Beware of the "Cash for Clunkers" Bill

Everyone is talking about the new "Cash for Clunkers" bill, but becareful or you might be sorry. The Cash for Clunkers voucher is great if you are already looking to buy a new car. It’s important to remember that getting a good deal on a new car doesn’t automatically mean that you can afford it.

I have a old Ford "Exploder" with 160K miles on its last leg, and want to buy a new F150 4x4. I considered trading in my clunker, but decided to pass it up because spending money to save money is pointless, when it equals a net loss.

Don't get me wrong, I would love to drive around in a brand new truck, but I know better than to bring unneeded financial stress on myself and my family. I don’t need another car payment. Instead I will build up my emergency savings, and payoff my credit card debt. When my clunker does die in the near future, I will probably buy a cheap used truck for a lot less than the price of a new car with the voucher.

Don’t get suckered into buying something you can’t afford because it’s on sale.

What is $5 worth to you?

$5 dollars can buy many things these days, but it's interesting to see exactly how far it will stretch in certain situations. Here is my personal opinion on what is worth five dollars, and what is not.




Worth $5

• A Car Wash - If an old car already has scratches in it, I would rather spend $5 to drive it through a Machine Car Wash, than wash it myself.
• Wine Tasting - Some wineries charge $5, others don't. Who cares! You are having a good time and drinking wine.
• A Flashlight - When you are fumbling around in the dark, what is $5.00
• Parking - If there is no where to park after the first few passes, I would rather pay for $5 for parking than circle the block for 30 minutes waiting for a space.
• Maps - If you get lost like I do, $5 is a small price to pay to reach your destination.
• Foot Long sandwich - OK, So I've been brain washed by the Subway commercials.

Not Worth $5

• Snacks at Movies Theaters - After paying $10 per ticket, I rarely spend $5 for snack at the movies.
• Extended Warranties - I won't spend an extra $5, for an extended warranty on small electronics like an alarm clock.
• Valet Parking - When choosing between tipping the Valet guy, and self parking; I would much rather park my own car and save the money.
• On Demand - Don't spend $5 dollars to watch the cable companies suggested movies, when you can subscribe to Net Flix or Block Busters unlimited monthly rental program.
• Magazines - Since most magazines publish their articles online anyway, it is difficult for me to buy a printed magazine.
• Ring tones - I keep my phone on vibrate, and don't feel the need to bother others with annoying jingles.
• Lottery Tickets - You are 20 times more likely of getting struck by lightning, So don't get your hopes up.

Please comment on what $5 is worth to you!

Count Up to Impulse Buys

We are all guilty of buying things on impulse, and specifically some of us more than others. Usually something catches our eye see, and we immediately justify the purchase by convincing ourselves that it's a necessity. That split second decision driven by emotion can often be detoured with a simple pause or hesitation. According to The Five Cent Nickle, "simply stopping to question your buying decisions can go a long way toward cutting down on frivolous expenditures." That is why I have developed a unique system called "Counting Up to Impulse Buys" which caters to the severity of each impulse.

The next time you see an item that walks the fine line between impulse and necessity, try counting up to the total dollar amount in your head before deciding whether to purchase it. The more expensive the item, the longer you will be counting. You might think twice before buying a $60 pair of shoes if you must first mentally count to sixty. Counting engages your brain in another activity, and removes your focus from the desired item.

I am not saying that when you finish counting the purchase will magically become rational, but it is a good way create a pause long enough to encourage a rational descison.

Save Big on Home Depot Tool Rentals

Whether you're a weekend warrior, or a contractor by trade, renting equipment from Home Depot can be a lifesaver. Home Depot has a variety of things to rent, the prices are reasonable, and the labor time saved can be priceless. Renting tools is a fairly quick and painless process.

I recently demolished a thin concrete slab in our backyard. At first I considered just buying a manual breaker bar, but after comparing the cost of the breaker bar with the price of a jackhammer rental, I ended renting the jackhammer. The jackhammer cost $45.00, and I was able to break up the concrete, hauled it away, and returned the rental within 4 hours. If I bought the breaker bar, I would have paid more and would be sentenced to doing hard labor all weekend long.

Last Saturday, I also had to rent a 32' extension ladder to clean out my gutters. I found out that Home depot has a policy that equipment rented after 6pm can be used until 9AM the following morning for the cost of a regular 4 hour rental. So if you plan on working late in the evening, and early the next morning, take advantage of this extended 4 hour rental (actually 15 hours).

So, without trying to sound like Tim "The Tool Man" Taylor, consider renting bigger and better equipment to get your next project done sooner. It will usually save time and money in the long run.

The Universal Importance of a Buffer

In life, it's very important to establish a good buffer. A buffer will help cushion the consequences of minor problems, and prevent them from becoming major problems. It's especially important when dealing with time and money. Not having a proper buffer is the easiest way to provoke problems with catastrophic consequences. So what exactly is a buffer?

Buffers
A buffer is leaving a half an hour early for a job interview 10 minutes away. A buffer is always keeping an extra $500 in you checking account, to avoid accidental over draft fees. A buffer is buying 350 sq ft of floor tiles, when the actual area is only 300 sq ft. It’s following 5 car lengths behind, when you know you could stop in 4. A buffer can be as simple as bringing a coat, when the forecast is good; or not letting your gas gauge needle dip below a quarter tank. It’s understanding limitations, and being smart enough to plan for unexpected problems.

Murphy's Law
When the unexpected happens, it usually compounds with other problems. Usually your car breaks down the day you forgot your cell phone. You lock you self out of the house while getting the morning paper in a bathrobe. You forget your wallet during a important business luncheon. Some of these situations are just a fact of life and cannot be changed, but in some situations a buffer may help to delay the domino effect. Get the help of 2 friends, even if you only need 1 to help set up the decorations for your wife’s surprise birthday. This way you don’t fall off the ladder while frantically trying to hang streamers. I'm sure your wife won’t want to blow out her birthday candles in the ER.

Pet Airways: Pets Fly with You in the Cabin

Scooby and Garfield can now travel with you when you fly. Well technically they always could, just not in the passenger cabin. But today is the dawn of a new era, and a new company called Pet Airways allows your pet to come on the plane with you and fly across the country.

The website is currently bogged down from all the publicity it receiving, so I have not seen the exact terms and conditions. The only available page is where they fly. It appears that their destinations are limited to a hand full of locations across the country. Having seen Snakes on a plane, I am interested to know what type of animals are allowed, and even more so how the animals will react being in such close proximity.

My wife and I are planning take our new puppy Teagan to my "In-laws" during Thanksgiving, but unfortunately Pet Airways doesn't fly out of Seattle. Alaska Airlines wants to charge us an additional $100.00 each way to transport our pooch in cargo, but we may end up driving anyway.

Only time will tell if this radical new concept, will be a success or a flop.

Out of Sight Out of Mind

If you are anything like me, you struggle with the discipline of saving money. The trick is to decide right now how much you want to save, and to do it. Pick any number that you can comfortably pay on a regular basis without impacting you bills. It could be $50.00 a month, or it could be $500.00 a month. Once you have your number, take a few minutes and open a free online savings account. Most online savings accounts like ING Orange Savings, or a Tradeking Roth IRA, can be opened in about the same amount of time it takes to make an online purchase with a credit card.

Now that you have an account, go to your regular banking web site, and set up a re-occurring bill pay to transfer your decided savings amount 1-2 days after each payday. You won't even notice the difference in salary, and since the account is not as easily accessible, you will forget that money is accruing. Before you know it there will be a nice little nest egg of savings. All it take is few minutes and a little will power.

Truly Free Credit Score Anytime with Credit Karma

Recently, I learned about a new site called creditkarma.com. It's a quick and easy way to continually monitor your averaged credit score for free. It summarizes your credit report, shows how you compare to others, how to improve your credit, and even has a simulator to see how your score will change in certain situations. Credit Karma is a reputable site that requires you to register, and yes it asks for you ssn. This does not concern me since they boast many security certificates, and we learned recently that your 9 digit SSN can be deciphered with public information anyway.

After a free account is established with creditkarma.com, you can log in anytime to see your current credit score. You can check it every day if you want. In the FAQs, credit karma states that the inquiries are on your behalf, and will not be shown to creditors or affect your credit.

So check out Credit Karma, I was very impressed and highly recommend it. It is a great tool to see where you stand before buying a house, car, or applying for a loan.

Lessons Learned from Homeless People

When people are forced into a financial hardship, like being homeless, they often survive only by making the best of their situation, no mater how bleak it is. This humbling experience can also illustrate the value of money, or lack of it, in a crystal clear manner. If only the average consumer looked at their finances like a homeless person trying to survive, they would probably be better off.



For simplicity lets take a look at the value of $5.00.

Scenario 1:
While walking by the corner store, one sweltering hot day, Trevor decided to buy a soda. Unfortunately the clerk only accepted cash, but pointed him to the ATM located in back. On the way to the ATM, Trevor noticed a water fountain by the bathrooms, but he decided the soda sounded more refreshing. After accepting the $2.50 ATM fee, he withdrew $20.00 and returned to the counter to buy the $2.50 soda. He stepped outside took a big gulp and continued his walk hardly skipping a beat.

Scenario 2:
Perry was laid off a while back, and has been without adequate income for a while. He sleeps under a bridge, and can't remember the last time he changed his clothes. He walks 2 miles everyday to the corner of Main street and Union to beg for change. Today it happens to be raining. Perry stands in his regular spot with a cardboard sign in one hand, and holds his garbage bag poncho over his head with the other. Since most drivers don't want to roll down their window in the rain, Perry only receives a handful spare change, and a few dollar bills. After standing on the corner for a couple of hours, he counts his earnings which total $5.00. He staggers into a grocery store to buy breakfast. He first walks into the bathroom to wash his hands, and to fill his water bottle from the sink. He then proceeds to gather his items: A banana for $0.59, an orange for $0.67, a loaf of day old bread for $0.99, a can of tuna for $0.99, a can of stew for $1.29. The total at the checkout counter is $4.94 including the 9% sales tax. It is a familiar total, and leaves him with $0.06 to save for later. Outside he sits against the wall of the building, and eats his fruit. He patiently looks forward to the tuna sandwiches for lunch, and the stew for dinner. Any day that Perry gets to eat is a good one.

The amount spent is exactly the same in both scenarios the only difference is the the way each person perceives money. In the first scenario Trevor chooses soda over water without giving it a second thought. While in the second scenario, Perry stands in the rain for hours for the same amount of money. Five dollars has a much different value in each of their hands. It is too bad that Trevor does not spend money as frugally as Perry, because Trevor owes 22k in credit card debt, while Perry has positive net worth of $0.06.

Happy 4th of July

Here are some emergency instructions in case your celebration gets a little out of control. Be safe, and please be respectful of your neighbors. They might not think lighting M80's at after midnight is as cool as you do. If you plan on lighting off fireworks, make sure you have a fire extinguisher. It can come in handy, and will even decrease your home owners insurance premium.

Now Might be a Good Time to Learn About Stocks

It's hard to go anywhere these days without hearing horror stories about the economy. Many long time investors and retirees have suffered huge losses as the market reached record lows. On the other side of the coin, if you have never invested in the stock market before, then you've never lost anything, and now might be an exceptional time to learn how it all works.

The market will have to recover sooner or later, and right now you can pickup shares at a fraction of the cost, compared to what most shareholders paid. Rumors are also starting to circulate about the economy beginning to recover, but there is no way to know if the worst is over. Consider investing a small amount of play money, that will not lead to your demise if lost. The odds of financial gain in the stock market are much better than going to a Casino or buying lottery tickets and can be just as exciting.

It's impossible to know everything about investing, and learning the basics can be intimidating. A good place to start is CNN's Money 101. It contains a wealth of information on various financial topics, and Lessons 4-5 are specific to Investing. When I started Investing not too long ago, I simply opened a Roth IRA at Tradeking.com, which I found to be the cheapest at $4.95 per trade, and invested $100.00.

I decided to invest in Ford (F) purely on intuition, and was lucky enough to more than double my investment over the past 3-4 months. As a 28 year old, with hardly any money, it was a great way to get my feet wet. I also made a few mistakes as seen in my article Stop Order vs. Limit Order, but it has given me the drive to start learning more and more about how the stock market works. I am now exploring more advanced trading techniques and learning what to look for in companies.

The most important rule when starting out is: to realize that you don't yet know what you're doing, and should never invest more than you can afford to loose. It is also important to realize that paying off debt usually is a better investment than trying to earn a return on stocks.

Overall the stock market really isn't that scary, and by getting in now, you might make a pretty penny when the markets recover.