Are you a Ramsey fan or critic?
Dave Ramsey seems to attract quite a few critics these days. I have heard him being criticized for everything from being over-simplified to allowing people to use debit cards to buy his products.
It is interesting to me how some people can find anything to criticize. Some people see the world with rose-colored glasses and think everything is perfect and others will never be happy with anything and therefore criticize everything. Most people are somewhere in between. But I guess after it is all said and done, we are all critics in one way or another.
Personally, I like Dave Ramsey. I think he has an excellent program that helps a LOT of people. It is a very basic and simple way of doing things, but it works for most people. I assume that is why he designed it that way. He wanted to help as many people as possible, knowing that he couldn’t please them all.
Experts are often the critics of simple tools and systems. Most times these experts are more advanced than the product they are criticizing and most of the time what they are criticizing was not intended to be used by them.
The iPod and Dave Ramsey
Let’s take Apple as an example. There were dozens of MP3 players on the market before the iPod came out. Apple just took the existing technology and made it so simple and easy to operate that your grandma could use it. They did not seek to satisfy the “techies” who were already using MP3 players. They were going after a market that wouldn’t have bought one unless it was simple.
Dave Ramsey is like the iPod of the financial gurus. While so many of the other financial guys are arguing and debating about trivial issues that are over most people’s heads, Dave was figuring out a way to boil all these financial principles down to a 5th grade level. He succeeded.
Dave’s books and seminars are designed for beginners and not for the people who have mastery over their finances. It is not perfect advice for everyone, but it is great advice for most people and is exactly what millions of people need.
Everyone is a critic
That said, just like all the other Dave Ramsey critics, I don’t agree with everything he preaches, but I think I understand why he says what he says.
- I haven’t cut up all of my credit cards, but if I were trying to help someone who didn’t have much financial discipline, I would probably suggest cutting them up.
- Mathematically, paying off the highest interest rate credit cards first would be a better idea. But, I understand the necessity for motivators on the journey to financial freedom. This is why Dave suggests paying off the smallest balances first, regardless of the interest rate. Getting a quick success under your belt is a much needed motivator for most people.
- I chose to save for retirement WHILE paying off my debt. Dave would suggest not saving for retirement until the debt is paid off. I know that I am not going to quit on the way towards my goal, but for some people knocking out the debt first is probably a good idea.
Although I do some things differently than Dave suggests, I understand why he is doing what he is doing. I am not his target market. Knowing this, I want to help him reach those people who he can help. So, I will just keep applauding him as he ignores the critics and keeps helping people break out of debt.
Technorati Tags: Dave Ramsey critics, Dave Ramsey
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Answering a reader question
I received a message the other day from a fellow newlywed-er (am I still a newlywed at year 3?) She was asking for a little financial advice. So, I will share what I have and hopefully we can get some input from some of the readers.
Here is an excerpt from what she wrote:
As a newlywed, I just started to plan my life with a person.
I really like your advice about using the Roth IRA to save early.
I am wondering could you write more about those?
I really want to know what you would recommend a new married couple should save up for? A house, a baby, pay off loans,Roth IRA…or what else?
Well, I guess I will just share what my wife and I are currently doing. Since we are transitioning out of the newlywed phase (having been married almost 3 years) we are likely in a similar place.
My financial story
My wife and I (look to the right) both brought a decent chunk of debt into the marriage from our past mistakes and education expenses. Since we got married we have been focusing most of our energy on paying off all of our debt. I really like the debt snowball method for getting out of debt and for the most part we have been using it. The variation that we have made is that we have been funding a Roth IRA as well as our 401k’s.
By not putting all of our financial energy into paying off our debt, we realize that it will take a little bit longer. All of our debt is at 3% interest rate or less, so paying it off quickly is not a major issue for us.
Having learned from a few wise mentors in my life, I have come to understand the impact that time has over investments. Without getting into too much detail, I will just say that getting started investing early puts you at a high advantage. It is not just a little bit better than waiting, but a HUGE amount better. Having enough for retirement can be a breeze if you get started while in your 20’s. It was for this reason that I wanted to get the ball rolling with my investment portfolio.
I say all that to say: everyone’s financial decisions of what to save up for should be based on their personal situation.
For us, our current priorities (always subject to change) are:
- Getting out of debt
- Having plenty of cash for retirement
- Home ownership
- Kids and all the expenses they bring
Because of this we have been focusing about 75% of our financial energy to paying off debt and 25% to retirement. My goal is to finish paying off our student loans this year, which will allow us to start saving for the other priorities.
Personally, I hate debt. I can’t stand the feeling of being a “slave” to lenders as Proverbs puts it. I also don’t want to have to work when I am 75. My strong feelings with both of these issues guide my financial decisions.
So, do you have any financial advice for your fellow newlyweds? What do you think young married couples should be saving for?
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How does Virtual Bank compare with ING Direct?
I decided to open a Virtual Bank savings account. They gave me $20 for opening it, so I figured I don’t have much to lose. To me ING has clearly been the best online savings account in terms of features, interface, and overall user experience, but I am trying to keep an eye out for other up and coming great online banks, so I decided to check out Virtual Bank.
ING Direct and Virtual Bank Features
|
ING Direct |
Virtual Bank |
|
| Minimum Balance |
$0 |
$100 |
| Minimum to open |
$1 * |
$100 |
| Interest Rate |
3.4% |
3.0% - 4.0% |
| Monthly Fees |
No |
No |
| FDIC Insured |
Yes |
Yes |
*$250 to get the $25 referral bonus
Refer a Friend program
- ING Direct’s refer a friend program pays $10 to the referrer and $25 to the person opening the account (if the new account is opened with at least $250).
- Virtual Bank pays $20 to both the referrer and the new account holder (if the account is opened with at least $100).
Security
As far as security goes, both of these sites are top-notch in the level of security they offer. I would almost say that both of them could be considered frustrating if you are used to having your browser log you in to web sites automatically. There are a few steps to log in for both ING and Virtual Bank. That said, if you are concerned with keeping your account safe, you can’t go wrong with either ING or Virtual Bank.
User Interface
For the user interface and overall web site, I have to give it to ING Direct. Virtual Bank’s layout and web site isn’t bad and it is actually easy to navigate from one place to the next. ING’s is just better. This is one of the area’s that makes ING stand out from the others. They have worked very hard to create a great user experience with their web site and they have been successful. ING’s interface is very user friendly, intuitive, simple, and well organized.
Virtual Bank interface
ING Direct Interface
Customer Service
I have had very good experiences with ING’s customer service thus far. I have called them 3 times and each time I got my problem resolved or question answered quickly and from a friendly person the line. I have heard from others that not all calls to ING go as well as mine did.
My first call to Virtual Bank did not go so well. After being on hold for 28 minutes, all of a sudden their hold music stopped and I was hung up on. Possibly in their defense, I looked at their hours of operation and it appears as if I called right after closing time. It just would have been nice if they would have had a message that said to call back later. It is never any fun to wait on hold for a half an hour.
Conclusion: ING Direct vs. Virtual Bank
After all is said and done, I think I am still in the same place as I was before my Virtual Bank experiment: ING is still the winner. If I had $100,000 to put in savings, I would probably put it in Virtual Bank to get the 4.0% return rather than ING’s 3.4%. But, for smaller amounts I am sticking with ING Direct.
If you are interested in opening either (or both) of these accounts - contact me so you can get the referral bonus cash!!
Technorati Tags: ING Direct, Virtual Bank
Also, if you have used either or both of these banks, I would love to hear your opinions about them…
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Debt Snowball: Dave Ramsey’s method for getting out of debt
Creating a debt snowball is Dave Ramsey’s preferred method of getting out of debt. The strength of using this method is that it focuses on the behavioral side of finance rather than the mathematical. Since we are not robots that always do exactly what we know we should, I recommend this method for most people.
These are the simple steps to snowball your debt…
- Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
- Next to each one write down the total balance owed.
- Re-order these from smallest to largest debts (use Excel or Google Docs to make this simpler.)
- Pay the minimum payment on all of the debts - except the smallest one.
- Put every extra dollar you can find towards paying off that smallest debt.
- Celebrate like crazy when you get that first debt paid off.
- Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
- Celebrate again!
- Continue this process until each one is paid off.
What you will find is that each time you pay off a debt, the “snowball” gets larger. Since you are taking the amount you used to pay off the first debt and putting it all + the minimum payment that you were already paying to the second together, you are making more of an impact towards that debt. Each time you pay off a debt, the snowball gets larger and more powerful - which is great, because it just increases the speed that each debt gets paid off.
The numbers don’t lie
If you are like most logical people out there (like me 
) you are probably saying, “you could save more money by paying the highest interest rate cards off first.” You are right - calculators do not lie and they will give you the correct logical answer. Paying your credits cards off starting with the highest interest rate to the lowest is “mathematically” the best idea. But, let’s look it at from another angle:
If we DID what we knew we SHOULD do 100% of the time, using the mathematical approach would be best. But, we are emotional beings and even the most disciplined among us still have emotions and are affected by them.
Computers use logic 100% of the time. Humans do not. We were not created to. We make decisions based on our emotions. We get let down, we get encouraged, we feel motivated, we get scared, we feel hopeful, we feel like quitting. These are all emotional states that each one of us could feel on any given day!!
Knowing that we are emotional beings, the key is to use our emotions to our advantage. Just like jogging with the wind at your back, it is a nice little boost to use our emotions to give us a little edge. So, rather than tackling the debt like a math problem, we can tackle it in a way that will give us emotional boosts! After all, isn’t it better to get out of debt and spend an extra $100 in interest than to give up half way to our goal because we were discouraged?
Status Bars and Debt
Ever wonder why there are status bars showing you the progress of the item you are loading on your computer? It is to keep us from going crazy while waiting 10 minutes for the computer to do what we told it!! Even though that little bar moves slowly sometimes, it is encouraging because we know how much longer we have to endure the torture of waiting.
It is extremely DE-motivating when there is no end in sight. Without that “light at the end of the tunnel” it can be hard to keep going. That little bar that shows us the progress that we have made gives us hope. What if there were no status bars? Or what if you saw no progress on the bar until you got to the 70% loaded point? Would you keep waiting or would you reboot assuming it there was a problem?
When on the phone, have you ever been waiting on hold for 15 minutes wondering, “Did they forget about me? Should I wait it out? What if the never remember that I am on hold?” Do you cut your losses or wait it out having no idea when they will pick up, or if they ever will?
This is the advantage of using the snowball approach to paying down debt. If you focus on the highest interest rate, it could be months or even years before you reach that first milestone. Would you have the endurance to keep going that long without reaching that first milestone?
It is a wonderful feeling to be able to celebrate your first milestone - paying off the first credit card is a blast! Speaking from experience, I was fueled with motivation after reaching that first milestone. The fact is that most people are strengthened by seeing even a small goal accomplished. I love the snowball method because it focuses on reaching these small goals first and using them as motivation to keep going. Let me know how it works for you!
If you are having trouble organizing your debt snowball, you may want to consider Debt Snowball software.
Technorati Tags: Debt snowball, Dave Ramsey
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Don’t be an easy identity theft target
Although some identity theft is electronic and sophisticated, most identity theft actually still takes place by dumpster diving and mail theft. So, depending on how secure your garbage can is, you may want to think twice about what you put in it. It is a great place for identity thieves to find a wealth of information about you.
Ways to prevent identity theft
Here are just a few tips and guidelines to follow for decreasing your chance of identity theft.
Never E-mail Sensitive Information
My employer has drilled this into our heads over the last few years. They have said that email is as private as a postcard; a lot of eyes could see it before it gets to its destination. Whether or not that many eyes actually see our email, it is a good idea to err on the side of caution when using sensitive information.
So, whether at home or at work think about what gets typed into an email. Be wary of including account numbers, user names, passwords, Social Security or PIN numbers, or credit card information.
Pick good passwords
Choose user names, PINs and passwords that are difficult to guess. Don’t use your birthday, phone number or any other obvious personal data. They also say it is a good idea to type your log-in information each time you go online instead of letting your browser save it for you.
Limit Personal Information
Always use a healthy dose of skepticism with incoming calls or incoming emails. It that personal really from the company that they say they are? You shouldn’t disclose personal information over the phone or via e-mail unless you initiated the call or email.
Practice Internet Safety
You should try to avoid using public computers to review personal information and account details because simply closing your browser does not automatically clear the browser’s memory. The information stored in cache is still available until deleted.
Look for sites that offer Secure Sockets Layer (SSL) technology. You can tell if a site uses SSL by checking to see if there is a locked padlock in the lower-right hand corner of your browser window. Also, when you log on to a secure site in the address bar you will see the, “http” change to “https.” These are good indicators that the site is secure.
Protect your identity with a shredder
Buy a shredder and destroy (or safely file) anything that has credit card information or your Social Security number.
Be cautious with Outgoing Mail
Deposit outgoing mail in the United States Post Office boxes rather than your home mailbox.
Get Your Credit Report
Review your credit reports from the three main credit bureaus (i.e., Equifax, TransUnion and Experian) at least annually. Federal law requires these credit bureaus to each give you a free copy once a year. If you really want to keep a close eye on your report, you could get one from each every four months.
I recommend using annualcreditreport.com. These guys make it easy to get all three once a year for free. Many other credit report websites will make it very difficult to get the free reports. If you notice that the information on one of your credit reports is inaccurate, contact the credit bureau to investigate.
Equifax offers a service where they monitor your credit report for you. If you don’t have time to monitor it or don’t feel like it, this could be a good option. I personally have not signed up with them yet, so I can’t attest to how good they are.
If you suspect that you have become a victim of identity theft, call 1-877-ID-THEFT.
Check Your Statements
Watch for unusual purchases or transactions on your statements and report them immediately. Also, if your statement appears to have been opened and resealed, contact the issuing institution as once.
Use Antivirus Software
Make sure your antivirus software is up to date, turned on, and enable the firewall on your PC.
Review Privacy Policies
When applying for an account or ordering a product online, review the Web site’s privacy policy to make sure you are dealing with a reputable company who won’t sell everything they know about you to spammers-R-us.
Do you have any tips or tricks that you use to prevent identity theft?
Technorati Tags: identity theft
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To the beginner…
Money management is not just for big corporations. It is for you and I as well. It doesn’t need to be labeled with terms like money management or budgeting. If you are where I was, it means nothing more than GETTING RID OF THE CHAOS.
If you are just beginning to get your financial life in order - I am excited for you! It is a fun journey and it is well-worth the effort. The peace that comes with knowing how much money you actually have and being in control of your spending is truly priceless.
Not too many years ago I was out of control financially with my maxxed out credit card and empty (and likely overdrawn) bank accounts, and not a dollar in savings. I decided that I was not going to live my life out of control and had to get things in order.
It did take a little work and a little time, but it is not much different than cleaning out a junk filled garage. It looks like an overwhelming task, but once you get going, it is easy to keep going. And once it is finished, it brings a sweet taste of satisfaction of a task accomplished.
Money Management
If you are looking for a way to get your bank accounts set up to to make bill-paying simpler I have laid out how I organize my bank accounts. And how I manage my bill payments will show you the steps that I take to keep my bills in order and pay them 2 times a month.
I also use a balance sheet to keep track of my financial life. You can also download a copy of my balance sheet template that I use.
Budgeting
If you are making the wise move to start a budget, I suggest reading why budgeting is like baking cookies to get some fun into your budgeting and these 4 quick tips to sticking with a budget.
Then you can learn some techniques with how to budget with the envelope system or how to budget with ING direct.
Saving Money
If you are having trouble spending too much money, then I suggest you read how to quit spending more money than you make or the trick to saving money.
If you are having trouble finding money to save read how to find money to save. One great way to find extra money to save, is to use the money from your raises at work. Read what to do with a raise for a more detailed analysis of what I do with each raise.
As you take your beginning steps with managing your money you will find that it is a lonely journey sometimes. Most people do not ever get their financial lives in order, and sometimes you can feel like you are not normal. Well, the truth is that in the U.S. “normal” means living paycheck to paycheck and in debt up to your eyeballs. Who wants to be normal anyway? Here are 16 ways to save money by not being “normal”
Building an Emergency Fund
One of the best tips for beginners is to build an emergency fund. Experts recommend anywhere from 1 month to 6 months of your expenses. It really depends on your personal situation.
Don’t be intimidated by the amount, just start saving, realize it may be a distant goal, and keep going and you will get there!! It is a very comforting feeling, knowing that if the car breaks down or the water heater breaks that you have money in reserve waiting for it.
If you are wondering if you need an emergency fund you can read “do I need an emergency fund?” and if you already have one and are looking for ways to make more money with it check out how to make more money with your emergency fund.
Saving for Retirement
So you want to retire? You mean you don’t actually want to work until you are 85? Good, me neither. The good news is that it is never too late to start saving for retirement. And, the earlier you start, the better off you will be. I have a quick and easy solution for twenty-somethings to retire well off.
You can find out more about saving for retirement with these 4 quick steps to retirement savings.
I think this should give you a good start at managing you money like a pro, keeping checking back (or get updates in your inbox) as I regularly aim to provide money management tips for beginners and veterans alike…
Veterans: Do you have any suggestions for beginners? What financial advice do you wish you would have received when you first started the journey?
Technorati Tags: beginner tips, money management
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Save money with the library
Normal = Pay for things that the library offers for free
If you can get past the frequently outdated décor, public libraries are home to a wealth of resources. Of course you can borrow books instead of buying them, but they also often have subscriptions to high cost services or publications like Hoovers or Valueline. Our local library has grown a huge collection of popular CDs and DVDs over the last few years. So, it can be a cheap (free) ways to catch a few good movies. If you must be “Normal” and buy, at least use these 5 ways to save money on books.
Buy used stuff
Normal = Buy new
I first learned the power of this back in college, when I discovered that I could get my textbooks for free, by buying and selling them at Amazon. I was paying a few bucks (at most) for my textbooks that many of my classmates were paying over $100 for.
Leo from Zenhabits suggests to, “Send out an email to family or friends, or just ask around. You might be surprised. I was about to buy a printer, and then found out my mom just bought a laser printer and didn’t need her old inkjet.” Freecycle.org and craigslist.org are also good places to look. And of course, you can always check out garage sales and thrift shops.
Simplify your wardrobe
Normal = Buying clothes that you like without looking at the wardrobe as a whole
Don’t buy clothes that will only work as one outfit. Look for clothes that you will be able to wear with many other things, creating multiple outfits. Instead of buying that green and purple striped coat that will only go with one or two outfits, you could get a solid color gray that will work most of what you wear. Spend less money on the trendy items that won’t be in style long, and spend more on quality items. You really can do this and still be stylish at the same time. Simplifying your wardrobe is just one way you can save money on clothes.
Make money with your clutter
Normal = Garage sale or throw away clutter
It is easier than you may think. eBay and Amazon make the process a breeze. Sign up for an account, take a few digital pictures, post it, and watch the buyers come to you. HINT: The biggest key I have noticed is selling brand name items and taking a few seconds to think, “If I wanted to buy this item, how would I search for it?” If you do this, you will be much more successful.
Of course, some of your junk won’t be worth the effort of selling it online. For that stuff - maybe garage sale, maybe just save yourself the hassle and give it to goodwill. Check out how to sell your stuff on eBay for more information.
Maintain stuff
Normal = Buy new, don’t maintain, it breaks, then buy new as cycle repeats again and again.
This is a no-brainer, but we don’t often think about it: if you take care of what you have, it will last longer. You’ll then spend less on buying new stuff. When you buy something worth maintaining, take a few minutes to read the maintenance manual, and create a maintenance checklist that you can attach to the item. For important things like your car’s oil changes or tune-ups, put them in your calendar. To make it even easier schedule most of your maintenance all on one day with a Car Day.
Saving energy = Saving money
Normal = wasting energy
Even though, “Being green is so IN right now,” the “normal” thing to do is waste energy. So not only will everyone think you are cool, 
but you can save money as well. Check out these 10 Energy saving tips.
Also, I am not sure how much money this will save you, but check out Blackle.com - birthed out of a question, “How much energy would be saved if Google had a black screen instead of a white one?” Supposedly, the search results are the same as the regular Google results.
Save money on exercise
Normal = Sign up for an expensive gym membership and never use it
Why not be extremely abnormal? You can get much cheaper access to a gym AND use it too!! Sign up for a class at a local community college (as little as $35 a semester). Then, use your ID to work out at the community college gym. That is a lot better than the $30-$40 a month most gyms charge.
Save money at the symphony
Normal = Pay full price to go to the symphony
By volunteering as an usher at theatrical events, you could get in free. Many concert halls and theaters across the nation do the same. Call your local theater to find out if it needs help. Or Google “volunteer” and “usher” plus your hometown.
Live in a smaller home
Normal = Buy the biggest house you can afford (or more than you can afford)
For some reasons, Americans just love to assume that bigger is better with just about everything. There is a plague of families constantly having to get a larger dwelling because their stockpile of junk gets too large for their current home. Often just by throwing junk away and spending time organizing storage areas and closets, you may realize that you DO have a big enough living space, it just needed a little organizational love. A lot of money can be saved by living in a smaller place. When you think about it that way, organizing really might pay very well.
Buy a used car
Normal = Buy a new car, pay it off (or maybe not) and buy a new one
You can save a lot of money on car depreciation by purchasing a car 2 years old or older. Some cars can lose as much as 35% in value during the first year. It’s best to drive a car as long as you can especially if you do purchase them new.
Shop after the season
Normal = buying Christmas décor during Christmas season
Shop for holiday cards, decorations, and gift wrap as the season ends, and keep them for next year. We do this and then we also enjoy the nice surprise after Thanksgiving of finding out what we bought the previous year that we forgot about.
Shop when no one else wants to
Normal = House shopping while the weather is nice
If you are considering a new home, remember the best time to buy is in the dead of winter, when other buyers huddle inside. You can save 5 percent off the peak-season price.
Find the best deal on car insurance
Normal = Buy insurance and keep renewing without checking rates
Regardless of who you buy from, you can be abnormal and save money by shopping around every year or so for insurance. I was paying a premium for convenience with my car insurance agent. But once I found that Geico offered me the same coverage for $330 less, I had to make a switch.
Buy jewelry from a discounter
Normal = Buy jewelry from the mall jewelry store or another traditional store
If you haven’t purchased jewelry in a while, you may be interested to know that the jewelry industry is going through some major changes. Diamonds have always had ridiculous markups, but recently there are more options for relief. Many direct importers are selling rings themselves at much better prices than you could get from the traditional stores. It makes perfect sense - the traditional stores have to pay for a storefront, sales force, utilities, etc., therefore the importers can usually beat their prices hands down. I bought my wife’s engagement ring at Amazon and ended up having it appraised for thousands more than I paid.
Save money at the hospital
Normal = Don’t know that it is possible to save money at the hospital
I didn’t realize that you had options and to be honest most times if the hospital is involved, I am “normal” and could care less about what it costs. But, if it isn’t an urgent matter there are ways to save money at the hospital that I had never thought of. Did you know that you can bring your own stuff (e.g. pillows, linens, nightgowns)? Evidently, hospitals charge quite a bit for these items. (I have no personal experience with this one - can anyone confirm or deny?)
Go out to dinner for half price
Normal = Go to the same few restaurants all the time and pay full price
I love to try new restaurants, but since it is quite an expensive hobby - it is nice when you can save a few bucks. Enter the Entertainment book. This wonderful tool costs about $25, but will pay for itself quickly if you use it a couple of times. It is available for most large U.S. cities and has thousands of coupons to participating restaurants - most of which are buy-one-get-one-free. This is one of my favorites ways to find new places to eat and save money in the process. Also consider Restaurant.com who sells $25 gift certificates (with restrictions) for $10 to thousands of restaurants across the country.
Feel free to share any ways that you save money by NOT being “normal.”
this post has been featured in the Carnival of Personal Finance
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How to save money on car depreciation
Cars are terrible investments. In their most basic form, they are merely a tool to get us from A to B. In their most elaborate form they can be a “shiny” tool that gets us from A to B, but with more luxuries. But either way, they are not likely to be much of a financial benefit. Everyone has heard that a brand new car goes down hundreds or even thousands of dollars the minute you drive it off the dealer’s lot.
This is just the beginning. Over the first year some cars depreciate as much as 35%. KBB.com says that the average car loses 65% of its value in the first 5 years. Add on maintenance, repairs, interest on the loan, and insurance and you can quickly see that automobiles can have quite a large negative effect on our finances. We dump all this money into our cars and what do we have to show for it? An asset that just continues to go down in value and still becomes LESS reliable. So, if we are not likely to benefit financially from our cars, how can we minimize the damage?
Minimize depreciation loss by buying used cars
I have always heard (and I agree) that a two year old car is a good age to buy, because you are still getting a fairly new car that is likely to have some amount of manufacturer warranty remaining, but yet a huge chunk of depreciation is knocked off.
SafeCarGuide.com says, “A stabilized rate of depreciation (7% - 12% per year) makes used cars a better value than new ones. New vehicles lose an average of 20% of their value the instant they are driven away from the dealership. When coupled to the average yearly depreciation of 7% to 12%, your first year’s loss is anywhere from 25% to 35%. That translates to a first year $6,000 to $8,000 loss on a $22,500 new vehicle, or a $10,000 to $15,000 loss on a $40,000 one. And that’s for a vehicle only driven the average 13,500 miles. If you drive more than that, your depreciation will be greater (35% to 50% for the first year).”
For more information, Bankrate.com has a good article about the basics of depreciation and although I am not sure how accurate it is, you can also try this car depreciation calculator.
A good way to find a reliable used cars is by checking Consumer reports. They are a Not-For-Profit organization that reviews thousands of products to help consumers get the most for their money. They have a very thorough and detailed list about the reliability of various different makes and model. Since they do no advertising (which helps them stay unbiased) they do charge for the service. They offer a one-month online subscription for $6.00 and a one year for $26.00. If you are in the market for a car, this would be a few bucks well spent.
If you buy a new car, plan on keeping it for a long time If you do buy new, plan on keeping it a long time. This is one of the best ways to get your money’s worth out of a new car. On the other hand buying a new car and trading in the “old” one every two years is one of the worst financial moves you can make. This seems to be what many Americans are doing these days as they try to keep up with the Joneses. As mentioned earlier, it is the first two years in the life of a car that are the most expensive. So why would you want to own the car only on the most expensive years?
One of the advantages of buying new is being able to break the car in properly and having the assurance that you know how the car was cared for all of its life. If you take care of your car and stay on top of your car maintenance, many cars these days can last 200,000 miles. I recently drove past a Toyota dealership that had an old Corolla that had been driven over 500,000 miles. I need to get hold of the owner and find out what he did to keep it running that long. I will let you know
Feel free to leave me some comments and let me know how you save money on your cars…
Technorati Tags: save money, car depreciation
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In October Kiplinger’s released what they called their “Green Issue” in which they basically dedicated the entire issue to “Green” living. A buddy of mine recently asked me for a copy of an article in the issue called, “29 Ways to Conserve and Save.” So, I figured I would share it with the CPF readers as well. I picked out my 10 favorite from the article.
- Use compact florescent light bulbs (CFLs) instead of traditional bulbs. Kiplinger’s mentions that, “if every U.S. household replaced just one incandescent bulb with a CFL, the emissions savings would be comparable to taking three million cars off the road for a year.” Supposedly the bulbs pay for themselves (from the energy savings) over the course of a year or so.
- Add extra insulation to your water heater. If you have a water heater built before 2004, you can wrap it with an insulating jacket
and save about $30 a year on your water heating bill.
- Have your furnace tuned every two years and you will, “save about 1250 lbs of carbon dioxide and 10% on your heating bills.”
- Lower the temperature on your thermostat. For every degree that you lower your home’s temperature during the cooler months, you can subtract about 5% from your bill.
- Use cold water to wash your clothes and you can save 50% of the energy that you would use if you used hot water. I honestly don’t know what effect this has on the clothes themselves, so I will have to check with my wife on that one
- Get a programmable thermostat. This wonderful tool allows you to program the temperature of your house on an hour by hour basis. So, it can be cooler when you are gone or asleep and warmer when you are around.
- Use a weatherstrip around your front and back door and you can save about $30 a year on energy costs.
- Set your water heater to 120 degrees (Fahrenheit for the international folks). Even if you don’t have a temperature gauge on your water heater, they suggest turning it down, “until the water feels hot, not scalding.” I think my parents need this one - I just about got second degree burns from washing my hands while I was visiting the other day. (Mom, Tell Dad to turn it down - money doesn’t grow on trees!! Remember?)
- Adjust your lawnmower to the 3-inch setting. They say that longer grass holds moisture longer, so you will not have to water as much.
- Have a pro wash your car. Kiplinger’s mentions that, “the commercial car washes save up to 100 gallons per wash over the do-it-yourself kind” and if every American, “took the lazy way out just once, total savings would amount to 8.8 Billion gallons of water.”
Technorati Tags: conserve energy, save money
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Start Saving Early
Duh. That is SO common-sense. Well, it is. But for some reason, I used to be surprised year after year at how hard Christmas hit my wallet. We know its coming. It is the same day every year. We can’t run from it, so we might as well save up for it. Sometimes these simple things take a while to sink into my skull, but I finally figured out that by saving up for it, I was a lot more likely to stay out of debt. Often times it is the simple things that have the biggest positive impacts on our finances. It is mid-November. Let’s start saving.
Create a budget for how much you will spend
Why after every Christmas are most people looking at huge credit card bills wondering, “Where did all that money go?” It is no different than any other area of our lives, if we don’t have a leash on it - it will be out of our control. Think of your money like your neighbor’s dog - Oh yeah, your neighbor thinks he has his dog under control. But every time he has the dog in the front yard it runs over and jumps on you. He thinks he has control of the dog, but I am sure if he had a leash on the beast, he wouldn’t let it jump on you when you are on your way to work. Of course you probably are not going to tell him that his dog is terribly behaved, just like my checkbook isn’t going to tell me that I have no control over my money. In order to have control you have to monitor it (dog or money) or have a system in place (fence or budget) that will do it for you.
My wife and I started doing this a couple years ago, after we realized how out of hand our Christmas spending was getting. We just sat down and made a list of everyone we were going to buy a gift for that year. We wrote down (actually we used Excel) how much we were going to spend on each person and totaled it up. We took this total figure and worked backwards from Christmas to see how much we would have to save each week in order to have enough. This helped us get motivated to start saving early.
Stick to your budget
After all, that is why you created it in the first place - right? If you decided to spend $20 on Billy Ray, then you have to be vigilant not to buy him that $50 toaster that is just glistening in the florescent light of the department store. Don’t get me wrong, there is nothing more fun than giving great presents, but you have to be honest with yourself and others about what you can spend. Trying to spend $100 on each person’s gift when you only have $10, isn’t being truthful and it is going to hurt you more than anyone else. This is the whole “keeping-up-with-the-Joneses” disease that is rampant these days. I think most people you are buying gifts for would want you to give from your heart, rather than under compulsion to spend huge amounts of money that you do not have.
Get Creative
When you are strapped for cash you have to use creativity to get the upper hand. A creative gift can often beat out the most expensive gift. I am not talking about, “it’s the thought that counts, dear.” I am talking about meeting a unique need or desire for that person. To give the best gifts you need to know about the recipient. Listen to what they talk about. Listen for clues as to what they are interested in. It probably isn’t a necktie or a picture frame. Shop accordingly.
Shop Online
A lot of brick-and-mortar stores can’t compete with the prices of the online stores even with the additional shipping costs. If you decide to do a bunch of shopping online this year, Amazon.com has a deal where you can ship as much as you want for a year for $79. And they are not just a bookstore anymore, they have everything from electronics to candles and you can even buy an engagement ring from them.
Start Shopping Early
I love the convenience of online shopping, but I also love going to the malls in the heart of the Christmas season. Granted, the parking normally isn’t fun, but I love Christmas (ask my wife and she will tell you how annoying I am - i.e. Christmas music starts November 1st) and it just doesn’t seem like Christmas to me without spending some time in the malls during the season. Since department stores start breaking out the Christmas decorations after the 4th of July sale (slight exaggeration, but not much), you have plenty of time to get started early and have the “spirit of Christmas.”
The key is to use early shopping to your advantage. Having your budget in mind, it gives you a lot more time to think about WHAT to buy everyone and gives you more opportunities to catch things on sale.
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