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.

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.

4 Secrets to Financial Health - Finance Action Plan - Part 2

Welcome to The Finance Gym Action Plan for a Better Life with Money video series.

If you’re ready to not just know better but do better, you’ve come to the right place and today I’m going to share with you the secret to financial health.

The secret to financial health is earn more, spend less, save more, and don’t debt. That’s it. Simple. If you can do all four of those things consistently, you’re not going to have any money problems at all.

But you probably wouldn’t be watching this video if you do all four of those things consistently. So we’re going to delve just a little bit deeper today. If you’re following along in the book, I want you to turn to page seven, chapter one, and if you don’t have the book, that’s all right. Grab a pencil and a piece of paper and we’re going to write a few short paragraphs about a few questions.

So, one of my great beliefs is that we spend so much time looking at numbers when we try to fix our financial problems. We don’t really connect with our feelings and our thoughts and our beliefs around it. So I like to have people write down what they think about their saving, their earning, their debting or not debting.

So on each of the four pieces of secret of financial health, I want you to answer these questions. Thinking about the last year, how was your earning? And about the last year, how was your spending?

I also want you to write a short paragraph about your savings. Did you save? Did you use your savings or would your short paragraph be two words like mine would have been years ago. What savings?

And then of course debt. Write a short paragraph about how your debt was over the last year. Were you chopping it down? Were you growing it or you just don’t have debt? If you don’t, write a really great paragraph about that and pat yourself on the back.

Last but not least I want you to back up and look at the big picture and write the short paragraph just about your overall feelings about how you and your money are.

Hope you learned something by the power of putting pencil to paper today and remember, you don’t have to do this alone. In my Date Night with Your Money chapter, I talk about the power of tackling your next money to-dos as a part of the community.

Gratitude for Milestones

I got an email from a past Boot Camp member the other day. She wanted to let me know she’s passed the milestone of accumulating over $100,000 between her reserves and retirement, and that she was grateful. 

That’s a huge number. Who wouldn’t be grateful to be staring at that number on a piece of paper? 

It made me wonder, though, if she experienced gratitude along the way, with every deposit into her savings and retirement account. When people start trying to figure out what's wrong with their money, they dive into the details. They pour through their credit card statements, utility bills and examine how much they’re eating out. They look at the amount they’re putting away every month. Details are important, but they can also keep you from seeing what is most important: the big picture. 

It’s hard, month in and month out, to get excited when you’ve paid just a portion of a debt off, or put just a little away in savings. That singular action you take by sending money to your 401k or IRA or emergency reserves account is one thread of your overall safety net. We should find a way to be just as grateful for that one thread, as we are for the whole net. It’s all of those threads that help us weave the entire net.

Experiencing the gratitude propels us forward as well. There isn’t much better in life than the feeling of deep gratitude. It’s the kind of feeling that you want to recreate. Connecting that level of deep gratitude of caring for yourself via your savings, and for reaching such an important milestone makes us want to do it again, build more, and hit the next milestone.

I have a debt that I’ve been working on paying off. It’s a large debt that I want gone. Sometimes I’m not all that happy about sending that check off every month. Sometimes I’m annoyed at myself for having the debt. But when I was looking at my own big picture numbers this month, I realized that I’m at the one-third of the way to the milestone of it being gone, and that I’ve made a huge dent in the overall debt. Deep gratitude swept over me, and when I sent the check this month, I smiled to see it go. 

I hope I can remember every time I send that check off to keep smiling. I hope I can remember that sense of gratitude.

What one little thing do you do every month that you should be grateful for?

-Stacey Powell

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