The reason I created a spending plan in the first place was so that I could pay my debts down faster and to not have to go into more debt in the future. Having the budget gave me that general framework, but it ended up being quite easy to just forget about the money at the end of the month. Then money like my poker savings just disappeared.
So now that I've said I want to budget my money, here comes the tough part. Actually doing it.
I don't currently have a lot of wiggle room in my budget. About the only number I can play with is the amount of debt repayment that I make. With both my wife and I in school (and some previous poor choices) we've managed to get a substantial debt built up. We're not really living outside our means now, but we have a pretty big hill to climb and I'd like to pay it off as quickly as possible.
My biggest motivation is to get out of the condo I'm in. Both to get away from my loud bass playing neighbors and so that we can start on a family.
So I started to tackle the job this week. I'm a pretty organized guy and pretty frugal so I have to confess I figured I'd jump on here and write about some minor tweaks I made and give some great advice about tracking these numbers. Unfortunately I have to admit, it's not quite as simple as I thought.
First off using a credit card complicates budgeting quite a bit. I can see why most financial books recommend avoiding them now. It's not just about carrying a balance. The concept of credit is buy now and pay later, so this months bill is for last months purchases. Mix in cash and it gets very confusing.
It probably wouldn't be so bad if I put the cash aside when I made the purchases to pay the bill next month. At this point though I'm essentially a month behind with not a lot of hope of catching up. In hindsight I shouldn't have let that happen, but let's move on...shall we.
I still won't say credit cards are bad, but they do make for some interesting budgeting issues. In fact, I wrote a posting on why I use my credit card for almost everything. I'll post it in the not too distant future.
At some point I'd like to catch up, so I'm not a month behind (tax return perhaps?). In the meantime, I tally up this months surpluses and deficits and use the difference to pay more (or less) on the line of credit in the following month.
My advice to anyone just starting out is to put money aside when you make those credit card purchases.
Part II next week...
Thursday, January 28, 2010
Monday, January 25, 2010
Doing Magic with Numbers
Time for a little magic!!
Last posting I talked about my poker strategy. I mentioned at the end of it that I had some problems tracking the funds. Here's the first part of the magic trick...the money disappeared.
That's when I noticed that there is a problem with my budgeting technique. I talked about the benefits of budgeting before, but I realize now that creating a budget is just the first step. It gave me a general idea of my limits and for the most part I kept within those constraints even though I wasn't checking the numbers regularly. And, if it wasn't for unexpected expenses it probably would work just fine.
When it comes time to pay the Visa and we need to decide how much to pay, the waters always seem to get a little muddy. We sort of just eyeball the balance in the chequing account and figure out how much we can comfortably afford to pay and still make the next mortgage payment.
To clarify, we don't leave a balance on the Visa ever. However, in this particular case we had some unexpected car expenses and some frivolous (but glorious) travel expenses that needed to be taken care of. So the question was how much to take from the chequing account and how much from the line of credit.
So using the eyeball method and seeing this inflated chequing account, we included my poker winnings in the amount to pay from chequing. Not intentionally of course, but I hadn't really been watching what was in there too closely. Well...there goes my poker plan...or so I thought.
Now here where the real magic begins. Ignoring my other expenses for the time being, let's look at just the car repairs and the poker savings. The poker winnings in this case were $200 and the car repairs were $3000.
Scenario 1:
I put my poker money into a savings account and draw the full $3000.00 from the line of credit.
The result: +$200.00 in savings -$3000.00 on the line of credit
Net result: -$2800.00
Scenario 2:
I use my poker money to pay down the visa and draw 2800 from the line of credit.
The result: $0.00 in savings -$2800.00 on the line of credit
Net result: -$2800.00
Prest-o change-o! The result is exactly the same. Actually I'm better off in scenario 2 because I save the interest on the $200 for as long as I don't pull it back out. And by changing my thinking the disappearing poker money comes right back into view. It's just a number in a column somewhere. Or, it would be if I had been tracking this better.
Keeping that in mind, I don't think it makes a lot of sense to have separate accounts for all these savings (i.e. poker, vacation, car, haircuts, etc). Especially when you have a large outstanding debt like I do. So instead of earning little to no interest I can put these things into the line of credit and save interest. This only works because I can pull the money back out again when I need it though. Putting these towards the mortgage for example would mean the savings would be lost.
The problem is only how to properly track these amounts. I'll discuss this more next post.
Last posting I talked about my poker strategy. I mentioned at the end of it that I had some problems tracking the funds. Here's the first part of the magic trick...the money disappeared.
That's when I noticed that there is a problem with my budgeting technique. I talked about the benefits of budgeting before, but I realize now that creating a budget is just the first step. It gave me a general idea of my limits and for the most part I kept within those constraints even though I wasn't checking the numbers regularly. And, if it wasn't for unexpected expenses it probably would work just fine.
When it comes time to pay the Visa and we need to decide how much to pay, the waters always seem to get a little muddy. We sort of just eyeball the balance in the chequing account and figure out how much we can comfortably afford to pay and still make the next mortgage payment.
To clarify, we don't leave a balance on the Visa ever. However, in this particular case we had some unexpected car expenses and some frivolous (but glorious) travel expenses that needed to be taken care of. So the question was how much to take from the chequing account and how much from the line of credit.
So using the eyeball method and seeing this inflated chequing account, we included my poker winnings in the amount to pay from chequing. Not intentionally of course, but I hadn't really been watching what was in there too closely. Well...there goes my poker plan...or so I thought.
Now here where the real magic begins. Ignoring my other expenses for the time being, let's look at just the car repairs and the poker savings. The poker winnings in this case were $200 and the car repairs were $3000.
Scenario 1:
I put my poker money into a savings account and draw the full $3000.00 from the line of credit.
The result: +$200.00 in savings -$3000.00 on the line of credit
Net result: -$2800.00
Scenario 2:
I use my poker money to pay down the visa and draw 2800 from the line of credit.
The result: $0.00 in savings -$2800.00 on the line of credit
Net result: -$2800.00
Prest-o change-o! The result is exactly the same. Actually I'm better off in scenario 2 because I save the interest on the $200 for as long as I don't pull it back out. And by changing my thinking the disappearing poker money comes right back into view. It's just a number in a column somewhere. Or, it would be if I had been tracking this better.
Keeping that in mind, I don't think it makes a lot of sense to have separate accounts for all these savings (i.e. poker, vacation, car, haircuts, etc). Especially when you have a large outstanding debt like I do. So instead of earning little to no interest I can put these things into the line of credit and save interest. This only works because I can pull the money back out again when I need it though. Putting these towards the mortgage for example would mean the savings would be lost.
The problem is only how to properly track these amounts. I'll discuss this more next post.
Thursday, January 21, 2010
Poker Strategy
I'll be the first to admit that poker probably isn't a good place to try to make money for most people. I gave it a shot but so have millions of others around the world. So, why would I be talking about poker in a personal financial blog??
I have two reasons. The first, is because I'm pretty happy with myself for the system that I came up with. The second is, it leads up to an interesting budgeting problem that I wanted to talk about. I thought about getting it all done in one posting, but then I thought "what's the hurry?".
Before you get all concerned about me here, poker isn't part of any long term financial plan of mine. It's just a hobby that I enjoy to do and I budget $60/month to play. So it's not like I can't pay the mortgage if I lose a lot in a month. For some people that could happen because they have an addiction. Clearly I'd advise them not to play.
I consider my poker money a sunk cost. That's a big economic word for money that can't be recovered once spent. So as I put the money on the poker table I count it gone. Any winnings then are free money. In the past that generally meant that I went out for lunch or bought a video game or something.
Probably not the most practical money management, but it's the way the human mind works. At least mine! It would certainly take at least some of the joy out of winning, if the money went towards groceries or Visa payments. We had those bills covered beforehand anyways. Otherwise the gambling would be irresponsible win or lose.
At the end of last year I won two fairly large tournaments. Large for me anyway. I spent the winnings from the first on a bunch of video games for my PS3. Then a month later I won another tournament. This time I wasn't sure what I wanted to do with it. So I hung onto it.
That's when I came up with the idea to save up my winnings. The winnings can then accumulate and I can draw them out to play more, play at a higher stakes, or better yet fly to Vegas! Wish I'd thought of this sooner.
One issue did come up through all of this though. How do you keep track of this money? Next posting I'll explain how I lost the winnings and then found them again through the magic of numbers.
Anyone else with a hobby that pays? What do you do with the money? How do you keep track of it?
I have two reasons. The first, is because I'm pretty happy with myself for the system that I came up with. The second is, it leads up to an interesting budgeting problem that I wanted to talk about. I thought about getting it all done in one posting, but then I thought "what's the hurry?".
Before you get all concerned about me here, poker isn't part of any long term financial plan of mine. It's just a hobby that I enjoy to do and I budget $60/month to play. So it's not like I can't pay the mortgage if I lose a lot in a month. For some people that could happen because they have an addiction. Clearly I'd advise them not to play.
I consider my poker money a sunk cost. That's a big economic word for money that can't be recovered once spent. So as I put the money on the poker table I count it gone. Any winnings then are free money. In the past that generally meant that I went out for lunch or bought a video game or something.
Probably not the most practical money management, but it's the way the human mind works. At least mine! It would certainly take at least some of the joy out of winning, if the money went towards groceries or Visa payments. We had those bills covered beforehand anyways. Otherwise the gambling would be irresponsible win or lose.
At the end of last year I won two fairly large tournaments. Large for me anyway. I spent the winnings from the first on a bunch of video games for my PS3. Then a month later I won another tournament. This time I wasn't sure what I wanted to do with it. So I hung onto it.
That's when I came up with the idea to save up my winnings. The winnings can then accumulate and I can draw them out to play more, play at a higher stakes, or better yet fly to Vegas! Wish I'd thought of this sooner.
One issue did come up through all of this though. How do you keep track of this money? Next posting I'll explain how I lost the winnings and then found them again through the magic of numbers.
Anyone else with a hobby that pays? What do you do with the money? How do you keep track of it?
Monday, January 18, 2010
Financing the New Car
OK, Thursday I talked about buying a new car. Today let's discuss the financing options.
Option 1, is to lease the vehicle again. I'm sure there are valid reasons to do this and if you think you have one talk to an accountant. I think for the most part these benefits only apply to businesses and only certain ones at that. Even if you want a new vehicle every 2 years it's cheaper to buy the car and then resell it than it is to continue to pay the lease amount. It's certainly not worth it to me when I want to buy a used vehicle and drive it until the wheels fall off. A lot of companies are starting to drop this option as well anyhow.
The only reason I leased the first time was because I bought a car I couldn't afford. Mind you I think they were pushing the lease and compared a 2 year finance to a 4 year lease, but that's beside the point. I don't think it's smart to buy a car you can't afford any more than it is to buy a home you can't afford. So, for me this option is out.
Option 2, is to finance the vehicle. You could finance it through the bank or through the car financing company. One thing to take into consideration which I didn't the first time around, was any financing fees. The car dealers financing options are almost always going to look better than the banks. However, when we financed the dealer charged us a $500 fee. They wanted to charge us $1000 but I told them there was no way that was going to happen. Even with the higher interest at the bank it would have been cheaper to go with them it turns out.
An attractive offer from the dealerships is 0% financing. Again though, this might not mean what it sounds like. Read the fine print. 0% might exclude any offers you would have gotten if you paid cash. It also might have extra fees to finance, etc. Borrowing the money from the bank might allow more bargaining with the company for those cash incentives.
If you have enough room on a line of credit, you don't even need to go to the bank and ask for the loan. If I buy directly from a personal seller and not through a dealership, dealership financing won't be an option anyhow.
So, I'm going to be looking at some form of Option 2 because I don't have any other funds set aside. I'll use the line of credit if I can free up enough room, but otherwise it will be some sort of financing. However, there is a 3rd option that I plan to use on every vehicle from now on.
Option 3, is to pay cash from a good old fashion bank account. Sounds crazy I know, but let me explain before you give up.
Let's say I borrow the $12,600 from the bank to buy a 2yr old Ford Focus. Ignoring the $1000 push, pull or drag event. Assuming I finance that over 4 years at say 5%, the monthly payments are approximately $275/month. Here's the trick, once I'm done paying off the car, I continue to make the payments. Only this time to myself. Assuming the car lasts my projected 10 years, I then have $13,200 sitting in the bank for the new car.
The next car becomes even cheaper because I have longer to save for it. I could put $130/month aside and be able to pay cash for the next vehicle. You get a much better feeling of satisfaction when you pay for something with your own money. Not only that but earn interest on your money instead of paying interest on the money borrowed.
Now, if you're thinking you can't afford to put the money aside monthly, then how are you going to afford to make the higher monthly payments to finance it yourself? Somehow we always find a way. That's the same sort of mentality you have to bring to this to make it succeed.
Now that you're talking about a significant amount of savings, let's look at a way to make the money grow even faster. This results in lowering our monthly car payment even further.
For example, if you put $125/month aside into a saving account and want a new vehicle every 8 years. After 1 years of savings, you can buy a 7 year GIC. Then the following year you buy a 6 year GIC, etc. Earning much more interest than in a simple savings account. This technique is called laddering. I think the 5 year GIC might be a max, so you might need to buy a 5 year then a 2, but you get the idea.
Using INGs current GIC numbers, you end up with $12,846.59. More than you need with $5 less a month. Money you earned rather than gave to the finance company. If you compared 4 years on your own to 4 years with the finance company you save at least $25 a month. Not to mention the benefits that paying cash gives you.
The best part of all of this is that this technique applies to every big purchase, not just cars. Reversing the cycle of borrow, buy, repay can save you a lot of money in the long run! Not to mention the great feeling of not being indebted to anyone.
I'm going to use this technique on my vacations, flooring, and new electronics as well.
As always I'd love to hear your thoughts.
Option 1, is to lease the vehicle again. I'm sure there are valid reasons to do this and if you think you have one talk to an accountant. I think for the most part these benefits only apply to businesses and only certain ones at that. Even if you want a new vehicle every 2 years it's cheaper to buy the car and then resell it than it is to continue to pay the lease amount. It's certainly not worth it to me when I want to buy a used vehicle and drive it until the wheels fall off. A lot of companies are starting to drop this option as well anyhow.
The only reason I leased the first time was because I bought a car I couldn't afford. Mind you I think they were pushing the lease and compared a 2 year finance to a 4 year lease, but that's beside the point. I don't think it's smart to buy a car you can't afford any more than it is to buy a home you can't afford. So, for me this option is out.
Option 2, is to finance the vehicle. You could finance it through the bank or through the car financing company. One thing to take into consideration which I didn't the first time around, was any financing fees. The car dealers financing options are almost always going to look better than the banks. However, when we financed the dealer charged us a $500 fee. They wanted to charge us $1000 but I told them there was no way that was going to happen. Even with the higher interest at the bank it would have been cheaper to go with them it turns out.
An attractive offer from the dealerships is 0% financing. Again though, this might not mean what it sounds like. Read the fine print. 0% might exclude any offers you would have gotten if you paid cash. It also might have extra fees to finance, etc. Borrowing the money from the bank might allow more bargaining with the company for those cash incentives.
If you have enough room on a line of credit, you don't even need to go to the bank and ask for the loan. If I buy directly from a personal seller and not through a dealership, dealership financing won't be an option anyhow.
So, I'm going to be looking at some form of Option 2 because I don't have any other funds set aside. I'll use the line of credit if I can free up enough room, but otherwise it will be some sort of financing. However, there is a 3rd option that I plan to use on every vehicle from now on.
Option 3, is to pay cash from a good old fashion bank account. Sounds crazy I know, but let me explain before you give up.
Let's say I borrow the $12,600 from the bank to buy a 2yr old Ford Focus. Ignoring the $1000 push, pull or drag event. Assuming I finance that over 4 years at say 5%, the monthly payments are approximately $275/month. Here's the trick, once I'm done paying off the car, I continue to make the payments. Only this time to myself. Assuming the car lasts my projected 10 years, I then have $13,200 sitting in the bank for the new car.
The next car becomes even cheaper because I have longer to save for it. I could put $130/month aside and be able to pay cash for the next vehicle. You get a much better feeling of satisfaction when you pay for something with your own money. Not only that but earn interest on your money instead of paying interest on the money borrowed.
Now, if you're thinking you can't afford to put the money aside monthly, then how are you going to afford to make the higher monthly payments to finance it yourself? Somehow we always find a way. That's the same sort of mentality you have to bring to this to make it succeed.
Now that you're talking about a significant amount of savings, let's look at a way to make the money grow even faster. This results in lowering our monthly car payment even further.
For example, if you put $125/month aside into a saving account and want a new vehicle every 8 years. After 1 years of savings, you can buy a 7 year GIC. Then the following year you buy a 6 year GIC, etc. Earning much more interest than in a simple savings account. This technique is called laddering. I think the 5 year GIC might be a max, so you might need to buy a 5 year then a 2, but you get the idea.
Using INGs current GIC numbers, you end up with $12,846.59. More than you need with $5 less a month. Money you earned rather than gave to the finance company. If you compared 4 years on your own to 4 years with the finance company you save at least $25 a month. Not to mention the benefits that paying cash gives you.
The best part of all of this is that this technique applies to every big purchase, not just cars. Reversing the cycle of borrow, buy, repay can save you a lot of money in the long run! Not to mention the great feeling of not being indebted to anyone.
I'm going to use this technique on my vacations, flooring, and new electronics as well.
As always I'd love to hear your thoughts.
Thursday, January 14, 2010
Thinking about a New Car
I've been thinking about this for awhile and figured I'm running out of time to figure this out. Our Honda has had a good run and while technically running fine now, it's getting up there in age. Car years are like dog years right?
When I leased it originally, I wasn't all that financially savvy. So I didn't give it much thought. My wife wanted a Honda and I figured we'd get rid of our two old vehicles and buy brand spanking new. I figured it would pay for itself just by saving on all our repair costs. Well...I was wrong. Leasing was the only option for us (or so I thought) because of the high cost.
Almost 8 years later it is paid off and I'm thinking of doing it all over again. Only this time I wanted to give this some more thought before I make this big purchase.
OK, now for the details. I'm not married to any make or model although I was pretty happy overall with my Honda Civic. I don't want or need a luxury vehicle and in fact never plan to own one. Although, I wouldn't mind a few more features this time, like automatic windows, mp3 player, etc. My preference is for a new vehicle, but I'm not opposed to buying used.
Seeing as I'm not devoted to any brand like I know a lot of people are, I have to consider domestic vs import. Those terms are used lightly these days as the parts for either are made and put together around the world. I searched and searched for some good statistics, but all I've found are opinions. From what I've gathered the life span and repair bill are roughly the same no matter which option you choose. I'm talking about cars built in the last 10 years or so. Once the vehicle becomes too costly I plan to move on anyhow and a newer vehicle should have few problems regardless of the make and model.
Just like our retirement calculation we have to make some assumptions. I'm going to assume the average car has a lifespan of 300,000km or about 10 years. When I did some searching I found the average age of a vehicle in the US to be about 13 years old.
For my comparisons I chose Ford Focus for my domestic and Honda Civic for my import. "Why?" you ask. I just wanted to keep the comparison simple for now and the make/model doesn't matter too much. I gave them similar features that I consider musts like A/C, floor mats, power windows/locks and MP3 players. The actual vehicle I decide to purchase might be completely different, but it gives us a general idea about which option will win out. Although if import wins out, Honda is likely to be my next purchase.
If it sounds like I haven't made up my mind yet, it's because I haven't. You'll be reading the results as I figure them out.
So my next question is whether to by new or used and when to trade the vehicle in. This is where the import/domestic comes into play again. The domestics are obviously cheaper and will therefore come out ahead in most scenarios. However, if I plan to buy a new car every 2-5 years, having a vehicle with a higher resale value is important. If I plan to drive the car into the ground like I did this time, then the low depreciation of a Honda/Toyota is irrelevant.
One last thing about depreciation. I've often looked at a 1-2 year old Honda and wondered why anyone in there right mind would buy used over new, when the saving was so small. The mistake I was making was that I was looking at the list price. The real price is going to be quite a bit higher on a new vehicle once you factor in taxes, financing fees, rust protection, etc. These used vehicles have all that included.
So let's run some numbers and find out who wins...
The 2 year old and 5 year prices were calculated using a depreciation calculator not actual prices. Although I did find the actual values to be pretty close to this.
I broke the costs out by the monthly amount in order to make the comparison. For example, a 5 year old ford every 5 years would cost $107.17 ($6430/5yrs/12months). The new Honda every 10 years would cost $211/month.
If you want a new vehicle every 2-5 years, the Honda wins out due to the lowered depreciation levels. In fact if it has to be a Honda you're better off buying a 2 year old vehicle and keeping it for 8 years than you are buying a 5 year old every 5 years. Odd I know! This phenomenon doesn't happen with Ford.
If you're looking for the best deal overall though, the 5 year old Ford wins out. So it's not that surprising then that the wealthiest people in the US generally buy used domestics. I learned that tidbit from The Millionaire Next Door (book review one day maybe?).
Preferences would obviously take a big role in this decision. For me personally I can't justify the extra cost of an extra $100 per month (plus the financing costs) to own a new imported vehicle. I have better uses for that money. However, I have decided that it is worth it to me to get the 2 year domestic over the 5 year old domestic. The cost difference is under $30 more a month, but it's worth the piece of mind to me.
I'll talk about how I plan to finance this next. This topic has already grown way to large.
So, what do you think? Is the extra $$$ worth new or import to you?
When I leased it originally, I wasn't all that financially savvy. So I didn't give it much thought. My wife wanted a Honda and I figured we'd get rid of our two old vehicles and buy brand spanking new. I figured it would pay for itself just by saving on all our repair costs. Well...I was wrong. Leasing was the only option for us (or so I thought) because of the high cost.
Almost 8 years later it is paid off and I'm thinking of doing it all over again. Only this time I wanted to give this some more thought before I make this big purchase.
OK, now for the details. I'm not married to any make or model although I was pretty happy overall with my Honda Civic. I don't want or need a luxury vehicle and in fact never plan to own one. Although, I wouldn't mind a few more features this time, like automatic windows, mp3 player, etc. My preference is for a new vehicle, but I'm not opposed to buying used.
Seeing as I'm not devoted to any brand like I know a lot of people are, I have to consider domestic vs import. Those terms are used lightly these days as the parts for either are made and put together around the world. I searched and searched for some good statistics, but all I've found are opinions. From what I've gathered the life span and repair bill are roughly the same no matter which option you choose. I'm talking about cars built in the last 10 years or so. Once the vehicle becomes too costly I plan to move on anyhow and a newer vehicle should have few problems regardless of the make and model.
Just like our retirement calculation we have to make some assumptions. I'm going to assume the average car has a lifespan of 300,000km or about 10 years. When I did some searching I found the average age of a vehicle in the US to be about 13 years old.
For my comparisons I chose Ford Focus for my domestic and Honda Civic for my import. "Why?" you ask. I just wanted to keep the comparison simple for now and the make/model doesn't matter too much. I gave them similar features that I consider musts like A/C, floor mats, power windows/locks and MP3 players. The actual vehicle I decide to purchase might be completely different, but it gives us a general idea about which option will win out. Although if import wins out, Honda is likely to be my next purchase.
If it sounds like I haven't made up my mind yet, it's because I haven't. You'll be reading the results as I figure them out.
So my next question is whether to by new or used and when to trade the vehicle in. This is where the import/domestic comes into play again. The domestics are obviously cheaper and will therefore come out ahead in most scenarios. However, if I plan to buy a new car every 2-5 years, having a vehicle with a higher resale value is important. If I plan to drive the car into the ground like I did this time, then the low depreciation of a Honda/Toyota is irrelevant.
One last thing about depreciation. I've often looked at a 1-2 year old Honda and wondered why anyone in there right mind would buy used over new, when the saving was so small. The mistake I was making was that I was looking at the list price. The real price is going to be quite a bit higher on a new vehicle once you factor in taxes, financing fees, rust protection, etc. These used vehicles have all that included.
So let's run some numbers and find out who wins...
| Ford Focus SE | Honda Civic SE | |
|---|---|---|
| New | 21,805 | 25,365 |
| 2 Years Old | 12,560 | 18,511 |
| 5 Years Old | 6,430 | 13,050 |
The 2 year old and 5 year prices were calculated using a depreciation calculator not actual prices. Although I did find the actual values to be pretty close to this.
I broke the costs out by the monthly amount in order to make the comparison. For example, a 5 year old ford every 5 years would cost $107.17 ($6430/5yrs/12months). The new Honda every 10 years would cost $211/month.
If you want a new vehicle every 2-5 years, the Honda wins out due to the lowered depreciation levels. In fact if it has to be a Honda you're better off buying a 2 year old vehicle and keeping it for 8 years than you are buying a 5 year old every 5 years. Odd I know! This phenomenon doesn't happen with Ford.
If you're looking for the best deal overall though, the 5 year old Ford wins out. So it's not that surprising then that the wealthiest people in the US generally buy used domestics. I learned that tidbit from The Millionaire Next Door (book review one day maybe?).
Preferences would obviously take a big role in this decision. For me personally I can't justify the extra cost of an extra $100 per month (plus the financing costs) to own a new imported vehicle. I have better uses for that money. However, I have decided that it is worth it to me to get the 2 year domestic over the 5 year old domestic. The cost difference is under $30 more a month, but it's worth the piece of mind to me.
I'll talk about how I plan to finance this next. This topic has already grown way to large.
So, what do you think? Is the extra $$$ worth new or import to you?
Monday, January 11, 2010
New Years Resolutions
Happy New Year Everyone! I suppose this should have been last weeks topic, but I had to finish up that series first. :)
I'm not big on New Years Resolutions. What I mean by that is I don't like waiting until the new year to resolve to get something done. If I resolve to change my life in March I start in March, not January of the following year. If I fail in February, I don't say "oh well, there's always next year".
I do believe in resolutions though. I also believe in "clean slates". If I fall short of my goals, I dust myself off and start again. Depending on the goal, that might be the next day, week or month. For example, my weight loss goals this past year were weekly and when I gained or lost little in a week, I just started fresh the following week and carried on. It sure helps prevent getting down on yourself (or at least keeps the mourning shorter).
So, if I'm opposed to "New Years" resolutions, why am I doing one now you ask? Well, it's only because my latest resolution happened to fall in January. :)
Ever since I did my budget (years ago) I've been staring at the big eating out number. I keep feeling like there isn't enough money to go around and it's really the only number I can play with at the moment. It doesn't feel like we're eating out that much, but every month we seem to spend about $300 on dining out.
I know what some of you are thinking right now! Before you freak out on me for that number, make sure you know what your number is first. I was very surprised when I found out mine!
So we resolved to cut this eating out number down. It's already been tough and tempting to break this resolution. Especially when we're both tired after work/school or when I wake up late and don't want to pack a lunch. What keeps me going is knowing how much we can save by eating at home and what we can do with that money.
I also just don't make it an option. When I sleep in (which is always by the way) I just tell myself that buying lunch is not an option. After all if I'm behind by a few minutes I still need to brush my teeth, get dressed, etc. I'd never cut those things out when I sleep in, so I just make packing a lunch one of those things.
I suppose I could have also resolved to pack my lunches at night and go to bed earlier, but one man can only do so much! ;)
Another resolution that I made, is to eat less processed foods. Why? Because it's generally cheaper and better tasting to make the food "from scratch". Less chemicals in the body probably won't hurt either.
While convenient, the processed foods don't really save all that much time.I already make my own pancakes from scratch and have often mocked the use of instant mix. Being the hypocrite that I am though, I buy pre-made patties, microwavable lunches, etc. Honestly I don't think the increase in time will be that significant, while the health and financal benefits will be.
Anyhow, wish me luck. What do you think? What resolutions did you make?
I'm not big on New Years Resolutions. What I mean by that is I don't like waiting until the new year to resolve to get something done. If I resolve to change my life in March I start in March, not January of the following year. If I fail in February, I don't say "oh well, there's always next year".
I do believe in resolutions though. I also believe in "clean slates". If I fall short of my goals, I dust myself off and start again. Depending on the goal, that might be the next day, week or month. For example, my weight loss goals this past year were weekly and when I gained or lost little in a week, I just started fresh the following week and carried on. It sure helps prevent getting down on yourself (or at least keeps the mourning shorter).
So, if I'm opposed to "New Years" resolutions, why am I doing one now you ask? Well, it's only because my latest resolution happened to fall in January. :)
Ever since I did my budget (years ago) I've been staring at the big eating out number. I keep feeling like there isn't enough money to go around and it's really the only number I can play with at the moment. It doesn't feel like we're eating out that much, but every month we seem to spend about $300 on dining out.
I know what some of you are thinking right now! Before you freak out on me for that number, make sure you know what your number is first. I was very surprised when I found out mine!
So we resolved to cut this eating out number down. It's already been tough and tempting to break this resolution. Especially when we're both tired after work/school or when I wake up late and don't want to pack a lunch. What keeps me going is knowing how much we can save by eating at home and what we can do with that money.
I also just don't make it an option. When I sleep in (which is always by the way) I just tell myself that buying lunch is not an option. After all if I'm behind by a few minutes I still need to brush my teeth, get dressed, etc. I'd never cut those things out when I sleep in, so I just make packing a lunch one of those things.
I suppose I could have also resolved to pack my lunches at night and go to bed earlier, but one man can only do so much! ;)
Another resolution that I made, is to eat less processed foods. Why? Because it's generally cheaper and better tasting to make the food "from scratch". Less chemicals in the body probably won't hurt either.
While convenient, the processed foods don't really save all that much time.I already make my own pancakes from scratch and have often mocked the use of instant mix. Being the hypocrite that I am though, I buy pre-made patties, microwavable lunches, etc. Honestly I don't think the increase in time will be that significant, while the health and financal benefits will be.
Anyhow, wish me luck. What do you think? What resolutions did you make?
Wednesday, January 6, 2010
Living Wage...More Like Living Nightmare
Wow, my wife told me about this yesterday and I'm still fuming over it today. As part of her public nursing she had to sit in on a "lesson", "sermon", I'm not sure what to call it. She was afraid to speak up and I can't blame her. It would be like ending up in a gay bar and trying to spout off the sins of a homosexual relationship. Or on the flip side shouting the benefits of a homosexual relation in a strict southern baptist church. No matter how absurd the comments seem to you, you either look for an exit or bite you tongue and wait for the end to come.
So, what am I so upset about. Well the whole thing actually. The horrible treatment of the poor, including not taxing the rest of us enough to buy them a nice home and fancy clothes for one. Minimum wage being too low to live off of (which I had already planned to address in some future post anyhow). Along with a slew of other things that just get my blood boiling.
What really took the cake though is the Living Wage suggestion. If you don't know what it is, it's a minimum wage that is set based on the cost of rent. They've determined that rent should be affordable for everyone that is working 40 hours a week at no more than 30% of your total income. Unlike the minimum wage it doesn't require legislation to rise. So if the cost of rent goes up, so does your wage.
That equates to $16/hour in Vancouver!!
So why does this get me so upset? Well, it's because I picture some 12 year old kid working at McDonalds earning $16/hour, while a Software Developer that just spent 20,000 on an education is doing a co-op for $20.
I see the potential disaster for this being incredible! How much does a Big Mac cost when you have to pay your employees that much? How many people do you think a company can keep employed at that wage? Why would anyone go to post-secondary when you can get a job that pays that well out of high-school? Heck, why finish high-school?!?
What happens to the rest of the industry? Does a Doctor's wage sky-rocket the same amount as well? If so, they still have the same margin over the minimum wage person as they did before. Which means they buy more, which pushes prices higher until the minimum wage isn't enough again. "That will be 1 million dollars for that milk please sir." Crazy!!!
Finally this is just an escalating nightmare. With the increase in people able to afford rentals while the supply remains the same the rents are going to sky-rocket. Which of course increases the wage again. Can you say "spiral of death"?!?
Another problem that occurs with increased wages is that it becomes cheaper to replace the labour. Already we're seeing self-checkouts at grocery stores, but it wouldn't be that big of a stretch to see these at fast food places. Automated floor cleaners like the automated vacuums, etc, etc. Entrepreneurs are a resourceful bunch after all.
If labour isn't replaced, the other option to the business owner is to not hire full time employees. After all the living wage only applies if you work 40 hours a week. So more jobs end up going part time and people are then forced to work 2 part time jobs at $8/hour a piece. Not exactly the solution they were hoping for eh?
OK, so maybe a little dramatic. I realize that this would probably balance out in the long run. After all, I'd want to get in on these higher rent prices while I can. Builders will jump at the chance to build more apartments to rent out and investors will jump at the chance to supply them at that cost. Of course increased demand in real estate will force that market up too.
I'm all for helping someone get on their feet, but I don't see why we feel the need to help someone sit their fat ass on the couch. We're saying it's OK, not to push yourself, not to go to school. It's OK to piss your money away on drugs and alcohol. It's OK to make horrible decisions. Because no matter how little ambition you have you will be able to afford rent, be given clothing, and given a job that pay 3 times what it's worth.
Phew! Glad I got that off my chest. Now I probably made other people that are reading this feel like my wife did in that meeting. However, if you disagree I promise to be gentle. ;)
I was trying to keep the blog to once a week, but I have too much bottled up, so I'm going to up this to twice a week for now. Monday and Thursday I think.
So, what am I so upset about. Well the whole thing actually. The horrible treatment of the poor, including not taxing the rest of us enough to buy them a nice home and fancy clothes for one. Minimum wage being too low to live off of (which I had already planned to address in some future post anyhow). Along with a slew of other things that just get my blood boiling.
What really took the cake though is the Living Wage suggestion. If you don't know what it is, it's a minimum wage that is set based on the cost of rent. They've determined that rent should be affordable for everyone that is working 40 hours a week at no more than 30% of your total income. Unlike the minimum wage it doesn't require legislation to rise. So if the cost of rent goes up, so does your wage.
That equates to $16/hour in Vancouver!!
So why does this get me so upset? Well, it's because I picture some 12 year old kid working at McDonalds earning $16/hour, while a Software Developer that just spent 20,000 on an education is doing a co-op for $20.
I see the potential disaster for this being incredible! How much does a Big Mac cost when you have to pay your employees that much? How many people do you think a company can keep employed at that wage? Why would anyone go to post-secondary when you can get a job that pays that well out of high-school? Heck, why finish high-school?!?
What happens to the rest of the industry? Does a Doctor's wage sky-rocket the same amount as well? If so, they still have the same margin over the minimum wage person as they did before. Which means they buy more, which pushes prices higher until the minimum wage isn't enough again. "That will be 1 million dollars for that milk please sir." Crazy!!!
Finally this is just an escalating nightmare. With the increase in people able to afford rentals while the supply remains the same the rents are going to sky-rocket. Which of course increases the wage again. Can you say "spiral of death"?!?
Another problem that occurs with increased wages is that it becomes cheaper to replace the labour. Already we're seeing self-checkouts at grocery stores, but it wouldn't be that big of a stretch to see these at fast food places. Automated floor cleaners like the automated vacuums, etc, etc. Entrepreneurs are a resourceful bunch after all.
If labour isn't replaced, the other option to the business owner is to not hire full time employees. After all the living wage only applies if you work 40 hours a week. So more jobs end up going part time and people are then forced to work 2 part time jobs at $8/hour a piece. Not exactly the solution they were hoping for eh?
OK, so maybe a little dramatic. I realize that this would probably balance out in the long run. After all, I'd want to get in on these higher rent prices while I can. Builders will jump at the chance to build more apartments to rent out and investors will jump at the chance to supply them at that cost. Of course increased demand in real estate will force that market up too.
I'm all for helping someone get on their feet, but I don't see why we feel the need to help someone sit their fat ass on the couch. We're saying it's OK, not to push yourself, not to go to school. It's OK to piss your money away on drugs and alcohol. It's OK to make horrible decisions. Because no matter how little ambition you have you will be able to afford rent, be given clothing, and given a job that pay 3 times what it's worth.
Phew! Glad I got that off my chest. Now I probably made other people that are reading this feel like my wife did in that meeting. However, if you disagree I promise to be gentle. ;)
I was trying to keep the blog to once a week, but I have too much bottled up, so I'm going to up this to twice a week for now. Monday and Thursday I think.
Monday, January 4, 2010
Retirement Percentages
OK, last post in this series...I think.
So what's the magic number. 40% of your last years income, 70%, 100%, or some other number? I don't think there is a magic number, but here are my thoughts anyhow.
The argument for 40% of your income is that you spend 30% on investing and 30% on your mortgage. So with 40% you cover all your expenses. But really, I could live with a lot less than that too. In fact, my salary is above average, so I could live on someone else's 40%. Or, if I become a CFO, I could make over 250,000 a year (hard to imagine, but I can dream). So 40% of that might be more than enough.
For me though, I don't want to settle with that minimum. After all, I don't have to go to school to be a junior accountant, but I am so that I can make more money. I'm not all about the money, but it only makes sense to me to get paid as much as I can doing what I love to do. I think it's just smart. So, if I'm not settling for a lower salary now, why would I want to settle for one later.
I plan to pay my home off well before I retire. When I do so, I'll then be able to spend at 70% of my income (using the same numbers previously discussed). I suppose I could save it all, or invest it all, but I'm looking forward to the increased standard of living. More vacation time at that point and I'd like to use it.
Assuming I put the last 30% towards retirement, it makes sense that financial planners tell you you need to make 70% of your last years income. After all, you've been living off of 40-70% most of your working life. You're retired so you no longer need to put money aside for it, so 70% make sense.
However, just like when I've paid off my home I don't want to save the rest I want to spend it. The same logic applies to my retirement. Once it's funded, why wouldn't I increase my spending to 100%?
OK, admittedly I don't need 100% or even 70%. But I don't need to earn 250,000 a year either. If I do earn that much though, I don't want to think of retirement as taking a pay cut. I want to look forward to it and look forward to spending the time and money with my wife as we do whatever we decide to do with our time. If we have any extra we can give it away. I plan to anyhow, but that's another topic.
I plan to enjoy life and my work as I work towards retirement as you never know what will happen in your life. At the same time I plan to enjoy my retirement for as long as possible.
Love to hear your thoughts and any numbers you think will work for you. If you haven't given retirement much thought I highly recommend it!
So what's the magic number. 40% of your last years income, 70%, 100%, or some other number? I don't think there is a magic number, but here are my thoughts anyhow.
The argument for 40% of your income is that you spend 30% on investing and 30% on your mortgage. So with 40% you cover all your expenses. But really, I could live with a lot less than that too. In fact, my salary is above average, so I could live on someone else's 40%. Or, if I become a CFO, I could make over 250,000 a year (hard to imagine, but I can dream). So 40% of that might be more than enough.
For me though, I don't want to settle with that minimum. After all, I don't have to go to school to be a junior accountant, but I am so that I can make more money. I'm not all about the money, but it only makes sense to me to get paid as much as I can doing what I love to do. I think it's just smart. So, if I'm not settling for a lower salary now, why would I want to settle for one later.
I plan to pay my home off well before I retire. When I do so, I'll then be able to spend at 70% of my income (using the same numbers previously discussed). I suppose I could save it all, or invest it all, but I'm looking forward to the increased standard of living. More vacation time at that point and I'd like to use it.
Assuming I put the last 30% towards retirement, it makes sense that financial planners tell you you need to make 70% of your last years income. After all, you've been living off of 40-70% most of your working life. You're retired so you no longer need to put money aside for it, so 70% make sense.
However, just like when I've paid off my home I don't want to save the rest I want to spend it. The same logic applies to my retirement. Once it's funded, why wouldn't I increase my spending to 100%?
OK, admittedly I don't need 100% or even 70%. But I don't need to earn 250,000 a year either. If I do earn that much though, I don't want to think of retirement as taking a pay cut. I want to look forward to it and look forward to spending the time and money with my wife as we do whatever we decide to do with our time. If we have any extra we can give it away. I plan to anyhow, but that's another topic.
I plan to enjoy life and my work as I work towards retirement as you never know what will happen in your life. At the same time I plan to enjoy my retirement for as long as possible.
Love to hear your thoughts and any numbers you think will work for you. If you haven't given retirement much thought I highly recommend it!
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