Is Now A Good Time To Buy A New Car?

by Tyler on March 2, 2014

If you are in the market for a new car this may be the time to act.  Economics 101 reminds us that there is an inverse relationship between price and supply.  That is, when supplies increase, often times prices decrease.  That’s exactly what’s happening with the current auto market.

Increased Inventory

Several factors have conspired to lower demand for new cars, thereby increasing inventories for many dealers.  Weather has played the most significant factor.  After all, who wants to go new car shopping in 10 inches of snow?

car-dealershipYou can use this glut of inventory to your advantage.  Auto makers and dealers are offering some sweet incentives to attract buyers to take some of this inventory off their hands.  Be sure to do your homework before you step foot on the lot.

Manufacturer websites are a good place to start.  For instance, Chevrolet.com has a deals and offers page which lists financing deals (Financing?  No thanks; I’m paying cash for my next car), rebates and incentives.  If a deal strikes your fancy, you can click “View Inventory” to see vehicles in your local area.  Other manufacturers offer a similar service on their website.

Low Rates

Those looking to finance a deal on a new car will find financing rates still fairly low, but one would have to expect them to increase over time as changes in monetary policy will cause borrowing rates to rise.

Locking in a low rate now can save you a significant amount for a large purchase such as a car, but keeps the terms as short as possible – no one should pay on a car loan for 72 months, in my opinion.  If you need that many months to buy a car you cannot afford it.

Tax Returns

For many, this time of year brings the promise of a tax return.  If you receive a large return this year, I’m hoping the first thing you will do is adjust some forms with your payroll office so you don’t get a large return next year.  After all, why give Uncle Sam an interest-free loan all year?

The second thing you should do, if you are in the market for a new car, is use some or all of that tax return cash towards the purchase of a new(er) car.  Don’t expect dealers to be pleased to hear you will be putting down a large down payment, or paying cash outright.  Dealers and manufacturers make a lot of money on financing, and they are all too happy to sign up for 60 months of payments.

Keep your preferred payment method to yourself until after you’ve been quoted a bottom line price.

Remember that buying a new car is usually more expensive than buying a quality used car.  If you have a hang up about buying a used car, remember that all cars are “used” immediately after they are driven off of the dealership lot.

You must judge every deal on its own merit, and not perceive a new car to always be more expensive than a used card, and vice versa.

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I spent a lot of time as a child camping with my grandfather.  He taught me basic survival skills that I have actually put into practice on more than one occasion.

As a father, I want to pass these same survival skills on to my children, but like most people, I’m stuck in suburbia without much land to drop us into a real-world survival scenario.  Lesson one:  improvise.

7 Critical Survival Skills You Can Teach Kids in the Backyard

backyardcamping

1.  How to make water safe to drink.  Fill and empty water bottle with (clean) tap water, but pretend it was just scooped out of a stream and you are unsure if it is safe.  Discuss the various ways to make water safe – boiling it, adding chemicals, etc.  Rig a camp stove or fire and bring the water to a boil for 3 minutes.  Allow it to cool and then share it with the kids.

2.  How to build a solar still.  Now that kids know how to purify water they’ve already found, teach them a way to manufacture water on their own clean water.  Dig a hole a couple feet deep in a sunny area.  Put some green, broken vegetation in the bottom around a clean, empty vegetable can with a wide funnel in the top.  You can also pour some dirty water in the hole to speed things along.

Place clear plastic (I like to use a painters drip cloth) over the hole and secure the edges with rocks or soil to form a fairly air tight seal.  Place a rock or two in the center of the plastic, directly above the cup and funnel underneath.  Leave the still working through the hot afternoon and check it later than evening, or first thing in the morning.  There should be a little pure, clean drinking water in your cup.

3.  How to make an improvised shelter.  Tent camping in your backyard can be a lot of fun.  Unfortunately, if you are in a survival situation, you may not have a tent available.

Teach your kids how to make a simple lean-to shelter.  If you don’t have a lot of trees on your property, imagine a fence or the side of your house is a ridge pole (the top line of your shelter where you will lean long tree limbs, boards, etc. to form your roof.  Cover your roof with some vegetation and crawl inside.

For bonus points, turn on the sprinklers and see if your lean-to occupants stay dry.

4.  How to use a manual can opener.  Do not take this idea lightly.  I’m sure many adults would struggle using a manual can opener.  If you become ill, or worse, and your kids had to fend for themselves from your stocked pantry, would they know how to crack into the cans?

5.  How to apply basic first aid.  Make this lesson age-appropriate.  Obviously, you don’t want to discuss how to seal a sucking chest wound with a six year-old.  Keep it simple with the little ones.  Show them how to rig a simple sling, or splint a sprained ankle.  Discuss infections and the important of wound care.

6.  How to teach basic weapon safety using Airsoft guns.  I’m a big fan of the newer Airsoft models that look and action like their real-world counterpart.  They provide a less-than-lethal introduction to the basics of weapons safety.  Remind kids that Airsoft weapons can do damage as well, and make sure to emphasize the four rules of gun safety:

  • Treat any weapon as if it is loaded
  • Do not point it at anything you aren’t willing to destroy
  • Keep your finger off the trigger until the target is in your sights
  • Be sure the target has been identified

7.  How to build and start a fire.  When it comes to building a fire, nothing beats waterproof matches or a lighter.  The first step of preparedness is to secure those waterproof matches and lighters, because there is really no substitute for them.

The second-best thing to have on hand and know how to use is a fire steel rod and some mechanism for throwing a spark into a dry tender bundle to get a basic ember started.  That becomes the basis for your larger fire.  Show the kids how to build a lean-to fire, a tee-pee fire, and a log cabin fire, all different ways of building your fire.

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A West Virginia water contamination emergency has threatened the lives of residents in a West Virginia community.  Many there are now attempting to live without access to clean water after a chemical spill contaminated the Elk River, the Kanawha County community’s natural water supply.  Where is Erin Brockovich when you need her?

FEMA and Homeland Security are currently inbound with trucks filled with water bottles, but many store shelves have been stripped bare since early Thursday.  This recent West Virginia water contamination emergency definitely qualifies as a real-world survival scenario, and should prove to be a great reminder for the rest of us that having backup water is a must.

rainbarrels3 Reasons You Must Store Water

Our family recognizes the important of having clean water, and has taken steps towards an emergency water plan, but preparing for emergencies is sort of like saving money – we can always do more.

If you are not convinced having some extra water on hand is important, consider the following.

  • Humans can only survive about three days without water, less if the elements are extreme.
  • Water is a basic means of sanitation – from washing dishes to bathing and flushing waste.
  • You will need water to reconstitute all those cans of dehydrated food you put away for a SHTF scenario such as this one.

A Water Emergency Plan

When formulating your family’s emergency water plan, start with the most immediate needs and grow from there.

Like any emergency preparedness plan, you must balance issues such as likelihood of scenario affecting you, storage space and budget.  It would be much more difficult for people living in a small apartment to store two 55-gallon drums than someone living on 5 acres.

Likewise, it would be hard for someone struggling to make ends meet to stock a full pantry and a year of Mountain House meals.

Talk things over with your family, and consider space and budget.  Find a balanced plan for storing food and water than helps you sleep at night, but does not unnecessarily strain other areas of your life.

With that in mind, here is my family’s four-level water emergency plan.

  1. Store 72 hours worth of water.  This first-level storage should be in the form of a mixed variety of gallon water jugs, plastic water bottles, and water packets (great for bug out vehicles). 
  2. Store 30 days of emergency water in 5-gallon containers or 55-gallon drums.  The general rule for determining how much water to have on hand equates to roughly one gallon per person, per day.  So a family of four needs access to about 120 gallons of water, or 24 5-gallon containers.
  3. Have a way to collect water.  Consider adding a rain barrel or two to your backyard.  Wide, shallow “kiddie pools” can also collect significant amounts of rain water in a thunderstorm.  Learn how to make a solar still.
  4. Have a means to treat non-potable water.  Water is heavy and takes up a lot of space, so for most people, storing anything beyond the requirements of level two is difficult.  For longer-term disasters, you will need to make plans for treating other water sources to make them safe to drink.  Have backup heat sources for boiling water.  Consider some iodine drops, bleach and solutions made specifically treating water.  Look into a water filter.

Remember the rule of threes:  You can only live 3 minutes without oxygen, 3 days without water, and 3 weeks without food.

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16 Reasons Why You Are Still Broke

by Tyler on January 9, 2014

Thirteen years ago I was broke.  I mean flat broke.  I was stuck in a dead end job.  I had a mountain of student loan debt, a smaller mountain of credit card debt, a new car lease, and a newborn baby.  I was stressed, depressed and anxious all the time.  I felt like an elephant was permanently parked on my chest, like that guy in the COPD commercial.  It really was a lousy way to live.

Fortunately, the birth of that newborn baby inspired something in me.  I decided it was time to get my butt in gear, to be a man, and get about rescuing my family from the debt that held us all hostage.

Along the way I learned some painful lessons about myself, and I begin to recognize why others stay in this perpetual state of being broke.

16 Reasons Why You’re Still Broke

newredcar1.  You buy a new car every four years.  This described me pretty well from the time I hit 20, and well into my 30s.  While I’ve never been a “car guy,” I still dreamed about a cool car when I was 16, and a nice car when I left college and started working, and an even nicer car when I got married.

To make those car dreams a reality I leased, then bought, then traded up and bought again, each time accumulating more and more debt.

2.  You rack up $100,000 in student loan debt for a $30,000 a year career.  It’s sad to see so many people willingly placing themselves into the bondage of student loan debt in the name of a degree.

I took on loans myself, though I managed to work part time and keep my final balance under $20,000.   Still, it’s hard to start out on the right foot when you owe more than a starter home to Sallie Mae.

3.  You use credit cards to buy groceries.  Some will argue this is a savvy move, and if you are a responsible person who would never be tempted to charge just a bit more to collect reward points, I suppose it is pretty smart.  Unfortunately, most people do not fit that category, myself included.  Better to avoid the temptation and take a sharp pair of scissors to your plastic until you are ready to keep things in check.

4.  You eat lunch out every day.  I like to eat out as much as the next guy, especially for lunch when the walls of the office are closing in like that scene in Star Wars with the human trash compactor threatening to squeeze the life out of a young Luke Skywalker and his friends.  But eating out gets expensive.  Pick one day a week to eat out with coworkers, and brown bag it the other four days.

5.  You think you deserve the very best of everything.  When I found myself broke it occurred to me that I had acquired a taste for some of the finer things, and was using Visa to finance it.  That is not sustainable.  I still appreciate quality, but that is often not measured by a price tag.

6.   You bought too much house.  Being house poor stinks.  Talk bout feeling trapped.  How would you like to be stuck in an underwater mortgage in a bad economy?  Millions of fellow Americans could tell you just how that feel.

7.  You do nothing to prepare for bad times.  Bad things happen.  It is inevitable.  Things break.  People get sick.  People have accidents.  If you have no buffer between you and disaster you are asking for financial trouble.

8.  You aren’t willing to work more than 40 hours a week.  One of the things that finally helped me break the cycle of debt was working extra hours.  I worked overtime at my full-time job.  I worked a part-time job.  I mowed yards for neighbors.  Every extra penny I earned went towards repaying our debt.  Every cent.

beachvacation9.  You take too many expensive vacations.  My family likes to take an annual beach trip every summer.  We don’t worry too much about being overly frugal, because most years, it is the only vacation we take.

Instead of several expensive vacations, we just do one, and mix in a few day trips here and there to see regional things that don’t cost a lot of money.

10.  You try to impress strangers.  One of the motivations I had to lease, buy, and trade up those cars that cost me a fortune in my early 20s was that I probably put too much effort into trying to impress others.  I thought expensive cars were a sign of success.  Trouble was, I had not yet found much success, so it was just a facade.

11.  You save too much money for retirement.  This one might look a little odd at first glance, but think about it.  How many people do you know trying to max out a 401k while piling on consumer debt to finance their lifestyles?  Seems a little ridiculous, doesn’t it.

12.  You can’t tell people “No.”  I’m still working on this one.  I have a big heart and I want to help as many people as I can, but I have to keep reminding myself that my first obligation is to my family.  You simply cannot say yes to every charity, every sad case you hear of, and every opportunity to “give back” that comes along.

13.  You buy your kids too many expensive toys.  Parents and grandparents, especially grandparents, often like to spoil their children with expensive toys.  I get that.  I’m a dad, and I love nothing more than to watch my kids’ faces light up when presented with a special prize.  However, I don’t owe them that.  I owe them security.  I owe them stability – a warm place to sleep, clothes, protection, and hot food in their bellies.  Don’t beat yourself up if all you can do is get by.  You are a great parent, regardless.

babycollegesavings14.   You save too much in your kids’ college funds.  Since the invention of 529 plans and educational savings accounts, parents have felt compelled to fully fund their children’s college fund from the time they are in diapers.  That’s a noble goal, but many times parents go broke in the process, or forgo their own retirement savings.

Find the right balance, and remember there are no scholarship opportunities for old age, failing health and busted hot water heaters.

15.  You buy new things instead of repairing old things.  ”Use it up, wear it out, make it do or do without.”  I used to be the world’s worst at tossing something the first time it gave me trouble – weed eaters, DVD players – you name it.  Now, I find myself enjoying the challenge of figuring out how things work, repairing them myself, and extending their useful life.

16.  You cannot be content.  I have discovered that a sure fire way to spend less money is to be content with what I have.  I often lie in bed on a cold, rainy winter night and think of how grateful I am to have a roof separating me and my family from the harsh elements outside.  I remind myself of the many reasons I am blessed, and all the things I’ve been wanting so desperately suddenly don’t seem so important.

Contentment is a powerful anti-debt drug.

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Should I Use Savings to Pay Off Debt

by Tyler on December 31, 2013

At some point in the process of attempting to get out of debt, most people will ask themselves an important question:  Should I use savings to pay off debt?  The answer is a complex one, because there are several variables in play.

The most obvious consideration is whether or not you have enough liquid savings to pay off your credit cards, or other debts.  Even if you do, is it a wise move to wipe out all of your savings to pay off debt?

Types of Debt:  The Good, the  Bad, and the Ugly

onehundreddollarbillsI’m not fond of any debt, in particular, but will admit that some debts are worse than others.  I’d put owing the IRS back taxes right up there with owing a loan shark money as ranking the highest in “ugly” debt.  Trust me; you do not want to owe the IRS money.  If you find yourself owing them a ton of money, try to raise the funds or borrow the difference from another source.

Things like credit cards and car loans fall in the “bad” debt category, because they are usually attached to depreciating assets.  Have you ever borrowed money against a car or a credit card for anything that went up in value?  I didn’t think so.

On the other hand, some may consider debt attached to real estate, or modest debt used to finance an advanced education as “good debt.”  After all, mortgages generally allow homeowners to purchase an appreciating asset that should eventually be worth more than the cost to finance.

Types of Savings

Much like there are several different types of debt, the same goes for savings.  I put savings into three large buckets:

  1. Short-term savings for immediate needs (my car insurance premium, real estate taxes, etc.) in sinking funds
  2. Long-term savings for big goals (college educations for my children, a newer vehicle, etc.)
  3. Retirement funds (Roth IRAs, 401ks, etc.)

Types 1 and 2 can be broken down further into liquid funds and non-liquid assets.  The easier it is to convert an item to cash, the more liquid it is.  Cash savings is the most liquid, and something like equity in a home may be the least liquid (after all, you’d have to sell your home to receive these funds, without tapping a home equity loan).

Now that we’ve established the various types of debts and savings, you can make a more informed decision about using savings to pay off debt.  If you can comfortably pay off all of your bad or ugly debt, without generating fees or taxes, and be left with a solid 3 – 6 month cash emergency fund, you should pay off your debt.

On the other hand, if paying off debt with savings would leave you complete wiped out of a cash reserve, it is not advisable.  You would find yourself in a precarious position:  debt free with no savings.  If you had even a minor emergency, you would be right back in debt.

A compromise may be to use a portion of your savings to jump start your debt payoff plan.  Consider taking 50% of your savings and paying off as many debt accounts as you can, starting with the smallest balance and working your way towards the largest balance.

Then use the amounts you used to pay on those smaller accounts to pay down larger debt.  This is often referred to as a debt snowball plan, and it is how our family became debt free in two years.

 Photo by 401(K) 2012 on Flickr

 

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