BUY USED !

I have always been amazed by how much money broke people throw away on new vehicles.

A coworker (who is flat broke) recently told me that he was buying a new car because the payment was the same as the used car he was looking at. What he didn't realize is -a) he wasn't getting a good price on the used car (paying almost double its value after financing) and -b) the payments on the new car were for twice as long those on the used car.

When I suggested paying cash he looked at me like I was crazy....but with a little PATIENCE he could save himself a lot of money...let me explain.

He was driving an old clunker that needed some major repair but was worth about $1000. He was planning on putting $1000 dollars down and paying about $350 per month.

If I were in his shoes (and I have been) I would drive the clunker as long as I could while saving the $350/month and trying to sell the clunker. If he could hold out for 2-3 months he would have $3000 with which to buy a used car in fair condition (1000 from clunker, 1000 cash, and 1000 saved). Now this car will have some flaws and may not be pretty. It probably won't be one he wants to keep for long but contrary to popular belief a reliable one can be found for 3K. I know because I have done it.

I recently bought a 10 year old Toyota Camry in excellent condition from a reputable dealer in my area. I paid $3800 drive out and have spent less than $100 on it since. That was 16 months and almost 30,000 miles ago.

If my coworker drives this car for about 6 months while continuing to save the 350/month he will have another 2k saved. Put that with his used car (which hasn't dropped much in value and can usually be sold fairly quickly) and he has 5k with which to buy a nicer used car.

If he continues this process every 6 months he will be in a $14,000 car in 3 years. If he buys the new car instead he will have 2 more years of payments and still be in a car that is worth about $14,000.

I have followed this process myself and currently have 3 vehicles completely paid for. They have 80K, 90K and 350K miles on them but are all extremely reliable and comfortable to drive. My next post will be on how to find good buys on reliable used cars.

Cut the Cord

The cable that is...

I know that cutting the cord is not easy but with HD reception available in most areas via an over the air antenna and the availability of most shows online it is easier now than it has ever been.

Most of us would not consider giving up our high speed internet just to save a little money. Even those of us who do not rely on it for work consider it a necessary utility. However, with most DSL providers in the $20-$40 range, cable tv costs can quickly dwarf that of high speed internet. So why not utilize that speed to watch TV?

That is exactly what my family did several years ago. We live 60-90 miles from the local network transmission towers in Houston use a terrestrial antenna with great results. The annual Super Bowl party is held at our house in large part because we get a better HD picture than do our friends who have cable and satellite. We subscribe to the $10 per month Netflix plan and have a free account with hulu. I was a initially concerned about picture quality but have been pleasantly surprised. Most cable shows that are not available via network television, netlix or hulu have a dedicated website that will show full episodes a day or two after they originally air. Our entertainment center houses a 50in plasma, an HD DVR (Philips DVDR3575H - $250) and a dedicated entertainment PC ($200) that uses a wireless keyboard (FK-760 - $60). For the cost of about 4 months of cable we will never have that bill again.

The one problem I still have is NFL football. I get to watch the Texans every week and get Sunday Night Football. However, I do not get Monday or Thursday night games. I'm a big football fan so this part is frustrating, but still is not worth paying that outrageous cable bill. Maybe this will be the year that NFL network offers an online subscription for live games.

Never buy on impulse

Our worst mistakes with money are often the things we do on impulse. Retailers price items at $49, $99 and $199 because research shows that most of us will "buy it now" at those price points. We typically put a lot of thought into larger purchases, but it is the smaller impulse purchases that often bust our budget.

I have an odd personality in that I am a tight wad but also an impulse buyer by nature. In order to control my impulses I follow a process similar to one recommended by Larry Burkett.

I keep an "Impulse List" in the notes application of my cell phone. Rather than purchasing an item that is not in my budget I add it to my list and abide by the following rules.

1) An item must be on the list for 2 weeks before I can purchase it.

2) I must get a price from 3 different sources.

3) I can only have 2 items on the list at a time.

4) I must budget for it and pay cash.

I implemented this strategy a few years ago and can identify with Larry when he wrote:

"I rarely buy anything on impulse. Do you know why? Because long before I have found two more prices on the first item, I find two more items I would rather have. A person could easily go broke saving money on good buys. The only way to conquer the impulse is self-discipline. Without discipline, no budget will help. 'For a man is a slave to whatever has mastered him' (2 Peter 2:19b)."