Archive for June 2014

Overlooked Costs When Buying a New Car

New Car

New CarBuying a new car can be an exciting time. You get to trade in your old ride for something fresh, hopefully with better gas mileage and more features than your old one had. If you spend a lot of time in your car, as many people do, it is a treat to be able to move up into a “new” vehicle.

Of course, buying a car is not a cheap thing to do, regardless if it’s new or used. That said, new cars are rather expensive, even if you aren?t splurging for a high-end model. You are probably looking a sticker price of $20,000 or more, depending on the model you are looking at. While that price alone is enough to make you want to start pinching your pennies, there are also other related expenses to having a new car that you need to take into consideration.

Buying a New Car Means Taxes

Just as with anything else you buy, taxes will be a significant part of your new car purchase. However, when you are talking about such an expensive item, taxes start to become much more significant as opposed to what you’d have on more common, everyday purchases. The taxes on your car purchase can easily be several thousand dollars so be sure to pay attention to that portion of the cost as well.

When you are trying to figure out how much car you can afford, don?t just look at the sticker price. You will also want to add in taxes and fees to get a better idea of how much money you will be spending on that new or used car.

Insurance

If you are trading in an old car to buy a new one, you already have auto insurance…well at least hopefully you do. 🙂 Insuring a newer, more valuable car is going to be more expensive than insuring your old one. Your premiums are sure to go up, and you should find out how much before you buy the car.

Contact your current insurance company and ask for a quote?based on the car you are considering. This additional monthly expense needs to be taken into the bigger picture of the overall cost to own. Every time I have bought a new to me car one of the of the first things I do prior to making the final decision is calling my insurance provider to see what kind of an increase in cost we’ll be dealing with.

Maintenance

For drivers of older model cars, maintenance is something that might have fallen off your radar over the years. Once a car hits a certain mileage, some owners might start to neglect taking the vehicle in for service and just decide that they will buy a new car once the old one breaks down.

If this sounds like you, remember that you will need to perform regular maintenance on your new car to protect it for the long run. That means frequent oil changes and periodic service visits back to the dealer or mechanic. Add in this cost as well when deciding if you can afford the car. We actually save money?specifically for taking care of car repairs. That way when we need to take our car into the shop we’re prepared to pay for the bill as opposed to scrambling for ways to pay for it.

Interest

Finally, assuming you are borrowing the money to purchase your car, you will be paying interest on the loan that you take out. With good credit, you should be able to get a relatively low percentage rate on your auto loan, especially in today’s interest rate climate. However, if you’re not able to secure a decent interest rate you will want to factor that expense into your overall purchasing decision. Of course, there’s always the option to buy the car straight out and not deal with the nasty loan but that’s just me. 🙂

 

When was the last time you bought a new or used car? What expense caught you by surprise? Have you ever bought a car in cash before?

 

Photo courtesy of: NRMA Motoring

Debt Reduction and Elimination: Attitude Rules

debt reduction

ID-100214806As we expand on our series on Debt Reduction and Elimination (you can find part 1 here), the first thing we’re going to talk about is attitude.? John touched on this a little bit in the introductory post, but because attitude is so vitally important to the success of debt reduction and elimination, we’re including an entire post about it. 🙂

When my husband and I first started our real journey to get out of debt in January of 2013, it wasn’t by any means the first time we’d attempted to get out of debt.? Several times before in the course of our 17-year marriage we’d started getting out of debt, and even gotten out of debt on occasion, but we always ended up right back in the hole.? Why?? Because we didn’t have the right attitude about debt.

You see, in our minds, debt was okay as long as we could manage the payments, and while that is an important factor on some level, for us, we chose to view it as an excuse to spend money we didn’t have on things we didn’t need.? We had no emergency fund to speak of?and a ridiculously high debt-to-income ratio, all because we had a carefree attitude about our debt.? We didn’t view it as a potential problem.

In October of 2012, we made a move to another home, one in which we added more debt (but the payments were the same as our other house, so it was “okay”), and then added more consumer debt as we purchased things we needed for the new house.? It was at that point that we recognized that we were walking, from a financial standpoint, dangerously close to disaster.? One missed paycheck, and our house of cards would’ve come tumbling down quickly.

Something clicked, and we finally saw the dangers of our carefree attitude about debt.? We recognized that debt limited our choices: our choices about where we could work, live and what we could do in our free time.? We saw that we were, in fact, slaves to our debt, as John mentioned in the intro post for this series, and it terrified us.? And because we have four children, we also recognized that our attitude about debt had put them in a very precarious situation.? If the house of cards fell down, it wasn’t just my husband and I that would be affected, but our children too.

Debt Reduction Requries A Change of Attitude

So how did we change our attitudes about debt?? First, we came to recognize that a large amount of consumer debt really does make you a slave: to your lenders, your job, etc.? We didn’t want other people to be in control of how we spent our time and money, so we made the decision that we would work out a plan to eliminate our debt.

Second, we started to view our consumer debt as an enemy – an enemy that kept us from pursuing what we really wanted to in life.? This changed how we spent money.? We started to value our hard-earned money, and our time, more, and we didn’t want to give it all to our enemy: debt.? This in turn led to better spending decisions.

Third, we started to view ourselves as financially secure people.? This was vitally important, because when you’ve been broke all of your life, you tend to get comfortable and used to not having money.? When you get used to a lifestyle of being broke, it becomes very easy to shirk responsibility and convince yourself that it’s not your fault, you just don’t make enough, blah, blah, blah.? However, when you view yourself as a financial secure person who is wise with his/her money and time, it helps you to make spending decisions that allow you to move toward your financial goals.

If you truly want your debt reduction or financially secure/independent plan to succeed, it has to start with the right attitude.? If a better and more secure financial life is on your list of goals, take some time today to assess what your attitude about debt and money has been in the past, and choose to have a new attitude: one that is committed to reach your goals of being free of debt.

 

Do you have a carefree attitude about your debt?? Do you have debt and feel that, on some level, it enslaves you? If you’re debt free now, what did it take for your attitude to get in the “right” place to attack it?

 

 

Photo courtesy of: Free Digital Photos

 

 

 

 

This post was featured on The Value Geek and Budget for Health.

How to Use a Credit Card Wisely

Credit Card

Credit CardCredit cards can be a double-edged sword. On the one hand, they can be a very useful financial tool which helps you build your credit score?and handle large purchases. On the other hand, they can mean trouble if you are using them to buy things you really have no place buying. Wise use of credit cards is one of the most important elements of managing your personal finances.

Some people avoid credit cards like the plague, and won?t even keep one in their wallet for emergencies. Other people rely on them on a daily basis, and end up wasting money on interest payments. Both approaches have their flaws, with the latter have many more of course. 🙂 ?If you can land somewhere in between these two extremes, you can use credit cards wisely and often to your benefit like with rewards you can earn such as through the U?-?where you earn 40,000 miles after making just one purchase in the first 90 days.

Before we talk about how to use your cards wisely, let?s take a look at a few reasons why it’s wise to have at least one credit card in your name ?

  • Build your credit rating. Simply by using your credit card periodically, and paying off the balance each month, you can build credit over time. When it comes time to make a big purchase, such as a car or a house, the credit you built by using your card will come in handy with a nice credit score.
  • Get rewards. Many credit cards offer rewards in the way of cash back, airline miles, bonus points, or some other system. Just by using the card and paying off your bill, you can rack up points that may be redeemed for cash back or even free travel in my case. 🙂
  • In case of emergency. Life is full of surprises, and it helps to have some credit available if you should happen to need it.?I would typically defer to having an emergency fund?for these instances. I say use both so that way if you can’t get access to the cash that day you can use the card and pay it off that month with money out of your emergency fund.

While there are several positives to having a credit card or two at your disposal, there are dangers as well. If you don?t use them in a responsible fashion, credit cards can lead to serious debt if you’re not careful.

How to Develop Smart Credit Card Habits

Follow the tips below to steer clear of credit card trouble and stay on a good financial path.

  • Pay your balance each month. If you can pay off the balance of your credit card statement each month, you will avoid paying interest charges. Interest and fees are really where credit cards get expensive, so avoiding paying interest at all costs.
  • Don?t buy stuff you can?t afford. This might sound obvious, but it is a common trap many fall in to. If you wouldn?t spend cash on something, don?t buy it with a credit card. After all, the day will come when you need to spend that cash to pay off your card, so always think twice before charging a large purchase.
  • Find a low interest rate. When getting a credit card, shop around and find the lowest possible interest rate on your purchases. While I would always argue to pay off your credit card in full each month I know that’s not a reality for some. You’ll want a lower rate to avoid more interest. Of course, this should be a moot point though if you’re using a card wisely. 🙂

At the end of the day, wise use of a credit card comes down to common sense. If you don?t buy items that you don?t need or can?t afford, and you pay off your balance each month, you will be in good shape. Follow those rules, and you can enjoy all the benefits that using a credit card has to offer.

 

What are some other wise ways to use credit cards that you would recommend? What is the first thing you look at when thinking of applying for a new credit card? For me it’s the rewards. 🙂

 

 

Photo courtesy of: Lending Memo

How to Make Retirement Planning Easier

Retirement Planning

Retirement PlanningRetirement planning?is an easy thing to put on the back burner ? until retirement starts to get closer and you realize you haven?t made the proper preparations to put you and your family in a good position. To make sure you are ready for retirement and are able to sustain yourself financially for the rest of your life, you should get started as soon as you can.

The good news is that retirement planning doesn?t have to be as complicated or scary some might believe. By coming up with an investment plan early on, and then sticking to that plan?you should be able to make some decent headway towards reaching your specific goals. You will most likely have to sacrifice in the short term to be able to put away money as part of your plan, but that commitment will be well worth it in the long run.

Keep Your Retirement Planning Streamlined

One of the biggest problems I saw in my job as a stock broker was that many individuals had retirement accounts all over the place. They would have accounts spread across a number of different online brokerages, not to mention several old 401k plans sitting with their employers. There is wisdom in having several brokerage accounts, for various reasons, but being too spread out will only make things more difficult especially if you lack the time to manage them all.

That is also not to mention the fact that being so spread out can make it difficult to know exactly how diversified you are and if you’re overlapping in any areas. When it comes to retirement planning you want to make it as simple as possible, not more difficult. In the event that you do have multiple accounts then you’ll want to make sure you’re on top of them so they don’t go off track. Personally speaking, I use Personal Capital?which is a free tool which allows to congregate all your accounts into one location – simply to watch how the entire portfolio is performing and see if there are any expenses you can mitigate.

Another option to consider if you want to streamline your investing is to consider using a robo-advisor, like Wealthfront. With Wealthfront, or most other robo-advisors for that matter, you get the benefit of a financial advisor without the nasty fees. This allows you to focus on growing your assets and allowing someone else to manage the ins and outs of the investing for you.

Take Advantage of Your 401(k)

If your employer offers a 401k along with a 401(k) match, you should take advantage of it as much as possible. I love the 401k match as it’s free money, which there is none better especially when it comes to saving for retirement. Take the time to learn about the program and generally choose the funds that are lower in fees as those will likely be broad based index funds.

If you’e not certain where to invest your 401(k) monies ask your Group Benefits area what educational offerings the 401k provider offers. Many providers will offer free courses or materials that will not only help you determine what kind of portfolio you may want to think of pursuing, but also make your retirement planning smoother overall. Don’t feel shy about taking advantage of those offerings as they’re there for you and your retirement planning is worth making sure you’re comfortable with what you’re doing.

Stay Out of Debt

A great way to make retirement planning easier is to reduce your debt as much as possible. By killing your debt now you will have more money to put away for retirement as well as have little to none when you enter retirement. Things like mortgages?and auto loans are great to try and eliminate while you are still working so you don?t have to worry about those payments once you enter your retirement years.

The most important piece of retirement planning advice you can receive is simply to start as soon as possible. There is no time like the present to think about your future and how you are going to pay for it. Even if it seems like a long way off, retirement might be here sooner than you think and you need to have the money in the bank to handle your expenses and be able to live the lifestyle you hope for after your working years are behind you.

 

What are you currently doing to make your retirement planning easier to manage? When did you start actively saving for retirement?

 

 

Photo courtesy of: Lending Memo

 

 

 

Debt Reduction and Elimination – Introduction

Debt Reduction

Debt ReductionAs many of you know, I recently bought Wise Dollar from Jose, who started the blog originally. As I was looking to buy the site one of the things I did was go through the existing posts to see what needed a little more love and light of day. That is where I discovered this post on debt reduction and overall killing of debt.

Seeing as I have my own personal experience dealing with debt I saw a good opportunity to go through and give it some healthy revisions. 🙂 This will also be a part of a small series on debt reduction tips and strategies to implement as you seek to pay off your debt.

Debt is Enslaving

Remembering back to my personal debt payoff experience?there was one palpable, recurring feeling I experienced …that I was a slave to my debt. I had made the incredibly poor choice of financing my wants and desires with credit cards. This is not to say that credit cards are evil, per se, as they can be a good tool to have in your financial toolbox, but I was using them because I was not content with what I had. The ending result was nearly $25,000 in credit card debt.

Going back to the slave analogy, it meant that I was obligated to the credit card companies. As a result of my poor choices, I now owed them a significant amount of money and received little to no value out of it. True, I had the things I bought, but that was largely crap. If the money I owed was due to a mortgage, I could understand the value of that, but this was not the case. Instead, I was beholden to the card companies for thousands of dollars of interest that I owed for my poor choices. This is not meant to shift blame, or complain by any means, as I take full responsibility for my choices, but to point out that when you’re in debt you’re enslaved to whomever you owe money to – like it or not.

Unfortunately I am definitely not alone in my debt journey as we have roughly $854 billion in credit card debt?here in the States. That is a staggering number to look at and breaks down to the average family carrying?credit card debt of?just over $15,000. This is not including student loan debt or other consumer debt. The source of the debt aside, the sad fact is that when you’re in debt you’re obligated to someone else and part of your hard earned money belongs to someone else each month. This is why beginning to work on debt reduction and an overall killing of debt is so essential.

What is at the Core of Debt Reduction?

Over my debt reduction and payoff journey I learned a number of lessons that I still carry with me today. Chief among those lessons however was learning that reducing debt and killing it altogether means one thing – freedom. It is quite simple really, if being in debt enslaves you to lenders then reducing your debt completely would mean the exact opposite.

If you think about it, debt reduction means that you have more control over what you can do with your money. It means that you can have more money to save for retirement, save for college for your children, save to buy a house, etc. That control equates to freedom of choice to do what you darn well please with your money. That freedom is well worth the cost of pursuing debt reduction.

What is Needed in Order to Kill Debt?

I’ve spoken about this before on Frugal Rules, but the key to debt reduction and killing your debt all together comes down to one thing…attitude. This is not a “I want a puppy” kind of attitude, but an attitude of going?after debt like a pit bull. Yes, doing things like cutting expenses and finding other ways to save money?is great, but they will only take you so far.

At the end of the day you need to attack your debt so it can be killed once and for all. Personally speaking, it wasn’t until I adopted this attitude that I was successful at debt reduction. I’d start and stop only to end up in the same place – broke and in debt. I had to get into a?mindset of making more money and killing the debt. This, of course, was done alongside my debt reduction plan, but this attitude was vital to becoming debt free.

If you’re struggling with your debt reduction plan or even getting started at paying off debt, then I encourage you to take a look at what your debt is costing you in terms of your future and things you want to accomplish and this should be a great way to give birth to the attitude that’s needed to begin killing your debt.

 

Are you currently working to pay off debt? What have you seen to help you with debt reduction? How long did it take you to get that attitude of wanting to kill your debt?

 

 

Photo courtesy of: StockMonkeys.com