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.

5 Strategies to Stop Creating New Debt

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

In last week’s video, we talked about the four letter word “debt” and I promised over the next few weeks I was going to be showing everybody videos with my favorite tips about how to stop using debt. If you’re really ready to stop, I’m going to share with you my favorite few tips about how to do that.

The first one is very important. Cut up all your credit cards. Cut up your credit cards. Let people know that you borrowed money from in the past that you’re not going to do it anymore. Every single avenue you have, to take that easy path of borrowing money, stop. Make sure you just don’t even have access anymore because it’s too hard otherwise and I know maybe you don’t want to do it. I understand that. But if you’re really ready to make a lifetime change, you’ve got to do it.

If you absolutely refuse, then secondarily take them all and put them somewhere where it’s really hard to find, in a bank safety deposit account, with a friend that you know isn’t going to just hand them over to you because some important emergency happened, someone who’s going to talk through things with you, which is my next tip.

Find an accountability partner. Not your best friend who you commiserate with when you run out of money and blah, blah, blah and they make you feel better and they’re going to talk about their money problems and you talk – no, no, no. An accountability partner is somebody who you respect about how they handle their money. You know they aren’t going to judge you. You’re not going to feel judged. Somebody to mentor you and tell them what you’re trying to do. They will be thrilled for you. They will want to help. You have someone in your life like that. Think about who that person is and tell them, “I want to stop using debt. Will you be my accountability partner? Can I check in with you about how this is going?” It’s so much easier to do it with somebody by your side, cheering you on and rooting for you.

Then the last thing is when you think you absolutely have to use credit for some important emergency, I want you to stop and I want you to journal about the thing that you want to buy and I want you to list six reasons that maybe you wouldn’t have to do it, six ideas of things you could do other than using that credit card.

This is on page 109 if you’re following along the book and if the only way you can buy this book is with a credit card, don’t do that. Just go to the store at TheFinanceGym.com. It’s on there under the free downloads. Download that page. Every time you think you need to use a credit card, fill that out and if you make that commitment alone, I promise you you’re like not going to be using your credit card at least half the time because you’re not going to want to take the time to fill that sheet out.

That little thing right there will make a difference and an impact on your life and then my fourth tip is sleep on it. Sometimes our subconscious can come up with solutions that we can’t come up with.

So, if you’re ready, I’m here to support you. We have a group called Team Do Better over on Facebook. Come join us. We will be your accountability partner if you think you can’t find one. You can also sign up for our newsletter at TheFinanceGym.com. Subscribe to our videos right here on YouTube and if you’re ready to do this, do it with us. I would be thrilled to support you.

How to Save Money & Get Out of Debt - Action Plan - Part 1

Welcome to the Finance Gym Action Plan for a Better Life with Money. If you’re ready to not just know better but do better with your money, you’ve come to the right place.

Today is the first video in the series and because it’s the first one, we’re going to talk about beginnings. My financial beginning and then I’m going to ask you about your financial beginning.

So I’m just going to start out by speaking the truth. My journey with money, my path of writing this book and doing these videos is that I was in a complete financial mess and could not pull myself out of it with all of my professional financial knowledge.

I had a dirty little secret that literally no one, not my best friend, no one in my family, no one knew. I filed bankruptcy. It was my secret. There’s a lot to the story I could go into but that’s the truth. I don’t think I need to say anymore.

My financial life was that messed up and it should have gotten better after that and it did a little bit but it didn’t get better like it should have and that almost made me more ashamed that I couldn’t pull it together after wiping away a portion of my debt. I had portions of my debt that I couldn’t wipe away with bankruptcy and every time I want to just get into the story, I remember, you know, we can’t live in our stories. My whole point of what I teach and what I did to make my money life better was to just do it, to just do better, to ask for help, find somebody. Pull up a chair with them and do it with them. If you can’t do it alone, do it with somebody else.

So my question to you is, “What’s your beginning? Why are you listening to this video? If you’ve bought the book and started reading the book, why did you buy the book? What do you want to accomplish? What are your dreams around money?”

You don’t have to do this alone. In one of the chapters in the book, Date Night with Your Money, I talk about the power of tackling your next money to-dos as part of a community. If you want to be a part of our community, subscribe to these YouTube videos or join our Facebook group. Have a great day.

- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready? 

What’s Your Monthly Nut?

Monthly Nut

The Wall Street Journal ran a great article by Carolyn Greer this week, From Spender to Saver to Investor. The financial media focuses so much on investing, it was refreshing to read an article about an every day person with every day money struggles. The story illustrated the exact type of family we strive to help.

 “A reader in Minneapolis has an all-too-common problem. Despite holding down a job in luxury-car sales for the past eight years, he struggles to save money.” The story went on to describe the exact circumstances of so many that I've worked with over the years:

• living paycheck to paycheck
• not living a life of luxury, and
• watch what they spend.

Why, one wonders, would someone who has a steady job and is careful about their spending still be struggling? That’s a question that perplexes millions of people about their own finances.

The answer is often found in their "monthly nut,” the amount of set expenses they have signed up for when they bought their home, car, private school tuition or any other number of financial decisions that we make and are then locked into for 5, 10 or even 30 years. You can tighten your belt month to month all you want. If your mortgage is 45% of your income, getting to the end of any month with extra money is going to be a problem.

I suspect that that is where the solution to Mr. Minneapolis’ quandary lies. His “monthly nut” wasn't mentioned in the article. If he was being honest about his obsession with careful spending, the only answer left is that his core expenses are too high for his income level.

Our financial health equation is simple:

Earn  >  Spend  =  Savings

When we talk about cutting back on our spending, we are usually talking about eating out less, watching our grocery bills and not buying so many new pairs of shoes. But the discretionary areas our spending, according to the Bureau of Economic Analysis, are often only about one-third of our expenditures. Shelter, transportation and health care comprise nearly two-thirds and thus have the biggest impact. I suspect that Mr. Minneapolis’ monthly nut includes a home that is more than 30% of his monthly income. 

Society encourages us to buy the biggest home we can afford. Mortgage brokers and Realtors persuade us, "keeping up with the Jones'" eggs us on, and our tax code puts the cherry on the top. "Oh, but I’ll be able to deduct more." Yes, yes you will.

If you really want to make an impact on the spending side of your financial health equation, get a pencil and paper out and do the math on what your financial situation would be if you bought a home that had cost 80% of the cost of your current home. And it’s of course not just the mortgage, but the total cost of your home impacts the cost of property tax, insurance, utilities and maintenance. The average cost of maintaining a home is around 1% to 3% of it's value. Price matters.

Did you do the math? What would your equation be? What would you do with the extra money you've not spent on your shelter?

“What would you do with the money” is the trick. If you're going to take that money and buy more shoes and dinners out, then you might as well just stay in your bigger home. But if you're going to take the extra money and use it on some important goals you haven't been able to reach, then perhaps its time to start hunting for a new home.

I can hear many people saying “hey, moving, selling and buying a home itself carries a cost with it!” True. If you're going to make a decision like this, you really need to be sure the math pencils out. For many, it will. If you really want to make an impact on your long term financial health, this is a decision that should be considered carefully. Even if you decide not to do it, simply considering it will give you a fresh perspective on your monthly quandary.

And don’t forget to make an honest assessment of the rest of your monthly nut. Shelter is most people's largest expense. Once you’re done with that calculation, move on to your next largest category. Is it transportation, children's tuition, vacations or some other area that is causing the squeeze on your financial health equation? Do that math too.

How much of an impact could you have on your financial health equation if you made one hard choice?


- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready? 

Why Do We Need to Hit Bottom to Change?

For the past couple of months, I’ve been trying to figure out why I (and so many that I know) need to hit a bottom before we implement change.

My current personal quandary is my behavior change due to the current drought. I consider myself water conscious. I’m very aware of our household water usage. And more often than not, I find myself asking someone (friends and strangers alike) to turn off the tap when it’s running unnecessarily. That being said, I also know that I could be doing a lot more.  

For instance, I’ve known for years, that I should implement grey water usage at home. Years! But it wasn’t until last month when Governor Brown declared the current drought a state of emergency that we finally started using our perfectly good grey water at home.

Step one: We switched from environmentally friendly detergent to grey water friendly detergent. Easy to find and reasonably priced at Trader Joe’s.

Step two: Was already done! This is the part that blew my mind. We were already set up for the biggest change, we just had to make a little extra effort to actually do it. Our washing machine already drains into a utility sink, which makes it very simple to stop up the sink and bucket out the water to water the lawn and plants.

The most ironic part of all of this is that we stopped watering our lawn last spring to save the water since we’re planning on replacing it with drought-resistant landscaping. Now that we’re using our grey water, our lawn is starting to come back.

Now, back to money; because everything relates back to money.

Why do we need to hit a bottom before we do something different to change and make our money better?

I’ve talked to so many people that say “I’m good” when I ask them about their money, but when we start diving deeper and asking more questions, they reveal that they’re not doing so good. Turns out that they’re just making due and they just don’t want to deal with it. For most of us, it isn’t till we hit our own personal bottom that we really change anything. And that’s okay. To each his own and all in good time. 

But I want to ask you: What is your bottom? What does it look like? And do you really want to be there before you start making things better? 

-Leah Schonlank

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

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Money Fears: Living Paycheck to Paycheck & the Government Shutdown

At some point in our lives most of us have lived in the fear of living paycheck to paycheck. We all know the risks, yet the majority of Americans live with less than one month of reserves set aside. For many, their "reserve" is their credit cards, for others it’s tapping into their home equity, and for others it's mom and dad (yes, even at 30-something, 40-something and 50-something.)

For many, though, there is no room on the credit cards, no home equity and no one to turn to. They are just one major car repair, health problem or job loss away from not being able to pay their mortgage or rent. This is the stuff that ulcers, sleeplessness and crippling anxiety are made of. Stories of people slipping into homelessness frequently begin with just one unexpected major event that triggered the collapse of what was a shaky financial foundation.

If you’re a federal government employee, though, you probably sleep a little better than most. You probably feel fairly secure that you have a good job, that your employer won’t fold, that your income is secure. Until now that is. The government shutdown is creating massive ripples throughout America. If it doesn't pull on your heart strings quite so much when you envision a $90,000/year employee missing one paycheck, think about the minimum wage maids and maintenance workers stuck in the Grand Canyon. How long can they go without their paychecks and still be able to put food on their family’s table? Where can they turn to for help? Not their neighbors, because they don't have a paycheck either. And while yes, the $90,000/year employee SHOULD have reserves set aside, the truth is that many don't. We've all been there, done that, and there are thousands of them that right now, today, are scared.

How do you ensure that you never have to live in the fear that thousands upon thousands affected by the government shutdown are living in this month? Go open up a new savings account, label it "Emergency Reserves" and move some money in there. If you think you can't, put $5 in there. Just take action. Every month, keep moving money in. If you can’t, still put $5 in there. Don't touch it, no matter what.

I know this sounds so much easier than it is for many people. I know, because I've been there. When I was walking through a particularly challenging financial time in my life, I had a wise money mentor. Every time something would go wrong, I'd call him for advice on how to fix the problem. He refused to talk to me about how to "fix" the problem. Instead, he'd trace back to the core of the problem and advise me to start there. In the beginning, it just annoyed me. "I think I know that if I had six months of reserves in the bank I wouldn't be struggling with this major car repair, but that doesn't help me right now!" He held firm. He'd just tell me "go put some money in reserves."

Annoying.

As time went on, though, and I lived with the annoyance and followed his advice, I could see how focusing on the core of the issue rather than the symptom started to have a great impact. Over time, I became better able to weather financial storms. Over time, the financial storms started to feel like financial flurries, and then just financial breezes.

My hope for all federal employees, contractors and others affected who are living in fear right now, uncertain of how they are going to weather the shutdown, is that they take this time to trace back to how they could ensure that the next time this happens, they'll have less fear. They'll be more prepared. They'll know that they took some action, no matter how small.

-Stacey Powell

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

Are you ready to reach your financial goals? Get motivated. Get support. Get results!