Community In Action – Found Money Edition

Posted by The Happy Rock on September 29, 2007

Here are some good articles from around the personal finance community :

Five Cent Nickel shares his story about doing the right thing with found money. It is always encouraging to see others live right.

Debt Beater shares his top five immediate benefits for starting a budget. I totally agree with budgeting starting good communication and exposing problem areas, even though it takes time to find your budgeting groove.

Consumerism Commentary shares a cool link that lets us know how many earths we would need if everyone in the world lived like us. My score was 2.2 earths. It was pretty eye opening to think I can have so much, because others have so little(even if it isn’t totally true).

Finally three great articles from the Silicon Vally Blogger : investing mistakes, a renting vs. buying discussion, and expand your yard by tearing down fences(my favorite). Driving through suburbia it sometimes seems silly that every house has a fenced in $1,000 play set and a beautiful park down the road. Other times I yearn for my own!

» Filed Under Bloggers

Low Minute Users Save With Prepaid Cell Phones

Posted by The Happy Rock on September 28, 2007

The Happy Rockette and I got our first cell phone a little under two years ago. We held out for a long time, because we didn’t want a monthly bill for something that wasn’t a necessity. Yes, I did say it wasn’t a necessity, and it still isn’t for most people. We all survived without cell phones ten years ago, but that is another story.

We got only one phone and the cheapest plan, 300 minutes for $33 a month through Verizon. Recently our battery died on our phone and that got me looking over our usage and contract. I wanted to see through we had made a wise choice, and in hindsight we hadn’t.

We use on average about 80 minutes a month, which with our current plan works out to about 47 cents a minute. Ouch! Even the expensive pre paid plans are cheaper than that.

With our usage being so low I researched prepaid plans, and was quite encouraged. Last time I briefly looked into getting a pre paid cell phone for myself it was ludicrously expensive. It was obvious that the major companies wanted you to buy a month to month plan with a long contract.

My research now reveals that the cheapest and best players in the prepaid cell market were T-Mobile and Virgin Mobile. The rest of the plans had crazy rules or exorbitant prices. Upon closer inspection, Virgin Mobile was getting great reviews and had the best prices.

They have two main minute plans: 18 cent a minute or $6.99 a month and 10 cent a minute. I ran the numbers to see which plan would be the best for monthly minute times of 25 – 300:

The break even point between the two plans was 87 minutes. Anyone who uses over 250 minutes a month is better off with a monthly plan. The takeaway should be clear enough; low minute cell phone users can save a ton of money with pre-paid cell phone plans.

» Filed Under Cell Phones, Frugality, Money Savers

4 Reasons We Rush Into Replacing Our Cars

Posted by The Happy Rock on September 26, 2007

Got an old car that is giving you problems? Scared that your junker is going to leave you stranded? Well, then you might be struggling with the question of when to let go of the old car and get a new one. It is a question I often see people struggle with, and one that people seem to make decision based on emotion or to justify their desire for a newer car.

Deciding that your current set of wheels is more hassle than it is worth isn’t an easy decision. I am not even sure that there is a correct answer, just like most personal finance questions it is a very personal choice. But let’s look at the top few reason people ditch their old cars two quickly.

The biggest mistake is to quickly ditch a car at the first major repair. If the car is in reasonable shape, it will almost always be cheaper to fix the car. From the outside it also seems that they are using the repair bill to justify our underlying desire to drive a better car. Evaluating our materialistic side and keeping it in check is a big key to making a wise decision.
We need to dispel our irrational fear of the car leaving us stranded. I have had it happen a few times, and it is not that big of deal. Today in the age of cell phones, you won’t be sitting helpless for hours upon end. You will be inconvenienced for an hour or two, but it isn’t the end of the world. There are personal factors like criticality of your job or income on the car that do make being stranded a lot worse.
People look at the future payments rather than the total cost of the situation. Paying $2000 a year in repair bills and a little hassle is still cheaper than getting a five year loan shiny new or used car. A $15,000 loan at 7% interest for 4 years will cost you almost $1000 in interest and $3300 in payments just in the first year.
The last big issue is lack of preparation. If we know our car is nearing the end of it’s life, it is extremely helpful to add a new car item to a monthly budget. If you can afford a $400 a month car payment, start saving that amount and you will be able to buy a $5,000 car for cash in a year.

If you don’t think a $5,000 car will last, think again. My Japanese made Nissan Sentra was 7 years old and had 50,000 miles on it when I bought it for $5,500. 6 years later I am still driving it without ever having faced a major repair.

Sometimes we need to let go of our cars, but often we sacrifice some financial success and prematurely rush into a new car purchase.

» Filed Under Cars, Materialism, Planning

ING Direct Lowered Their Interest Rates on 9/19

Posted by The Happy Rock on September 25, 2007

In case you missed the emails and the news like I did, ING Direct lowered there interest rates effective 9/19.

ING Savings accounts went from 4.5% to 4.3%.

Electric Orange Checking rates took and even bigger hit from 4.0% to 3.5%

$0-49,999.99 earns a 3.50% APY

$50,000.00-$99,999.99 earns a 4.90% APY

$100,000.00 or more earns a 5.00% APY

Finally, Business Savings rate went from 5% to 4.75%.

For the $12,000 we have in emergency fund and our average checking account balance, the loss will be about $50 a year. Not a huge loss in the scheme of things. I don’t plan on changing my checking or savings account from ING anytime soon as I love their service, reputation, and interface. I also suspect other companies will follow suit.

*If you would like a free $25 dollar for opening a new brand new checking or savings account at ING direct, contact me for more information.

» Filed Under ING Electric Orange, Personal Finance Systems

Was Paying Cash For A Car Worth It?

Posted by The Happy Rock on September 25, 2007

Previously I shared how we paid off our $15,000 car loan and were able to pay cash for two more cars in the following years.

As I thought back through our story, I was left asking myself “Was it worth it?”.

We got a lemon of a car in the Ford Focus, so yes it was extra hassle dealing with that. The fact of the matter is that bad breaks happen sometimes, even if my research said the Focus should have been pretty reliable. I don’t think making choices based on a fear of low percentage what-ifs isn’t going to breed success.

The decision was close to being a wash in the strictest financial sense. If we purchased the Murano right out of the gate, we would have paid about $17,000 for a similar Murano. That would have left us with financing of $8,000 @ roughly 7%. Since we paid about $8,500 in cash after the Focus trade in, we would have had the loan paid off in a year. That would have wasted about $300 in interest, and about $150 in opportunity cost in savings interest.

The only other thing to factor in is that we would own a car with an extra 15,000 miles on it. Using a Kelley Blue Book estimate that is about $1,000 dollars or so in unrealized savings.

Most of the numbers were irrelevant though. We had spent 4 years digging out of debt, so going back into debt would have proved that we hadn’t learned any lessons. On the other hand, sacrificing the car we wanted for a year and paying cash continued to set the stage for us to win financially. Going into debt would have opened up the financing option again on all other subsequent purchases. This was a test, and we passed. We had the benefits of being debt free firmly implanted in our minds, and we were not about to give them up.

The intangible benefits we received from paying cash seem extremely worth it, what do you think?

» Filed Under Cars, Debt Elimination, Psychology of Spending

Learning From Others – Romance, Giving, and Leadership

Posted by The Happy Rock on September 22, 2007

Here are couple links that I thought were worth some attention over the last week or two :

Giving changes us! Millionaire Mommy Next Door writes a nice article about the addictive nature of giving.

How we dress often portrays how we feel about ourself, and can shape others opinion of us. Clever Dude walks us through some clothing choices that make us look unprofessional.

Two nice tips for adding some romance. 5 outdoor dates(with some local New Jersey flair) and some free ways to increase romance.

jeanjeanie discusses the cost of overcoming her fears. I like the open discussion, and I still have similar struggles to this day!

And finally a slightly off topic post for those of us whose jobs and pursuits require us to be leaders that explores influence as true leadership.

Enjoy!

» Filed Under Links

Our Personal Paying Cash For Cars Story

Posted by The Happy Rock on September 19, 2007

Last post we talked about changing the way we talk about car loan debt, now let’s talk about avoiding the debt in the first place.

The picture to the right is the car we own today. Ok, ours is just a normal bronze Murano, but you get the picture. In this post I wanted to outline the strategy we followed after going $15,000 for a 1999 black on black Toyota Celica.

First off, I didn’t realize it until years later, but buying the Celica was a mistake. My wife liked the car so much that she may disagree, but going into $15,000 of debt in the first few months of marriage was not a wise choice.

The payment was just over $300 dollars a month, but the loan was our highest interest debt and was paid off in two years. During that time we decided not to go into debt again. We had a lot more debt to pay off, so we snowballed the freed up money into other debt.

Fast forward two years, and we were just about out of debt and had a brand new baby boy. The ride home from picking him up was quite a sight. The rear bucket seats of a sports car don’t accommodate a car seat well. The Rockette was smushed into dash, just so the car seat would fit.

We needed a new car, and fast. We didn’t have the money for the nice lower mileage SUV that we wanted, so rather then going into debt, we traded the Celica and paid cash for a four door Ford Focus hatchback. After a year we were quite unhappy with the Focus; to us it was a cheaply made lemon.

With no debt, we had been stocking away cash at a good clip. Finally, we traded the Focus and paid 8k in cash for a 2 year old bronze Nissan Murano. We had the car we wanted, and were able to avoid going into debt while doing it. Next post I will dissect this strategy, and share some tips for staying out of auto financing.

» Filed Under Cars, Cash, Debt Elimination

If You Are Making Car Payments, You Don’t Own The Car

Posted by The Happy Rock on September 17, 2007

We usually talk like we own the car, but this is just a delusion. If you secure financing for an automobile, the bank or financing company probably owns your car. The person with the auto loan is most likely granted non-possessory security interest in the vehicle. Basically, the bank owns the car and you are not able to sell the car without the loan being paid in full.

The reason I mention it, is to clear up what I think is a major reason it is so easy to be in debt. The lending industry wants debt to sound rosy and cheerful, so that consumers will go into more debt. If we continue to fool ourselves into thinking we own things that are not actually ours, we will continue to by more things we can’t afford. Yes, I said it! If we are paying payments, we probably couldn’t afford the item. We delude ourselves by affording payments!

If you think I am crazy or sound foolish, you probably never received the title to a car in the mail after you made your last payment(or paid cash in full). It is just a piece of paper, but it feels so good for some reason. I would love the world to change how they talk about debt. Let’s talk more about the great feeling of working hard for something and paying for it in full, rather than tricking ourselves into thinking items that we don’t own are ours.

» Filed Under Cars, Materialism, Psychology of Debt

New Look at The Happy Rock

Posted by The Happy Rock on September 17, 2007

The long awaited site redesign is finally done. It did the design and upgrade myself, and I am pleased with the results. It was a very good learning experience, although with all the new found knowledge by the time you finish something like this you are ready to do it again.

I want to thank all the readers and friends that voted a few weeks back. Number 3 was the overwhelming favorite, although it wasn’t my favorite. The first column color doesn’t look right on my home computer, but looks good everywhere else. But this site is for the readers, and the readers spoke! Please, always feel free to drop me an email or leave me a comment if you have ideas for improvements or things you don’t like about the site. I highly value your input, and it is this input that shapes the site!

If you are in a reader, click through to the main page and take a look. Let me know what you think. Remember to leave web browser and version information for any comments about problems.

Enjoy!

» Filed Under Misc.

Don’t Forget Your Health Club Membership Reimbursements

Posted by The Happy Rock on September 13, 2007

Just recently I received an extra $250 in my paycheck, because my application for my health club reimbursement finally came through. I am still waiting on one for my wife, but I will continue to pursue that. This excellent little benefit that many employers are offering will save us $500 this year.

Many more employers and medical insurance policies are offering preventative medicine programs that help you and them save money. If you pay dues at a gym or health club, you may be eligible. My company offers a straight $250 reimbursement on gym fees in a given 12 month period. To receive the payout I had to submit an application with an official receipt or acknowledgment on my gym’s letterhead showing that I had paid $250 dollars in dues.

My company’s offering is quite a liberal program, as most require some amount of proof that you are actually benefiting from the gym membership. These requirements can vary, but usually consist of the health club proving that you went twice a week or some a set number of times a year, like 150.

I have seen actual refund amounts range from $150 – $350 dollars. For anyone that has a monthly gym payment, this can be quite a nice savings, and in some cases covering the whole membership.

If you have never heard of such a company benefit, don’t know if your employer offers it, or have never taken the time to file a the form, start by contacting the person or group responsible for benefits. Sometimes it is a straight company benefit, but often it is offered through your medical insurance.

It is definitely worth a few minutes to see if you can save any money from a health club/gym membership reimbursement.

» Filed Under Fitness, Money Savers

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