Saving $46,728 by Bucking America's New Car Norm

My friend recently sold her 1992 Volvo that she’s owned since 1996.

I’ve had countless conversations with people trying to balance their financial life, and when the conversation turns to their transportation expenses, excuses pop up faster than a Ferrari. The most common excuse: “I don’t want to deal with the high maintenance cost of a used car.” I sketch out the math for them, I explain that if they set aside half of their current car payment for maintenance, all but the most serious of problems would be paid for, and I tell them how much I’ve saved by my car choices. Still, it’s a rare instance I convince someone that they can reach their goals by ratcheting back their transportation costs.

It’s under this context that when my friend, also a financial professional and frugal by nature, told me she kept a maintenance cost spreadsheet on her 1992 Volvo that I got excited. I knew that someday I was going to have a treasure trove of data to share with clients and readers. Well, this year is the year. In her spreadsheet calculations, after 22 years of ownership, the math no longer penciled out on getting the Volvo fixed. She’s moved on to a Prius.

I set about researching the historical average expenditures by U.S. households on transportation and calculating how much she saved by bucking the American norm of getting a new (or new to you) car every 6-7 years. The grand total she saved over the 22 years she owned her Volvo? $46,728.

She’s likely saved a lot more, perhaps $10,000 to $15,000, on insurance costs and registration. Most people, when considering the cost of buying a new car, only look at the monthly payment. They don’t take into consideration all the other factors that they’ll be paying for: interest, higher insurance, higher registration, warranties, and for those leasing, the “turn-in fee.” The largest “expense,” though, is depreciation. A new car loses 20% of its value in the first year, and 15% each of the next nine years.

American’s love their cars. I get that. Personally, I don’t care about cars, so it’s easy for me to choose to spend less on transportation so that I can meet other goals. And if you’re meeting all of your financials goals, then how much you spend on a car doesn’t really matter. But if you’re struggling, living paycheck to paycheck, not funding your retirement, or having constant financial emergencies, perhaps it’s time for you to take the Volvo approach.  

If you'd like to learn more about spending money, and saving money, Stacey's book is available on Amazon and at thefinancegym.com, and videos available at You Tube.

My Dad and the Value of having an Appointment with a Financial Advisor

Welcome to "The Finance Gym Action Plan for a Better Life with Money" video series. My name is Stacey Powell and if you're ready to not just know better, but do better your money, then you've come to the right place.

The last several videos, I've been focusing on Chapter 7 in my book, which is the grown up stuff.

All the stuff which is for most of us not really fun to do. Making decisions about insurance. Hiring a financial planner. Do I hire a tax accountant or not?

One of the things I try and do in that chapter is I try to help people make a decision about: is this something that I can learn on my own, and make decisions for myself? Or is this an area where I should go hire a professional?

And so today I'm going to share a story with you about my Dad, may he rest in peace, and sorry Mom, if you're watching this, but you know it's true.

I love my Dad, and anyone in my family will tell you: I'm just like my Dad. He was super smart, he was highly capable, and he loved learning. It's really unfortunate that he lived in a time mostly before the advent the internet until he got into his later years. He was also a little mistrusting of salesmen, even though he was kind of a salesman.

What all of that meant for him was he would not seek the advice of a financial planner until he had studied everything he needed to study to learn to make his own decision. Then, maybe, he'd go see someone. The same thing about insurance. And not just simple things like car insurance, but complicated insurances like long term care insurance.

When I started getting more and more into financial stuff and realized my parents had two long term care policies, I asked "Why do you have two long term care policies?" His answer? "I haven't done all the research I need to decide which one to keep." So he just kept them both. There's many of those stories that my brothers and I chuckle about from time to time.

Why didn't he make decisions? Because he hadn't fully studied everything he needed to study to make a final decision.

Here's what I like to teach people using my Dad as an example: sometimes the best reason to hire professionals is to have an appointment and a deadline.

For my Dad, a deadline would have changed everything. He put stuff off because he was such a perfectionist and he was so smart that he wouldn't get to the point of making a decision. If he had just hired a financial planner and put a little bit of trust in that person, or simply had an appointment he had to show up to, it would have been an impetus for him to get all that reading done, go see that person and make a decision.

Left to our own devices, we all walk around thinking, "Hmmm, I should get my estate planning done; I should probably buy life insurance; I should probably take care of that long-term care insurance." But we don't have a deadline.

Hiring a financial planner provides you an appointment and a deadline to get it done.

On any given day, what are we going to do? Do you want to go to swim practice with your kids or stay home and make decisions about insurance? It's a no-brainer.

When I started the firm Creating Answers, a financial coaching company, providing consistent accountability was one of the core objectives. Once a month, clients have an appointment to get on the phone or walk in the door and talk to us about their money.

Are they getting value from that conversation? Absolutely. But I'll tell you what they're really getting value from: every single month having an appointment to talk about their money.

So take a lesson from my Dad. If you don't have an appointment with someone in your world to talk about your finances, go make one.

If you'd like to talk about this more, come join us over at our Facebook group, Team Do Better, signup for the videos below, or go sign up for our weekly newsletters at Finance Gym. 

The One-Third Money Rule

Hi! Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell and if you’re ready to not just know better but also do better with your money, you’ve come to the right place.

The last few weeks, we’ve been showing videos on the four letter word “debt” and as I’ve looked at them, I realized, oh my god, they’re really serious. Like, I’m really serious when I’m talking about and telling you to stop using debt in this very serious tone.

Maybe I shouldn’t have been quite so serious. But you know what? It’s a serious issue. But today we’re going to talk about something a little bit more fun around debt and that’s how you can accelerate your debt payments in kind of a fun way.

So one of my very favorite money tips that I ever got and now it’s the favorite money tip that I give, I like to call the one-third rule. Whenever you get extra money, no matter what kind, you divvy it up in thirds. One-third goes toward your debt. One-third goes into savings because we do that equally and then one third goes towards something fun, something that you’ve really wanted, something that you haven’t let yourself buy because you’ve been so busy paying down debt over here.

So whether it’s a tax return, a bonus at work, birthday money, yeah, even birthday money, like if you’re serious about getting out of debt, even birthday money, an inheritance. Now if you get some huge inheritance, I’m not suggesting that you use the one-third, one-third, one-third rule. I’m suggesting that you go talk to a certified financial planner.

But if you get a $5000 inheritance, $10,000, $20,000, even something small, still sit down and think about this one-third, one-third, one-third concept because I think like with everything in life, if we do things in a more balanced approach, it benefits us. It benefits the mission we’re on. I see so many people get their tax refunds every year and use it to pay down debt and then they use their credit cards all year long and then they get another tax refund and they use it. It’s just this ongoing cycle.

What would it look like if you had a tax refund and you had no debt to put it down towards? You can do a one-half rule. Half of it goes towards savings and half of it goes towards fun.

So this is a tip that I’ve seen really accelerate people’s mission to pay off their debt. I’ve seen it accelerate their mission to build their savings and the other great thing about it is that you also kind of remember that when these little pockets of money come up, instead of just immediately shoveling all of that money off here towards paying down debt, it in a way motivates us. So that’s my favorite tip to get yourself out of the four-letter word “debt”.

So, as always, I would love it if you would come join us over at Team Do Better on Facebook. You can sign up for our newsletter over at TheFinanceGym.com. Subscribe to our videos right here and the next time you get some extra unexpected money, sit down and think about where you would like to spread that out to.

Should I Save or Pay My Debt Off First?

Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell, and if you’re ready not just to know better but do better with your money, you’ve come to the right place.

Lately, we’ve been talking about the four letter word “debt”. How to stop using debt. Today I’m going to talk about how to, both, stop using debt and how to pay off your debt. I get asked this all the time. Now should I pay all my debt down first and then start saving? And in fact, if you watch Dave Ramsey, he says to save $1000 and then do nothing but pay down debt whether you have $5000, $20,000, $60,000.

I disagree. I think that it’s really important that you pay your debt down at a rate somewhere equal to what you’re saving. Because if you don’t have savings set aside, it’s like Groundhog’s Day all over again. Emergencies are going to happen. They are always going to happen, and you’re going to need a way to pay for the emergency. If you made a commitment to stop using debt, but you have an emergency, and you have to keep going back to the credit card, energetically, it just doesn’t work. We all think a lot harder about what our options are when we have to take money out of our emergency savings account than if we just pull our credit card out.

It’s something like needing a root canal and you don’t have savings. Well, I’m certainly not going to tell you that this is the moment to absolutely stop using your credit cards. But if your TV breaks, stop watching TV for a while. If your tires go bad, well, you know what? Maybe it’s time just for a couple of months to put used tires on or take public transportation or borrow somebody’s car. There are always options out there and we look at the situation differently when we're using our savings account rather than our credit card or getting the help from some other place.

So my recommendation when it comes to paying down debt and saving is: if you’re paying $500 to bills, put $500 into savings. Make sure you’re building your savings at a rate somewhere equal to the amount that you’re paying your debt down.

As always, these things aren’t easy to do on your own. If they were, you would have done it by now. I would love it if you would join us. We have a support group on Facebook called Team Do Better. It’s private. The only people that are in there are people just like you who are ready to do something different with their money life.

You can also sign up for our newsletter at TheFinanceGym.com or subscribe to our YouTube video series right here and be sure to watch next week when I give my one last final great tip about how to get out of debt.

Prioritizing Needs vs. Wants

I no longer need or want a dryer.

We need air, shelter, water, and food (in that order).

Survival rule of threes: You can survive for three minutes without air; three hours without shelter; three days without water; and three weeks without food.

Absolutely everything else is a want.

When it comes to my personal finances. I need emergency reserves.

Everything else is a want.

It’s so easy to get distracted by our wants because there are so many of them and they are so easy to fulfill. I want a new pair of shoes, the store is just down the street, and they’re only $50, done. The problem is that those shoes aren’t going to do anything for me in the long-run.

My favorite financial want vs. need dilemma was when my husband and I moved into our new house and there was no washer or dryer and our emergency reserves were just under my comfort zone. We went to the laundry mat for a month before a friend gave us a free washer because they had just upgraded. Then I wanted a dryer, but my reserves were my primary concern, so we started hang drying our clothes because it was summer and 100 degrees outside. Months later, I no longer wanted a dryer. It turns out that I like hanging my laundry to dry—it’s good for my clothes, the environment, and my pocketbook.

Designating my emergency reserves as my financial priority helps me put my life into perspective and I haven’t even gotten to the amazing emotional rewards.

My emergency reserves provide me with a sense of freedom. When shit hits the fan, I’m prepared. Just want to emphasize that I just used “when” not “if” because no matter what, shit will hit the fan. That’s life. And it’s not just when there’s an unexpected home repair, it’s also when I want to make a life change.

My emergency reserves provides me with choices. The choice to live my life as I see fit. This does not mean to buy the things that I hope will make my life better. I’m talking about the freedom to change careers, travel the world, or even start working as a consultant.

The absolute best part about having emergency reserves is not worrying. When I have less than three months of reserves, I’m constantly stressed that something will pop up, because expenses are always popping up. When I have six-months socked away, I can focus my energy on the important things in life, because I’m not constantly worried about my emergency reserves.  

What's your financial priority? 

-Leah Schonlank

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

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