The New Car Mistake

Looking for a new family truckster?

When I see someone gloating about their new car, I struggle to share their excitement.  In fact, I usually feel anguish more than anything, which is quite a buzzkill for the new owner.  This is because most of the people I see buying new cars are buying something they can't afford, or they are buying far more than they need.  In this article, I'm going to do my best to talk you out of the new car mistake.

New car excitement lasts about 1-2 months, while the payments last for 60

For some (myself included), buying a new car is an impulse buy.  I made this mistake many years ago, and it took long time for that mistake to go away.  It was an emotional buy, mostly out of boredom.   What happens with emotional buys is you don't think about the long term effects, like what the total cost of the vehicle will be with interest payments.  This is why dealerships always talk about monthly payments instead of total cost.

A car is not an asset

Another mistake (or justification) people make is to call their car an asset.  Your car is an expense, therefore it is a liability.  If you are using your car to win cash prizes at underground drag race tournaments, then you can call it a liability.  Chances are, this is not the case.  So remember, the higher the price, the bigger the liability.  The more you pay each money for a car, the less you can put away into savings.

New job, or promotion is not an excuse

This one really makes me cringe, and I see it constantly.  Someone gets a new job or promotion, and immediately goes out and buys a new car.  Now you're locked into that payment for the next 60-72 months.  If that job or promotion doesn't work out, you're now stuck with the stress of making that payment.  Don't fall into the trap of matching your expenses to your income, unless of course you enjoy life in the rat race.  If you need to take a loan out for a car, keep the cost to a minimum.  Put the extra money in savings or invest it.  If you really want an expensive car, save you money, and wait until you can pay cash.

New cars not always a bad choice

I'm not saying a new car is always a bad idea, but it is when you buy more than need, or when it's unnecessary.  New car warranties and lack of maintenance issues can eliminate unexpected expenses, and the gas mileage continues to improve with every year.  As I always say, do your research, and find the car that makes the most sense for you.

Saving Money While on Vacation

Vacation can quickly turn into a money trap. Justifications will run rampant while you are on vacation. Just as exercising is replaced with late nights and hangovers, smart spending is replaced with the words "I'm on vacation". Those 3 words can justify anything while on vacation. Over-eating, under-sleeping, and especially over-spending. I'll be quick to point out that being thrifty can often be misunderstood. I'm not saying you should cut back on the things you love, especially on vacation, but there may be a way to keep the cost down, while still doing the things you love.

Hotels

Before you even leave, the hotel you stay at will play a big part of your spending. DO YOUR RESEARCH. Much like airline tickets, prices can vary daily, so monitor the prices for a few weeks to ensure you're getting the best deal. Check the location of the hotel. If you are close to attractions, you may be able to walk or take a free shuttle, and save yourself the price of a rental car, as well as parking. Make sure you have a kitchen in your room (we'll get to that later). Pay attention to user reviews. These always give an accurate description of what your sojourn experience will entail. I'm a huge fan of Hotels.com for it's ease of use, critic and user content, and their points system (book 10 nights, get one free). I prefer their points system over specific hotels point systems, because I am not limited to using one hotel chain.

Drinks and Meals

This can quickly turn into a vacation's biggest expense. You can easily fall into the trap of dining out for every meal, and ordering all your drinks, but this can become expensive very quickly. This does not mean you should eat sandwiches and granola bars the entire time, but pick and choose when to spend. Breakfast and lunch are two meals that can easily be handled cheaply. If your hotel room has a kitchen, then you should buy a few essentials like bread, milk, eggs, cereal/oats, lunch meat and snacks. Anytime you need to eat quick, or it doesn't need to be a special meal, just make your meal in your room. This way you can splurge on the big dinner guilt-free. If you do check a bag, you can take bottle of your favorite drink.  Another option is to buy at a local store. Avoid the bar, which is where resorts love to make their money.  You can save yourself a boatload of bar tabs if you bring your own alcohol.

Souvenirs

Two things bother me when people go on vacation. First, I see far too many people buying souvenirs they will never look at again, and taking too many pictures they will never look at again. Well, you may look at them when you force your friends, co-workers, and family to look at every single picture. Now pictures don't really cost you money, but it still bothers me. Relax, stop worrying about pictures. You may feel the need to take pictures because that's what you have always done, but honestly, how many do you really need? The same can be said for souvenirs. A few is fine, but don't go overboard. You don't need to bring an extra suitcase just for souvenirs. Not only are they unnecessary, but they are a hassle. Anything you buy, you will have to carry with you the rest of the day. You're on vacation for the experience, not to buy more stuff.  Keep it hassle-free, and save your money for your next trip.

Break the mold

I will say it many times, but being thrifty does not mean cutting out all the things you love to do. Thrifty means being smart with your money. If you love a fancy dinner on the beach, then by all means treat yourself. But don't eat out every meal when you don't need to. Don't buy unnecessary items that will never see the light of day again. Keep your trip simple. Focus on enjoying yourself and the things you love guilt-free.

How do your Saving Habits Rank vs. a Squirrel's?

You may think this is a joke but the stats say that squirrels are much smarter than us when it comes to saving up a 6 month emergency fund.  In fact, only 24% of Americans can match a squirrel's 6 month savings habit.  This tells me that humans don't have the willpower of a squirrel.  This is likely because without their savings, squirrels will die, and we can just rack up credit cards and loans, so we lack accountability.  So in order to save like a squirrel, we'll have to play some mind games.

Automatic transfers

This still remains one of the best methods to ensure you contribute to your savings every pay period.  People by nature have trouble letting go of their money, so it can be hard to manually transfer money into a savings account.  Most banks can set up an automatic transfer that puts money in your savings every month.  The only drawback is that you are seeing the money deducted from your checking every time.  The preferred method is to have your direct deposit set up so that part of every paycheck goes to your savings.  That way, much like taxes, you never see the money.  How much more annoying would taxes be if your gross pay was deposited into your account, and then the taxes were deducted?

Accessibility of accounts

Another problem people face when trying to save is that their accounts are too visible, and available. Every time you log into your checking account online, there's your savings account, just a few clicks away from becoming a new HD TV.  These "Keep the Change" auto transfers that banks do (every transaction is rounded up to the next dollar, and that change is put in savings) sound great in theory, but run into this problem of visibility. What I suggest here is using two different banks.  One bank for your everyday checking, and one that is used only for savings.  Don't even set up an online account for the savings account.  If you can't see it, you won't be tempted.

"I don't have enough money left over"

This is the excuse you hear the most.  People just don't have any money left over to save.  I will call you out on this.   There is no way that you can't spare ANY money for savings.  The problem is that you spend according to your income.  An easy fix for this is to set up the direct deposit transfer anyway.  You'll figure it out, because you'll have to.  I did this recently.  I set up a direct deposit at a much higher amount than I can afford, because it forces me to make it work.  I'll have to find places to cut expenses, hold back on unnecessary purchases, or find more places for additional income.

Squirrels are on to something

If humans were squirrels, we'd likely trade our stash of nuts in for the latest Iphone, and starve within a few weeks.  Back in the day, this is actually how things were.  If you ran out of money, you would starve.  Now, with credit cards, support systems, bailouts and loans, that accountability has vanished.  This is why many people don't ever worry about their savings.  I propose we go back to thinking like a squirrel.

Fixing your Credit Score

Do you have a Costanza wallet?

Most people don't realize how easy it is to raise your bad credit score by 100 points. Most assume that once your score has been damaged, that it takes years to fix. This is not the case. In my youth (younger youth), I was reckless. I made decent money, which allowed me (so I thought) to be careless with my finances. I lived paycheck to paycheck, overdraft fees were common, and I needlessly missed payments. I hit bottom in 2008 when I needed to buy a new Guitar (I wasn't any good because of the Guitar I had). Denied. I checked my scores, and found them in the low 500s. There had to be a way to fix this, so I did some research online. Here is what I found, and the steps I followed to fix my scores.

Phase 1 - Dispute everything

This is the easiest, as well as the most effective step. As you know, there are 3 credit bureaus. Experian, Transunion, and Equifax. They each have their own websites, and they each should give you one free report every year. Get your reports for each bureau, and find all your late payments and collections. Now, dispute every one of them. You can do this right on each bureau's website. It matters not if you were at fault. I know what you're thinking. It's lying, yes (don't judge me). Try not to think of it as lying, but as a way to fight back against the big bad banks without skipping showers and sleeping in a sleeping bag on Wall Street.

You see, these lenders have only 30 days to respond to your dispute, or else it gets removed from your report. Most lenders don't care enough to respond to every dispute, so there's a good chance you can get at least half of your credit dings removed. I did this, and within 2-3 months, my score was up 130 points.

Phase 2 - Pay down your balances

Now things get more difficult. You must pay down your balances. Any revolving credit account with a balance over 30% of your credit limit is hurting you. Use the Debt-Snowball Method and pay off the smallest balances first. This will free up more money to pay off the larger balances faster. Call the credit card companies and ask for better rates (once again, you'll be surprised what asking can get you). Obviously, paying down your debt isn't just good for your credit score, but also a fiscally sound practice in general.

Phase 3 - Need, not want

Lastly, once you have your balances paid down, you can close out a few unnecessary accounts. Don't go overboard and close out every account, since this can work against you. Don't open new accounts unless you absolutely need to, and not because you want a new Guitar. Keep your credit clean and simple. Take the cards out of your wallets or purses. You don't need the Constanza Wallet. In my wallet, I have one credit card, one debit, health insurance card, and my company credit card. That's it. Keep it simple.

No relapses

Keep your credit clean is a lot like an Alcoholic keeping their liver clean. It's tough to stay clean, and embarrassing when you can't. It will be tempting to relapse once you have fixed your credit, because the justification fairy will visit and make you feel like you have “earned” a little credit mischief. This is why I recommend removing the cards from your wallets and purses, and taking the impulse factor out of the equation. Using these methods I was able to raise my score almost 200 points in about a year.  Keeping a good credit score can save you thousands of dollars over a lifetime, so don't procrastinate, start now!

Good luck savers, we're all counting on you.

Traveling Simply and Cheaply

It blows me away how many people still check bags when they travel. This may be the way your parents did it, and how you always have traveled.  This is the type of mindset i'm hoping to change with this blog.  The fees that domestic airlines are charging are already ridiculous, and they are getting worse.  Expedia does a nice job listing the fees here.  It's not just bag fees, but drinks and meals as well.  I know the Southwest claims that bags fly free (or maybe you haven't seen one of their increasingly annoying commercials), but the cost is just built into their ticket prices.  Here are a few ideas I suggest when traveling.

Keep it simple

Travel light.  Don't take more than you need.  Whether traveling for business or pleasure, you should have an idea of what you will need before you leave.  Pack accordingly.  Make your decisions on what to wear before you leave.  There is no reason that you can't fit a weeks worth of travel items in one carry-on, women included.  Get creative, challenge yourself.  Here's a great guide on how to pack a carry-on.

You'll save yourself the hassle of carrying extra bags, save time not waiting for baggage claim, and not risk losing your luggage.

Save your money

Obviously, you can save at least $25 each way by not checking a bag, but there are other ways to save as well.  Not only is it expensive to eat and drink on the plane, prices inside the terminal are high as well.  Eating meals before you leave for the airport will keep you from giving in and paying the inflated prices at the  airport.  Bring snacks to eat on the flight, as the same snacks can cost $5-$8 in the air.  If you really want to go the extra mile, you can bring an extra water bottle to fill after you get through security, or just avoid buying water until you get the free water on board.  Most flight attendants will give you as much free water as you want, so you don't need to pay $3-$5 a bottle in the terminal. If you know you want an alcoholic drink or two while on the flight, bring your own mini bottles and mix your own drinks. On a round trip flight, you can save yourself over $100 with a little planning ahead.

Pack according to security lines

Most of you already know what to expect in security lines.  Shoes and belts come off, pockets emptied, liquids removed, etc.  Knowing what to expect, you can dress and pack accordingly.  Wear slip-off shoes and pants that don't need a belt.  Put your wallet, keys and other metal items in your bag so that you don't need to take them out and back in your pockets in line.  Make your toiletry bag easily accessible so you aren't digging for them while in line. A little planning ahead can help make the security line a breeze.

Enjoy traveling again

Traveling doesn't need to be such a hassle, or as expensive as it is.  When you aren't worried about bags, fees, or security lines, flights can actually be very relaxing.  It's one of the few places left where you can't be reached on your phone (I wish there were more places).  It's a great time to catch up on reading, watch a movie, get some work done, all without the stress, expenses, and buyer's guilt that usually comes with airline travel.

Cutting Expenses: Part 2 - Save on everything you buy

HDMI cables keep me up at night

HDMI cables are one the great enigmas of modern society.  Never has there been a product with so much misinformation and price variance.  Example:  I had just finished setting up my brand new HD TV and surround sound system, and ventured out to buy HDMI cables.   First I stopped at Best Buy, where they were $80 for a 6 foot cable.  The clerk says "yeah, you need the high speed cables for HD 120hz signal".  "Oh", I said "these magical cables are able to transfer information faster than the speed of light?  That's incredible".  I tried other stores and fared no better.  Then I tried online, where I found many options for under $5 dollars.  It didn't seem possible, so I did more research.  Sure enough, reading all the reviews, these $5 cables worked great.  I bought them, and have been using them for 3 years with no issues.  This is when I realized that I had been lazy and outdated, and brick and mortar stores have been taking advantage of it.

The greatness of user reviews

We live in an incredible age, and I'm certain that the majority of people don't take advantage of it.  People are still shopping the old fashioned way.  Going into a store, looking at all the choices, maybe asking an employee, and making their purchase.  You might get a good product, you might not.  You might get a good price, you might not.    The better option is to go online, search for a product, sort them by customer ratings and price, and make an informed decision.  95% of the time you will get the best product, for the cheapest price possible.  Back in the day you would have to rely on employee knowledge, or friend's recommendations.  Now you have hundreds of actual user reviews at your fingertips.  It's a crime not to take advantage of that.

The enormity of technology


If you do still go into stores, many still don't take advantage of the technology on their smart phones.  There are apps that scan bar codes, and give you the price of that product at all the surrounding stores, and online.  A few good examples of these apps are Redlaser, Shopsavvy, and Barcode Scanner.  So if you want to actually see and touch the product before you buy it, you can still do so intelligently.

Be patient, and don't be lazy


I still struggle with this at times.  I'm in a store, I see something I want, and I just want to buy it.  This is a slippery slope, my friend.  Fight the urge.  Fight the impulse gremlin within.  You probably don't need what you want to buy anyway (that's a whole other article), but if you are going to buy it, make sure you get it for the best price.  There also times I don't feel like waiting for something to ship.  2-3 days seems like an eternity when you have a brand new TV in your living room.  Again, fight the impulse gremlin.

Combining the Free Market with the Information Age

I love all this technology.  If used properly, you can almost eliminate buyer's remorse completely, because you can ensure you got the best product for the best price.  The Internet combines the Free Market World with the Information Age, and with this, prices tend to end up exactly where they should be.  You need to break from the habit of going to the store.  Many of us just stick to doing things the way you always have.  Change your mindset.  Once you start saving money, or continually get the best product on the market, you will be hooked.

Cutting Expenses: Part 1 - Who actually pays list price?

You are paying list price for your subscriptions and utilities, and you don't even know it.  You know what I'm talking about when I say list price.  It's the suggested retail price set by the manufacturer.  With all the competition between vendors and distributors, list price is rarely used, except when vendors want to show how great their price is, by comparing it to list price.  Now think of all the monthly bills you pay.  You are most likely paying these companies directly, without going through vendors.  In effect, unless you negotiate, you are most likely paying list price for these services.  The good news is that these companies do have competition, and where there is competition, there is price negotiation.  Many of the services you pay for every month, can be reduced with a simple phone call.

You never know until you ask

Since I'm strange and obsessive, and oddly take pleasure in it, I often just start calling all my all services asking if I can get better rates. This started last year when I noticed that my annual SiriusXM charge had hit my account for $150 (last year it was $80).  I immediately called them up and asked why it was so much.  They told me I took advantage of a promotion last year, which explains the increase this year.  My exact words were "well $150 is too much, what can you do for me?".  The NEXT sentence out of their mouth was "how about we give you the $80 rate again?".  Just like that, I saved $80.  

I was feeling cocky now.  

Convinced I was negotiating genius, I called up DirectTV and told them they charge me too much for the MLB and NFL sports packages.  They immediately cut the charges by $30/month.  Next I called my security company and they immediately gave me 3 months free (worth $100 total).  Next was my gym membership, and they knocked $5 off my monthly bill (every bit counts).  

On and on this went, and after about a hour, I had knocked about $150 off my monthly expenses.  I don't consider myself the brightest light in the harbor, but I just saved $1,800/year with under a hour of work.  If you make $50,000 a year, you just got the equivalent of a 3.6% raise.  You didn't even have to laugh your boss's jokes to get it. 

Some of the places where you can save money:

• Internet provider
• Cable/Satellite provider
• Gym memberships
• Credit card interest rates
• Internet services (Pandora, Spotify, Netflix, credit monitoring)
• Insurance (Car, home, boat, etc)
• Cell phone bill

Start calling.  It may be uncomfortable at first, but remember, you are paying LIST PRICE.  These vendors are fighting for your business, and competing against each other.  Make them work for it.  Don't be that guy or gal that pays list price.

More expense cutting to come.  This is only part 1.

Welcome to RatRaceExodus

I blame your parents.  I also blame you, which is what you should get in the habit of as well, but I mostly blame your parents.  They didn't know any better, since their parents probably didn't know any better either.  From your parents, you sucked up all your habits, good or bad.  How/when/where you do laundry, cook, clean, drive, pay bills, make friends, wash your hands, run errands, etc.  You learn all these life skills from your parents growing up.  It was the world you were born into, and what you accepted as normal.  I remember watching my parents pay bills, use credit cards, buy a new car every 5 years, buy groceries, and how they lived paycheck to paycheck.  So if your parents weren't successful at managing money, why are you doing the same things?

Change your mindset.

As I grew up with this, it became what is normal to me, just the same way that living in Vermont made -20 degree weather seem normal.  I didn't know anything else, so I didn't know there was a better way.  When I was 21 I moved to Arizona, and experienced the wonder of having over 300 sunny days a year.  I was blown away.  I didn't have to scrape my windshield every morning.  I could play sports year round.  Rain doesn't ruin outdoor events.  I had no idea life could be so good!  It changed my outlook on where you live forever.  This happened again in my late 20s when I started learning about money.  I was forever changed.  I had no idea the difference that financial freedom, and a plan, could make in life.  Just as I know the bitterness of -20 degree weather, I know the stress of being bound by debt.  I know the difference in life it can make, and I want to teach others.

This is why I have created this blog.  I will post about things I have learned, as well as things I am still learning.      I want to change the way you think about money, and in effect, how you think about what life should be.  I want to help you exit the Rat Race.