair warning that many of the future posts will be financial in nature, I'll do my best to drop some other delectable delights here from time to time.
Enjoy!
Enjoy!
Thursday, June 12, 2008
Radio to the Power of X
(I hope I don't get any posts from XM's corporate lawyers for lifting their slogan for the title of my post.)
My commute to work is an hour long each way. I know, I know - it stinks for sure. Well, it's further justification for my XM radio subscription. XM is satellite radio, kind of like satellite TV except no picture. There are something like 200 channels, and, just like satellite TV (if we had it), I only listen to about 15-20 channels regularly.
At any rate, satellite radio isn't bound by the same limitations as "terrestrial" radio. Mainly, it's rare to lose a signal and the vast majority of music channels don't have any commercials. Since a large portion of my commute is out into the farmland east of Raleigh, most radio signals wouldn't survive. XM keeps me trucking right along.
With all those channels, I get some very specific niches of music to listen to. One channel plays alternative 80s music - which is great when I'm in a particularly synthesized mode. Another plays alt rock hits from the 1990s, which immediately takes me back to high school (complete with sweater vest and carpenter jeans). A particular favorite of mine is "Ethel" the new alt rock channel. Listening to Ethel has introduced me to droves of bands I otherwise would never hear about. I've tried to keep the music streaming on this blog updated with new bands I like as I hear them. Some of the music is from artists that I've liked for a while, too.
A friend of mine from high school once introduced me to Modest Mouse, but it wasn't until the release of their newer album We Were Dead Before the Ship Even Sank that I started to "get" their music. I've also been enjoying new music from Matt Nathanson (check out Come On, Get Higher on the playlist). I can also safely say I knew of him "way back when": I downloaded a fair amount of his music from...ahem...Napster (when it was still free and music piracy didn't exist).
Sure, every now and again I'll mix in a little X-Country (pronounced "cross country") for a slice of down-home cookin'...musically speaking. Cinemagic is a great channel, too - it plays music from just about every movie. The other day I listened to John Williams' scores to the first three Indiana Jones films. Doing so made me wish action music could follow me around all day. When I want a dose of what our friends across the pond listen to, I'll check out U-Pop (Euro Pop).
Even though I spend two hours a day in my car, the variety of music and talk channels are enough to pass the time. Now, if I can just boost my gas economy a little more...
My commute to work is an hour long each way. I know, I know - it stinks for sure. Well, it's further justification for my XM radio subscription. XM is satellite radio, kind of like satellite TV except no picture. There are something like 200 channels, and, just like satellite TV (if we had it), I only listen to about 15-20 channels regularly.
At any rate, satellite radio isn't bound by the same limitations as "terrestrial" radio. Mainly, it's rare to lose a signal and the vast majority of music channels don't have any commercials. Since a large portion of my commute is out into the farmland east of Raleigh, most radio signals wouldn't survive. XM keeps me trucking right along.
With all those channels, I get some very specific niches of music to listen to. One channel plays alternative 80s music - which is great when I'm in a particularly synthesized mode. Another plays alt rock hits from the 1990s, which immediately takes me back to high school (complete with sweater vest and carpenter jeans). A particular favorite of mine is "Ethel" the new alt rock channel. Listening to Ethel has introduced me to droves of bands I otherwise would never hear about. I've tried to keep the music streaming on this blog updated with new bands I like as I hear them. Some of the music is from artists that I've liked for a while, too.
A friend of mine from high school once introduced me to Modest Mouse, but it wasn't until the release of their newer album We Were Dead Before the Ship Even Sank that I started to "get" their music. I've also been enjoying new music from Matt Nathanson (check out Come On, Get Higher on the playlist). I can also safely say I knew of him "way back when": I downloaded a fair amount of his music from...ahem...Napster (when it was still free and music piracy didn't exist).
Sure, every now and again I'll mix in a little X-Country (pronounced "cross country") for a slice of down-home cookin'...musically speaking. Cinemagic is a great channel, too - it plays music from just about every movie. The other day I listened to John Williams' scores to the first three Indiana Jones films. Doing so made me wish action music could follow me around all day. When I want a dose of what our friends across the pond listen to, I'll check out U-Pop (Euro Pop).
Even though I spend two hours a day in my car, the variety of music and talk channels are enough to pass the time. Now, if I can just boost my gas economy a little more...
Tuesday, May 20, 2008
The Slippery Slope
I follow financial current events daily. Just about every headline has oil in it (and most also include inflation). Right now it seems like the entire continent is blaming every problem in the world on oil. “Oil is going to push us into a recession.” “Gas prices are killing working-class America.” “Those oil companies are strangling the little guy.” “I can’t afford my car payments because of gas prices” (I guess the repo man will bring the sweet relief!)
Anyway, I’d be careful about how I allow the “Texas tea” become an excuse for all my problems. In so doing, I might invoke the Great American Right: deflecting my personal responsibility.
Even though automobile manufacturers can’t give away SUVs right now, they’re licking their lips because you – yes, you! – need to get a brand new vehicle that will maximize your fuel economy in these very trying times. Why should you pay another dime to fill up that gas hog when you can find a lightweight gas sipper on their car lot? Think of all that money you’ll save at the pump! What are you waiting for?
I hope you’re waiting to power up your calculator so you can do the math; that bubble of enthusiasm is about to pop…
Few people do the math when they make a change “for the better.” Case in point: when buying a new vehicle in the name of better gas mileage, most folks probably don’t realize that they’re going to have to hold onto the car for a long time before the switch pays off.
Let’s assume the following:
A gallon of gas costs $3.75.
You own a 2004 Chevy Trailblazer outright with 60,000 miles (~15,000 mi/year). According to Kelley Blue Book, you could probably sell it for $8,000. Your Trailblazer gets a combined 16 mi/gal (between city and highway), has a 22 gal gas tank, and therefore costs $82.50 (yikes!) to fill up. You drive 15,000 mi/year.
Anyway, I’d be careful about how I allow the “Texas tea” become an excuse for all my problems. In so doing, I might invoke the Great American Right: deflecting my personal responsibility.
Even though automobile manufacturers can’t give away SUVs right now, they’re licking their lips because you – yes, you! – need to get a brand new vehicle that will maximize your fuel economy in these very trying times. Why should you pay another dime to fill up that gas hog when you can find a lightweight gas sipper on their car lot? Think of all that money you’ll save at the pump! What are you waiting for?
I hope you’re waiting to power up your calculator so you can do the math; that bubble of enthusiasm is about to pop…
Few people do the math when they make a change “for the better.” Case in point: when buying a new vehicle in the name of better gas mileage, most folks probably don’t realize that they’re going to have to hold onto the car for a long time before the switch pays off.
Let’s assume the following:
A gallon of gas costs $3.75.
You own a 2004 Chevy Trailblazer outright with 60,000 miles (~15,000 mi/year). According to Kelley Blue Book, you could probably sell it for $8,000. Your Trailblazer gets a combined 16 mi/gal (between city and highway), has a 22 gal gas tank, and therefore costs $82.50 (yikes!) to fill up. You drive 15,000 mi/year.
Enough is enough! You’re sick of paying an arm-and-a-leg at the pump so you jump for a 2008 Toyota Prius (from sinner to saint you go). Your Prius is going to cost $23,500, will get a combined 46 mi/gal, and has a 12 gal gas tank costing $45.00 to fill. You still drive 15,000 mi/year. It costs $3,516/year in gas for the Trailblazer, and only $1,223/year for the Prius ($2,293 less). Holy cow! What savings, right?
Hold the phone.
Unless you have the cash to buy the Prius outright, you’re going to have to finance it. After you sell the Traiblazer and put the proceeds toward the purchase price, you finance $15,500 at 6% for 5 years, which comes out to a payment of ~$300/month. That’s $3,600/year. Are you seeing the problem? You’re spending $3,600/year on the car to save $2,293/year in gas. This means that by switching from Trailblazer to Prius you’re spending $1,307/year more, not including increased maintenance costs for hybrids and insurance on a new vehicle. In fact, not until nearly 7 years after you pay off the Prius will the gas savings offset the initial $15,500. So, if you plan to drive the car for 12 years, you’re all set! (The average American keeps a car for 5.7 years, by the way).
Of course, my little case study assumes you don’t pay off the Prius early and that gas prices don’t change. Likewise, I’m not counting the cost of depreciation in this example, but you should be aware that in those first 5 years that you’re paying more for the Prius, the vehicle will lose at least 60% of its value. If you truly wanted to dump the Trailblazer for a more gas-friendly vehicle, you’d be better off going the used route: a 2003 Toyota Corolla. The Corolla will trade practically straight up for the Trailblazer, and you’ll save $1,861 in gas annually.
Hold the phone.Unless you have the cash to buy the Prius outright, you’re going to have to finance it. After you sell the Traiblazer and put the proceeds toward the purchase price, you finance $15,500 at 6% for 5 years, which comes out to a payment of ~$300/month. That’s $3,600/year. Are you seeing the problem? You’re spending $3,600/year on the car to save $2,293/year in gas. This means that by switching from Trailblazer to Prius you’re spending $1,307/year more, not including increased maintenance costs for hybrids and insurance on a new vehicle. In fact, not until nearly 7 years after you pay off the Prius will the gas savings offset the initial $15,500. So, if you plan to drive the car for 12 years, you’re all set! (The average American keeps a car for 5.7 years, by the way).
Of course, my little case study assumes you don’t pay off the Prius early and that gas prices don’t change. Likewise, I’m not counting the cost of depreciation in this example, but you should be aware that in those first 5 years that you’re paying more for the Prius, the vehicle will lose at least 60% of its value. If you truly wanted to dump the Trailblazer for a more gas-friendly vehicle, you’d be better off going the used route: a 2003 Toyota Corolla. The Corolla will trade practically straight up for the Trailblazer, and you’ll save $1,861 in gas annually.
Sure, oil is a damper on the global economy right now, but without car payments your personal economy can stay afloat. Do the math on car payments – what you pay and what you get (a depreciating asset) – and you’ll see it’s just as silly as buying a brand new Prius for gas economy. Buyer beware.
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