Last week, I introduced you to two awesome business concepts that translate well to personal finance – the SWOT analysis, and the executive summary. In today’s third and final part of my series, I’ll apply another well-known business plan staple to our home money – the profit and loss table.

A disclaimer of sorts before I get into the details–I am good with numbers, but I am neither an accountant, nor a lawyer or business specialist. My “analysis” of a profit-loss table is limited to my vague understanding of business accounting and focused on the application of the principles to personal finance.

Whew! Okay, with that out of the way, let me define what I think a profit and loss table shows in simple terms. Long story short, a profit and loss table takes your total sales, subtracts the cost of those sales, expenses, interest, and taxes, and shows you the final net profit (your “bottom line”).

Here’s a quick example with a few of the numbers filled in:

Fun Fact: The term “bottom line” originated in accounting and refers
to the bottom line of a income statement or profit-loss table,
which shows how much the company will make every year.

In business, this deceptively straightforward table allows a quick overview of the projected financial state of the company over the next X-number of years (1, 3…maybe 5). How much are we going to bring in, how much is it going to cost us, and what can we take home at the end of the day?

Getting Started

Can you begin to see the usefulness at home? Let’s dig further and fill in the first column. This can either be a projection for the next 12 months, the current calendar year, or the last 12 months. I have found that historical data works best as a starting point. In either case, I strongly suggest using a one-year time frame to get the broadest overview.

Sales – This is the amount of money you bring in by selling your product or service. If you are a traditional employee, your sales essentially equal your salary–what you make in exchange for your time and/or skills.

Cost of Sales – If your business sells widgets, this would be the cost of producing that widget. Can you attribute any expenses directly to your salary? I would–taxes and student loans, for example, as well as transportation costs to and from the office, continuing education, business lunches, etc. Basically–anything that would not be spent if you weren’t working.

This “direct cost” is also useful if one member of a couple is thinking of becoming a stay-at-home parent.

Gross Margin – Your gross margin is the amount left over after you subtract cost of sales from sales. Taking your income and deducting taxes and your other expenses will yield what you have left over–your gross margin. This is everything available to spend and save.

It’s also useful to calculate a percentage here for easy comparisons year-to-year. Do this by dividing the gross margin into your income, then multiplying by 100.

Expenses - While the other parts may seem easier, this section will probably take the most time. First, you’ll need to obtain accurate budget data or take best-guess estimates. Second, I would suggest no more than 10-15 categories in this section to make the most of this “overview,” so some consolidation may be necessary. Lastly, you’ll need to convert monthly expenses to yearly, and determine irregular expenses in your budget.

Line-item everything and then add it up to get your total expenses.

Profit Before Income and Taxes – In a normal business table, at this point you would have your your gross profit, and subtract interest expenses and taxes.

However, at home you have your tax taken out on what you make, not what you keep, so that’s why we included it in the cost of sales. Additionally, your interest expenses are typically swallowed in a category like “mortgage” or “debt,” so don’t worry about those.

Net Profit - This is the amount of money left over after you subtract all of your expenses from the gross margin. It should be positive, indicating your have money to save at the end of the year. If it’s negative, you’re probably living beyond your means.

Another percentage calculation is helpful at this point for later comparison, dividing the net profit into sales.

Projecting Out

Once your first column is in place, the benefits of the profit and loss table really start to kick in. Now we get to fill in the rest of the table!

Take a good look at your current-year column. Is this your ideal financial situation? Are there things you would change? Of course! If you’re like most people, you’d love to make more money, cut expenses, and save more.

Here’s your chance to make that fantasy into reality–where can you realistically (but aggressively) hope to be in five years in terms of income, expenses, debt, savings, etc.? It may be helpful to pull out your SWOT analysis at this point, and especially your executive summary. They are true guiding lights to your target.

Develop that dream and write it into the column that represents Year 5. That is your target profit and loss in five years – your mid-term goal.

Now you have your beginning (where you are now) and your end (the five-year goal). The next logical step is to fill everything in between. Do so on a straight-line (steady growth/reduction over 5 years), accelerating-curve (increasing growth over 5 years), or decelerating-curve (slowing growth over 5 years). If you have specific benchmarks or opportunities in mind, account for them.

Using This Analysis

Remember that the two biggest benefits of this analysis are concrete goals and benchmarks for the next five years, and the broad overview you get by looking at your income/expenses on a yearly and consolidated basis.

The way you use your finished table is up to you–but it makes sense to review it regularly and to review it once a year when the time comes to compare actual progress to projected estimates.

One thing I would advise against is revising the table. Use exceptional progress to feel good about how you’re doing! If you’re behind, use it as extra motivation to kick things into high gear.

Everything I’ve given you over the last two weeks is a tool – customize it as you see fit and use it to your advantage. You’ll reap the most benefits that way. Good luck!

Photo credit: Life in LDN via CC2.0

Putting Together Your Personal Profit and Loss Table is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

Thanks for stopping by! The last week at Fiscal Fizzle has been dedicated to applying business plans to your home finances, and we’ll wrap up next week with a look at profit and loss tables. The response to these posts has been fantastic!

I’d also like to throw in a quick announcement today about a sister blog I’ve just started called Fiscal Fizzlettes. I encourage you to click over and take a look. I’ll be talking about it more in the weeks to come.

Without further ado, let me present what caught my attention over the last few weeks:

• The first and probably most controversial/interesting post I came across is from Kevin at Moolanomy, talking about why the first time home buyer credit is terrible for the economy. If you consider the economics behind stimulus plans, are we shooting ourselves in the foot?
• The list of the week is Trent’s 24 Ways to Save Money Today, posted at The Simple Dollar. Take a few tips from this list and you’ll be on your way to financial heaven.
• Here’s an awesome post from Adam Jusko, guest posting at Five Cent Nickel, on how to use weight loss strategies to get out of debt.
• One of my favorite new blogs (and with good reason) is Zen Family Habits. This week, Baker from Man vs. Debt guest posted about whether we should give our kids an allowance or commission. Awesome!

• David from Money Under 30 posted about five forgotten habits to develop in our twenties. If you’re young like me, you’ll appreciate this perspective.
• Another gem from The Simple Dollar, and probably my favorite post of the week is Trent’s “The Ten Most Important Things I’ve Learned About Money and Life Since Starting the Simple Dollar.” Long title, solid post.
• Baker recently featured a number of guest bloggers at Man vs. Debt. Austin Morgan wrote a great piece on the pros & cons of being your own part-time boss.
• My Life ROI featured a post about 9 weekend home projects that will save you money. These are great ways to go “green” while saving a ton of money.

• Jim Wang came up with the idea of conducting a financial fire drill at Bargaineering. This is a great way to prepare for financial disaster.
• Here are some interesting tidbits of information from Own the Dollar: 15 personal finance stats that will blow your mind.
• If you’re buying a home anytime soon, this is a must-read from Kyle at Suburban Dollar – the sleeper costs of buying a home.
• A new eBook is out this week, if that kind of thing floats your boat. Check out 52 Ways to Make Extra Money…Revisited from PT Money.

Shout-Outs

• A special shout-out to The Festival of Frugality #201 at Gather Little by Little.
• Thanks to One Money Design for doing an interview with me this week about the differences between Mint and Mvelopes. Mvelopes is coming out with new features in 2010, which will hopefully make one of my favorite products even better.
• Special thanks to J.D. Roth and Jim Wang for sharing my SWOT Analysis post with their readers.
• Baker pointed out a great charity to me this week via Twitter. If you don’t know about Charity: Water yet, check it out when you get a chance. When the time is right, I hope to leverage my blog community to make a difference for this cause.

Have a fabulous and relaxing weekend and see you here next week!

What’s Sizzling? – November 7th Edition is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

Earlier this week, my post on applying SWOT analysis to your personal finances got a lot of attention. Some of you got flashbacks to business school, and the rest of you were intrigued to discover a unique way to look at your money.

Before we move on to another very focused section of a business plan–the profit and loss table–let’s take a much broader approach today. I’m talking about the Executive Summary–the business plan’s most general look at the intended operations of a company.

The intent of the executive summary is to live up to its namesake by providing a short, broad overview of the entire plan. It’s a quick reference to its contents, and many parts of it may be completed even after the rest of the plan is written.

Personal Finance Application

Applying the concept of the executive summary to personal finance is not a big stretch. It’s a natural culmination of your goals, established priorities, benchmarks and timetables. As such, you need to do a little leg work before you get to take advantage of going through this exercise.

If you’re well established with your financial goals and have done a great deal of introspection about your money, getting started with a draft of your executive summary should be a piece of cake.

If you’re a newcomer to the world of financial priorities, consider some of the following concepts I’ve written about previously:

• The Basics of Setting Financial Priorities
• 7 Ways to Find Your Financial Heart
• Optimizing Your Contact With Money
• What’s Your Reason for Working?
• Forget Business! Do You Need a Business Plan?
• How to Set Joint Financial Goals With Your Partner
• Using Life Roles to Organize Your Budget
• Hurricanes and Planning for Financial Disaster
• X Marks the Spot: Navigating Financial Treasure Maps

Once you’re ready to get started, let’s take a look at some of the components of a good executive summary:

Personal Objectives

The objectives list is one of the first things defined in any business plan, and amounts to what is essentially a major goals list. In my personal experience, I’ve found that a bullet-list approach works best, itemizing what you hope to accomplish in your financial life.

If you’re looking for a little help getting started, here are a few ideas:

• Considering your entire lifespan, what are the major financial goals you hope to accomplish?
• What income levels do you want to reach and by when?
• What are some other benchmarks you’d like to set for yourself?
• Do these benchmarks or other goals have a specific time line?
• Are some of your major goals multi-step? If so, what are the major components?
• What relationships would you like to establish?

Financial Mission

Writing a financial mission statement is not only very personal, but very difficult. A complicated analysis of the various methods you can employ to draft a mission statement deserves its own future post.

Let me briefly talk about some of the basics of a financial mission. A well-written mission is usually short, dense, and meaningful. Most importantly, it should be highly motivating every time you read it. Other than that, almost anything goes. It usually takes a few tries to get the format and content “almost there.”

Here are a few starting considerations when writing your first mission draft:

• Looking at life as a whole, what do you consider to be your primary financial objective?
• What are your major career and family goals in life?
• What do you hope to accomplish in your lifetime and how will money play a role?
• What do you believe are your major skills and ways you can contribute to the world?
• What exists at the intersection of all of your financial goals, objectives, and skills?
• How do you view money and the place and function it holds in your life?

Your Keys to Success

These are things that will make or break your efforts to fulfill your mission and objectives. Many of them deal with both personal characteristics and external forces.

Think back to last post’s Strengths and Opportunities sections. They defined what you were good at and what doors were open for you. At the same time, the Weaknesses and Threats sections defined what you should look out for. Both are great places to start as you begin to think about your keys to success.

Here are a few things to consider:

• What are the most important characteristics of your primary income streams?
• What are the important skills you have to offer to the world?
• What are the largest pitfalls you must avoid to succeed?
• What are your worst (and best) financial habits that need to go (or stay)?
• Who are your most important relationships? In what ways can future relationships help you further your goals? With whom?
• How are you different from everyone else?

The Executive Summary

One of the last tasks in any good business plan is writing the introduction to the summary section, or what can be thought of as “the” executive summary–a short overview that is even more concise than the other three sections described above.

What makes up a good introduction? Hit the very key points of every other section and you’ve done it right. Get to the core of what will make your plan tick and help you accomplish your end goal. If you’re verbose, give yourself an arbitrary limit – perhaps 5 sentences.

A good executive summary introduction will read like an abbreviated mission statement.

Wrapping Up

Remember the ultimate goal in writing the executive summary – to provide a quick-reference and concise summary of your most important financial priorities. If it’s too long or too meandering, it will lose its effectiveness and waste your time. Maintain your focus and keep the end goal in mind.

Have you tried working on some of the sections of the executive summary? Would you like to share your experience? Check out the comments section and post your thoughts.

Don’t miss my last post of the series next week, when I discuss applying the profit and loss table to your home finances.

Photo credit: Yodel Anectodal via CC2.0

Writing an Awesome Personal Executive Summary is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

No, I didn’t mis-spell SWAT, so the picture above is a little misleading. I just think guys in gas marks are pretty intense. And intense is how I roll–dropping this little analysis method on your money is going to feel like the SWAT team flying in, full-force.

Several months ago, I wrote about how you could apply a standard business plan to your home finances. Since that time, I’ve been working closely on the guts of a number of business plans, and have come to know and love specific portions for their tendency to make me think and evaluate things with a critical eye.

Over the next three posts, we’ll explore some of these components – the SWOT analysis, the profit and loss table, and the executive summary. All three have specific and useful personal finance applications that will help you define where you’re headed and how you plan to get there.

What is SWOT?

Wikipedia defines SWOT as a “strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture.” Hat tip to Albert Humphrey, who analyzed data from Fortune 500 companies and developed the technique. It’s fantastic and it works on almost any future objective.

SWOT is divided into two main segments – strengths and weaknesses, which deal with internal characteristics, and opportunities and threats, which deal with external forces. Each segment is uniquely critical to the overall analysis, as you’ll see in a moment.

Why is SWOT so Useful?

SWOT is extremely useful because it helps in the planning process by identifying things that will be helpful and harmful to achieving the ultimate objective.

Each question presents a new paradigm of thinking – internally vs. externally, and pro vs. against. The exercise starts with a stated end objective, as simple as “financial security.” At the end of the exercise, we should arrive at an informed list of forces that will either help or hinder reaching that goal.

Going though the analysis can be as simple as meditating quietly on a Saturday afternoon, or as complicated as creating a color-coded computer spreadsheet and corresponding chart. Whatever seems to call to you – go for it.

For now, you’ll probably want to grab something to write with as I go through each of the components of SWOT:

Strengths and Weaknesses

I’ve grouped the “SW” portions of SWOT into one section because they are either-or characteristics. Each question we’ll look at will either fall into the strength or weakness column.

Strengths & weaknesses generally have to do with personality traits and your unique skill set. Capitalizing on skills and watching your back on weaknesses are both keys to using this analysis to your best advantage. We’ll get into that a little more later.

Getting to the heart of your strengths and weaknesses is a very personal matter, much more so than for the “OT” component. It’s an examination of your focus, your history, and an honest assessment of your skills.

With the understanding that your will have to dig deep to identify your own S&W, here are a few prompts to get your started on your thinking:

• What are some of the skills you have that have a direct financial application?
• What has worked in your financial life in the past?
• What has not worked?
• Has anything sat stale that you wish would move forward?
• What is your childhood “program?” How do the things you learned growing up affect your emotions and actions with money now?
• How do you deal with mathematical concepts or financial jargon?
• What is your overall tolerance of risk when it comes to life and money?
• What is your age? (Don’t worry, I won’t ask you to tell–but it’s important to know, especially for things like retirement)
• What are your money “buttons?” What really pushes you over the edge when you talk about money?
• How are your relationships with those closest to you when it comes to money? Can you talk about it openly and without too much emotional attachment?
• Are you able to learn and adapt quickly and effectively?
• Have you developed customized systems or methods for your money? Do they work or fail?
• What makes you unique from everyone else?

Opportunities

The “O” component is sufficiently different from the “T” component (threats) to deserve its own section. Opportunities are like doors – the might be open right now, you might expect them to open in the future, or they may need a little coaxing or forceful entry.

Like threats, opportunities have to do mostly with outside forces under or outside of your control. Look beyond yourself and think about things that will be helpful in your quest for world domination. Here are a few ideas to consider:

• What is your expected career path? What opportunities might propel or change that path?
• What are some ways to control your money better? Save more? Cut back on expenses?
• Do you have circumstances that are currently in your favor?
• What “bucket list” ideas in your head right now have a financial application? Do you have a great business idea you’ve been hiding?
• Do you have a desired direction in your life?
• What “doors” are currently open–career options, large purchases, etc.?
• Are there market trends in play that can enhance or threaten your decision? (For example, how is the real estate market?)
• Are there opportunities to earn a side income or start a home business?
• What are some things you feel you’re ahead on?

Threats

Threats are actual or perceived external forces that can prevent you from reaching your goals. This list can obviously go on forever, so we want to strike the balance of being realistic while ensuring that we capture a lot of the probable and also some improbable threats that can bite.

Consider your own life and things that could go wrong in the future. Maybe some of these will ring a bell:

• Do you have a dependence on anything? For example, are you dependent on a paycheck, a future tax refund, or anything else to come through?
• Is the safety/security of anything in your life an issue right now? Your job, perhaps?
• Are you particularly exposed to future lawsuits, maybe because of your professional career or other liability factors?
• Are there things in your life that are, or could become, very unpredictable? (Like self-employment income or large expenses?)
• What are some things you feel you’re behind on?
• How do the current economic conditions affect your bottom line? Can they affect it in the future?
• What circumstances are currently not in your favor?
• Would future changes in government affect your finances? (A large tax increase, for example)
• Can inflation kill your retirement or college plans?
• Are you prepared for unexpected events like accidents, health downturns, and others?
• Could your credit score negatively affect your ability to make major purchases?

Using your SWOT Analysis

Creating your first SWOT analysis means writing down everything you always knew about yourself and may have thought about once in a while, but never really got on paper. It makes the sum total of your life and your goals converge in one location and enables them to be evaluated as a whole. Pretty neat…

Having completed your SWOT, you can take each section and evaluate it individually. For example:

• Leaning on the strengths – Most of us want to be known for what we are best at. Therefore, it makes sense to capitalize on your strengths and develop them even further. Become an expert in what you can rock out at.
• Protecting and improving weaknesses – While it’s critical to optimize your strengths, it’s also important to work on your weaknesses so that they’re less of an effect on your life. Being aware of these blind spots and protecting yourself from them will help in the long run.
• Going after opportunities – Opportunities may be available to you all day long, but without recognizing them and being proactive about the process, they may just pass you by completely. Very little in this life comes without work, and if your opportunities are truly important to you, effort will be key.
• Guarding against threats – The nice thing about threats is that we can prepare for all of them, in one degree or another. Whether it’s an insurance policy, a plan of action, or another form of preparation–being ready to act when a threat rears its ugly head is critical in the usefulness of this plan.

Another neat capability of SWOT is cross-referencing the categories and making relationships between them. For example:

• Strengths-Opportunities – How can you use your strengths to take advantage of potential opportunities available now and in the future?
• Weaknesses-Threats – Which of your weaknesses may enable or enhance the danger of a threat and what is the best way to mitigate it?
• Strengths-Weaknesses – Can any of your strengths compensate for or help to develop a weakness that you have?
• Strengths-Threats – Will any of the strengths in your tool belt protect against potential threats?
• Weaknesses-Opportunities – Do your weaknesses have the potential to throw in a monkey wrench as you go after some opportunities in your life?

At its very basic level, SWOT will spring from your mission and goals–and will ultimately serve to develop and expand those goals even futher. If done well, it’s a constant cycle of planning, doing, and evaluating.

SWOT is extremely useful in business analysis, and I hope that you can now see how to apply it in your own life as well. Happy SWOTing!

Photo credit: alshain49 via CC2.0

Send the SWOT on Your Money is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

When you see a treasure map, like the one pictured above, what’s the first thing that pops to mind? Some of the images in my head are:

• Adventure
• Goals
• Sword fighting
• Really old stuff
• Damsels in distress
• Egyptian tombs

More important, and definitely more apropos to the blog, is the financial application of treasure-hunting. Yes, my friends – the same strategies used by the “greats” like Indiana Jones can be applied by us mere mortals to our boring checking accounts.

What the Heck is X Anyway?

Isn’t X supposed to mark the spot? If you’re not looking for “X,” you’re not really treasure-hunting. You’re just wandering around the desert aimlessly. How do you define your financial end-goal, or your wildest dream? Is it income independence? Freedom from debt? A red Porsche?

If you’re like some treasure-hunters, you know that there’s a prize at the end of the road, but you’re not quite sure of what’s in the chest. Other adventurers actually do their homework and know exactly what they’re looking for and what it’s supposed to do…i.e. a key to open an ancient sarcophagus, send down 10 virgins, etc, etc…

What camp do you belong to? Are you making progress, but unsure of what it is you’re looking for? Or do you have a picture in mind so clear that you can almost touch it?

• Make sure you’re setting financial priorities in your life.
• Understand that goals will shift and remain flexible enough to change them.

Rolling the Dice

The path and the goal may be self-evident once mapped out, but the way to get there never will be. We have control over our own actions and responses, but we rarely control our circumstances. Protecting against failure and putting ourselves in the best position possible is key.

• Create financial systems that work to protect you against unforeseen circumstances.
• Simplify your finances for optimal effectiveness and greatest control.
• Know that financial storms come and go, but preparation is key.

Taking Shortcuts

As a kid, did you ever play the game Chutes and Ladders? (It used to be called Snakes and Ladders, for the older generation…not to make you feel “old” or anything…). You go along your merry way and there are a series of “shortcuts” that take you to a different part of the board.

Opportunities in life present themselves like ladders, while setbacks can feel like chutes. Either way, we end up somewhere unplanned – way ahead of the pack, or starting our climb all over again.

Through the course of the game, it’s typical to ride so many of these chutes and ladders that, in the end, you end up where you would have even without them. The key is not the setback or opportunity, but how we react to it. In life, we have a bit more control than just rolling the dice, so let’s take advantage:

• Look for and take opportunities that present themselves to get ahead financially in an ethical way.
• Learn from setbacks quickly and put them behind you. Live in the present while respecting the sum total of your life experiences.

Looking for Clues

When the real pros hunt for treasure, they’re usually looking for clues, right? A scratch on the tree bark, or an upside down-reversed-mirrored ancient symbol inscribed in the translucent watermark visible only under infrared light after 6 PM. Maybe I just watch too much TV…

I define financial awareness as being able to keep your mind open and scanning for important things outside your direct scope of current attention. What the heck does that mean?

It means that while doing what you normally do on a daily basis, like paying bills and buying groceries, we train our mind to scan and pick up important financial opportunities outside of those daily tasks and nudge them into consciousness when they’re important. This is a great trick I learned from Life Matters.

The Importance of Varied Terrain

Treasure hunters don’t face just one type of obstacle – most of the time they arrive by ship after having fought off sea monsters, and go on to traverse mountains, hills and valleys, cross dangerous rivers, and climb into very dark caves. What I’m trying to say is – it ain’t easy.

A few months ago, I read a fantastic book titled Peaks and Valleys by Dr. Spencer Johnson, the same man who authored Who Moved My Cheese? At the core of the book are simple principles for anything in life – managing your peaks to get the most out of them and preparing for valleys, as well as getting out of valleys quickly and onto the next peak.

Your financial life is not like Florida – long and flat. It’s more like West Virginia – one hell of a ride. Sometimes you’re cruising downhill, and sometimes you’re giving everything you got to get to the top. In the end, you wind up right where you started – sea level. No matter what the obstacles, we can get to our goals through any terrain.

What is the Key?

What is the key that unlocks our treasure chest? We can journey along and get to the end, but unless we know what to do once we get there, we can spoil the entire journey.

The key here is planning – know what you intend to do once you actually reach your goal. If you don’t have a plan, are you fully committed and believe that you’ll reach your goal in the first place?

Is Financial Freedom Real?

Think about the guys on TV – what percentage of the show is about getting to the treasure and what percentage is actually getting it? Doesn’t it always seem that they spend most of the time on a wild goose chase, fail miserably to get what they were looking for, but “get the girl” anyway, and life is good?

You never know what the treasure chest might hold anyway – we put so many expectations on what we will find when we get “there.” We may be disappointed or surprised – the key is keeping an open mind, after all – most of the time, it’s not about the treasure anyway.

Many, many millionaires have failed and gone bankrupt along the way. Was their money ever their measure of success? No, it was the knowledge they had in their head that allowed them to pick themselves up and do it all over again, and faster.

The Lottery Effect

For those who do really find “treasure” and find it very early (through a shortcut, for example), the lottery effect can be their downfall. A fellow blogger (who exactly, I can’t remember), turned me onto this – the story of William Post, who won $16.2 million in the Pennsylvania lottery. Here’s a quote that really stood out from the article, talking about the effects after William won the Lotto:

“His problems included a brother who tried to hire a contract murderer to kill him and his sixth wife; a landlady who forced him to give her one-third of the jackpot; and a conviction on an assault charge, after Mr. Post fired a shotgun at a man trying to collect a debt at his deteriorating dream house in northwestern Pennsylvania. He went bankrupt, came out of it with $1 million free and clear and spent most of that windfall, too.”

Ouch! I thought everything was supposed to get easier when you get a ton of money…right? If you learn HOW to get there, you won’t waste the spoils WHEN you get there. That’s why millionaires are usually made slowly.

Applications

Too often, life can feel like a bit of a treasure hunt. We’re lost in a maze of seemingly unrelated events and circumstances on our way to a distant goal that often goes undefined. Take a few lessons from your movie stars and figure out:

• Where you’re going
• How you’ll get there
• How to act along the way

May we all get to X someday…

Photo credit: Cameronparkins via CC2.0

X Marks the Spot: Navigating Financial Treasure Maps is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

This weekend marks my wife’s birthday! Luckily, it falls on a Sunday, so there should be ample opportunity for joy and celebration. This year is particularly special because we’re having our first child! It’s a gentle reminder that no matter how much we worry about the day-to-day stuff of life, we have so much to be thankful for. Think about that.

As always, the quality of writing from my personal finance peers is very impressive. Here’s the best of what I’ve been able to find over the last two weeks:

• I have no concept of when winter starts in South Florida. I think the last time it snowed here was in the 80’s. But for those of you in most other parts of the world, it’s time to get ready. Suburban Dollar has some great tips for preparing your home for winter.
• Craig Ford writing at Moolanomy makes us consider whether we should have double money standards for our kids between genders. He’s right – what was once thought of as ‘tradition’ is changing, but these are still questions to ponder.
• A lot of people become so money-centered that they fail to see or enjoy their actual life. Don’t let this happen to you. The Simple Dollar presents fifteen things that are more important than money – a comprehensive list of focus points outside your financial life.
• Mr. Credit Card has a great post at Len Penzo dot Com talking about why low-cost and no-fee products may not be such a good deal. Remember, frugality is not the same thing as being cheap. For many things, we still get what we paid for.

• I don’t normally link to book reviews, but this one peaked my interest – The Simple Dollar reviewed Janet Luhrs’ Simple Living Guide. It looks like a fantastic source book for making your life just a little bit simpler.
• Finally someone went out and did this! Cudos to Len Penzo for beating me to it. It took years to convince my wife that generic foods were just as tasty as their name-brand counterparts. Len rounded up his panel of judges and conducted a blind experiment – see the results. Turns out it’s not as clear-cut.
• There are plenty of reasons to get a budget and stick to it. On the other side of the coin, there are also reasons to dump your strict budget. Frugal Dad shows us why.
• J.D. of Get Rich Slowly is finally able to get most of what he wants in terms of finances. So why is he feeling guilty? Find out in The Guilt of Wealth, and make sure you read some of the great comments.

• If you’re a frequent shopper at Costco like us, you’ll appreciate this post from Gather Little by Little which warns us about the pitfalls of buying in bulk. Most of us have learned these lessons the hard way. If you haven’t yet, take the shortcut and read his post.
• Hindsight truly is 20/20 as this post from Shrinkage is Good tells us. Learn about seven financial mistakes that ended in disaster. Some are just amusing, and some are great warnings for what to avoid.
• Consumerism Commentary shares Money Magazine’s list of ten things you could do with $1,000 right now. All too often, we squander unexpected windfalls, like tax refunds. Keep this list around and pull it out the next time you’re in a position to allocate some serious cash.
• Finally, Leo Babauta’s new blog – Mnmlist, shares 7 ways to avoid buying new stuff. In these times of tight wallets, this is a great resource for making the most of what you have and what you need to get.

For my latest links without the wait, don’t forget to follow me on Twitter and join my network on Delicious!

I’d also like to recognize the personal finance carnivals I participated in over the last two weeks. PF carnivals are a great way to expand your reading with a lot of amazing posts:

• Money Hacks Carnival #87 at Green Panda Treehouse
• Festival of Frugality #199 at Yes, I Am Cheap
• Festival of Frugality #200 at Miss Thrifty
• Carnival of Personal Finance #226 at All Financial Matters

Fiscal Fizzle is popping up all over the Internet! I’d like to thank a couple of bloggers in particular this week for their links:

• Frugal Dad
• Len Penzo
• The Canadian Finance Blog
• SPENDonLIFE
• Yielding Wealth

Have a happy and healthy weekend, enjoy your family and friends, and take this fantastic quote with you:

“The successful man will profit from his mistakes and try again in a different way.” – Dale Carnegie

What’s Sizzling? – October 24th Edition is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

We can’t all be math geniuses. We didn’t all score A’s in calculus class. Most of us don’t even remember algebra. So how can we possibly be any good with money, right?

“I’m bad with math” is not a good enough excuse for financial failure. Either come up with something better or accept the fact that you can be bad at math and still do well with your money.

Let me help you along – here are five solid strategies for developing your math skills and taking control of your finances when your 2+2’s are not up to par:

Make Heavy Use of Tools

Before the days of computers, you were out of luck. You had to figure things out or give up completely. Now you have no excuse.

If you’re mathematically-challenged, make very heavy use of financial tools. Don’t go crazy and download everything out there, but here are a few ideas to start you off:

• Tracking systems. Your principal financial software, like Quicken, Mvelopes, Mint, etc. The online varieties usually present your information in a very clear and visually pleasing format that is easy on the eyes.
• Mobile apps. There are lots of fun tools that can make day-to-day life easier. For example, downloading a tip calculator saves you the next time you have to figure out 20% or split a check with your friend.
• Online Calculators. There’s an online calculator for everything now. Want to buy a house? Bam! Trying to figure out what to save for retirement? Bam! Get on the bandwagon and calculate away.

Make It Easier On Yourself

If you’re having a tough time navigating the array of numbers in your financial system, it’s possible that you’re making things too difficult for yourself. Here are a few ideas for making your system more math-friendly:

• Stop using cents. Round up everything to the nearest dollar, or even ten dollars. If you’re scared about falling short somewhere, round down for income and up for expenses. Review your balances once in a while to reconcile the difference.
• Take away detail. I might want to know the individual balance of every investment account I own, but then again, a grand total might be perfectly sufficient. Why get all bent out of shape about the details?

Focus on Concepts, Not Examples

When you want to learn something new about money, most people will show you an example or overload you with unnecessary details. For you, my math-deprived friends, the concept is the golden ticket. Focus on it. Consider the following from two different perspectives:

“To buy a home, you need a number of basic conditions – new home expenses that are about 1/3 of your income or less, great credit, and a large amount of cash for down payments and purchase expenses.”

or…

“To buy a home, you need a number of basic conditions – your new home expenses must be no more than 28% of your income, while total debt expenses cannot exceed 35%. Your credit score should be 760 or higher, however – it is possible to get a home with 700 or more. You will also need between 5-20% of the purchase price in cash to cover down payments, closing costs, taxes and escrow as well as other purchase expenses.”

The second example means nothing if the numbers have your head spinning. You’re lost at 28%. Understand the concept at its simplest and worry about the details later.

Delegate

This might be my favorite of the bunch. Delegating doesn’t mean you throw up your hands and give up. It means you transfer the bulk of the mathematical work to someone else – permanently or at least until you can learn how to do it.

• Your spouse might be a great person to load off on (although the more mathematically-inclined spouse is probably already handling the finances).
• Accountants (although expensive) are also a good choice, especially for important stuff – like taxes.
• A friend or family member might be willing to help you re-vamp your system and work with you until you get the hang of it.

Improve Your Skills

I’ve left this one for last, because there may be no hope for you. If you’re not interested in improving your math skills (you think you’re too old, too dumb, too…whatever), just follow the above four suggestions. Otherwise, consider:

• Math games. Game developers have jumped on the skill-training bandwagon with titles like Brain Age. They not only improve mental acuity, but teach you tangible math skills that are useful for money management (like how to count change!).
• Take a finance class. It might not be math that’s confusing you – maybe it’s just money! In either case, taking a class gives you the opportunity to ask questions, get extra help, and learn skills and shortcuts from your peers. More than anything, don’t be embarrassed about your math problem. You are not alone.
• Learn a trick or two. The way kids learn math is fascinating, because there are amusing songs, shortcuts, or tricks to go along with almost anything. Learn a few yourself – whether it’s a math ‘operation’ or a new paradigm for money, it might make the process more fun.

Do Something

These five tips should get you going on your way to more control over your financial life. Just promise me that you’ll do something.

Sitting around and feeling sorry for yourself because you can’t add won’t make you financially successful. But with a little help, you can get there. Promise.

Photo credit: d3 Dan via CC2.0

Being Good With Money When You’re Bad With Math is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

Doing all three sounds like nothing short of an impossible task. You must think I’m a superhero. But I assure you – it’s possible and a lot easier than you think. In fact, I am thinking of wearing a cape for Halloween...

Over the past month, very quietly and in the comfort of my own home, I’ve been conducting a little experiment. It’s occurring at the intersection of three goals that are so dear to many of us:

• Spending less on our grocery bills
• Eating more nutritious foods
• Losing excess body weight

Spending less money on better food sounds like a sick personal finance joke, while losing weight is hard just about any way you slice it. Am I crazy or do I seriously have a solution that can tackle all three?

How Did I Get Here?

Let me give you a short history. Ever since college, I have struggled with weight. It’s never passed the magical point of obesity, but by most accepted standards, I could use to lose a few pounds…or 30. I don’t like “new-age” exercise (what many would consider “traditional”) like treadmills and ellipticals, but love active sports like tennis and even softball. All things considered, successful weight loss for me is 90% food and 10% activity. I’ve proven it before. (Read last week’s post if you want to save money on exercise).

My motivation for weight control is two-fold. My excess indulgence has cut my performance in sports, which hurts especially because I’m a competitive person. Secondly, I’ve reached something close to my target weight a few years back, and saw the way it affected my energy level in a positive way. I’d love to get there again.

The heavens opened up for me after reading this post from Zen Habits, courtesy of Brad Pilon from Eat Stop Eat. You can read the entire post and be enlightened, but it really comes down to two words: eat less. The post argues that if you really want simplicity in weight control, that’s all you needed to remember. Everything else is useless fluff that may or may not be helpful.

I really took this advice to heart. It makes perfect sense, and it merges seamlessly with my drive to introduce principles and simplicity into my life.

The Way We Used to Eat

I’m not proud of the way grocery shopping has been handled at home. We’ve done the “wrong” thing for a very long time – shopping when hungry, going to the store without a list, buying a lot of novelties or not knowing what we would make for the rest of the week, and so on.

We would buy food infrequently, relying instead on eating with relatives and at local restaurants. We spent a lot of money on eating out. We purchased perishables without considering the finished product or our schedules, and much of our food would inevitably go to waste. It was frustrating, but we would repeat the cycle again and again.

Quite simply, we ate a lot, and we purchased even more – often foods that were neither high in quality or nutritional value.

There is a Better Way

Think back to the Zen Habits post. I took that “eat less” approach and, with more of Leo’s advice, and reviews from fellow bloggers of great books like In Defense of Food, added “better foods.” I was also determined to prove that I could save money doing it.

I’ve really focused on quality over quantity, targeting core foods (fruits, vegetables, lean cuts of meat), and selecting the best of the bunch. I buy organic and/or local whenever possible, and avoid foods with additives.

When making purchases at the store, I’m careful to pick out things in season and only selecting ripe and ready-to-eat produce. If it doesn’t turn me on, I skip it and move on to something else.

One of my strong side passions is great cooking. I love to try my hand at new dishes and serve things up, Top Chef style. Having worked with produce and other foods on a regular basis, I can vouch for the fact that organic and local foods have a significant difference in quality. Their colors are more vibrant, their taste is stronger and fuller, and they are easier to work with (in preparing, for example, potatoes are much easier to cut).

The end result is that foods that had little to no taste before (like many fruits and vegetables) because of the way they are picked and transported, were now filled with incredible flavors. Amazingly, it takes much less of something to satisfy you when it’s of a high quality. Think about it – fillet mignon, caviar, etc, etc…usually served in very small portions, right?

Most importantly, respecting the high quality of the produce we now purchase means that we haven’t wasted a single piece of food that’s entered our home.

Results

I’m walking proof that you can make this work:

• In the last 30 days, I’ve lost weight consistently (but not rapidly, like most weight loss fads).
• We’ve only spent about 80% of our typical month’s grocery budget.
• Most of the foods we’ve eaten are natural or organic, and they’re frequently unusual (things we don’t normally eat), which has introduced a great deal of variety in our diet.

Above all else, I’ve been more satisfied and impressed with my diet than any other point in my life. Quite simply, I love what I’m eating, and it makes me feel great.

Tips for Making It Work

If you want pure grocery tips, check out either of the following: 13 grocery-saving tips, and how to shop for loss leaders. I’ve also written about going vegetarian as a great way to lose weight and save money at the same time. But if you want to use the ‘eat better and buy less’ strategy, I suggest the following tips that have worked for us in the last month:

• Don’t be afraid of organic stores and farmer’s markets. Visit every local market and store (like Whole Foods) in your area and take mental notes on the best value (not necessarily the cheapest – take stock of the quality of the produce).
• Shop at the grocery store about twice as often as usual (this is about every 3-4 days for us).
• To start, try to shave 20-30% off your total existing budget. Divide your monthly grocery budget by the number of trips you expect to take, and use that as your target/limit for each trip to the store.
• Focus on buying less with each trip – if you normally buy five peaches, get three instead. The idea is to purchase fresh foods frequently and focus on quality.
• Monitor how food is consumed at home. Get rid of all of your fresh ingredients before making the next trip to the store.

Get With the Program

It’s okay if you don’t think you can revamp your entire grocery experience in one fell swoop. Your family might not be willing to make the change even if you’re immediately motivated. If there’s one thing you take away from this post, just remember to ‘eat less.’ Everything follows that one simple mantra.

If you can commit to eating less food, you’ll pave your own way to better health. You’ll figure out your own unique way to accomplish the goal. As you start to eat less, you’ll naturally desire better-quality foods, and you’ll search out the best nutrition you can find. After all, it’s natural.

If you’ve had experience with natural foods and/or eating less food, I’d love to hear about it!

Photo credit: WordRidden via CC2.0

Eat Well, Lose Weight, and Save Some Money is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

College affiliations aside (ahem…Miami), I have a special relationship with hurricanes. While veterans of the Florida hurricane “scene” might still consider me a rookie, I think having personally lived through three or four major storms is a pretty big deal.

As the 2009 hurricane season winds down to an uneventful close, everyone in Florida is breathing a small sigh of relief. Meanwhile, I’m thinking about what I’ve learned from a quiet hurricane season that has a financial application. Quite a bit, I’ve realized.

Unpredictability

The primary characteristic of hurricanes is that they are widely unpredictable. Okay, I lie. They are far more predictable than, say, tornadoes or earthquakes. After all, they usually occur from June through November, and through careful analysis, we are warned days to weeks in advance.

Having said that – even with forewarning, and unless your home has wheels, there’s not much you can do to avoid a hurricane. Once it’s ready and spinning, it will make its way slowly and mockingly to the coast and slam in with all its fury.

It’s not a stretch to liken a hurricane to a financial storm. We know that they come around once in a while, but we know neither the intensity of the future season, nor the strength or landing site of individual hurricanes. And we can usually get a little warning to prepare.

Can we actually learn something useful from hurricanes? I think so:

Long-Range Planning

Preparation for hurricanes begins long before each season. Purchasing flood insurance, upgrading hurricane shutters or new roof materials, and getting a generator in place are all great ways to get ready. Once a hurricane is physically approaching, these tasks are almost impossible to get done – both because of time constraints and because everyone else is trying to do them, too. It’s too late.

Building a strong “foundation” is imperative to getting through a hurricane with as little damage as possible. Here are a few ways we can build a good financial foundation:

• Save an emergency fund adequate enough to cover unexpected disasters.
• Prepare living wills and other legal documents that communicate your intentions during a medical emergency.
• Evaluate your insurance needs long before you think you’ll need the benefits.
• Decrease your expenses and increase your income to keep the “freedom gap” large.
• Take care of your credit score, even if you never plan on getting credit.
• Predict regular, large expenses conservatively, like your tax bill or yearly insurance.
• Stay one step ahead of problems by using last month’s income (YNAB Rule 1) for this month’s expenses.
• Don’t lock yourself into loan payments for the long term.
• Automate critical portions of your finances that must go on in case of emergency (like a power outage or urgent trip out of town).

Short-Range Planning

Without adequate long-term preparation, scrambling to get ready for a hurricane is superficial at best. Prepared or not, some last-minute tasks must be completed, like gathering food and water, ensuring equipment like generators and flashlights are ready to function, and boarding up the house with shutters or plywood.

When a financial storm approaches, we often get some warning. In that span of time, there are things that need to get done, like:

• Evaluating options for handling the situation in the best way possible.
• Transferring money between accounts to prepare for a large expense.
• Selling assets like stocks and bonds to free up cash for spending.
• Activating consumer protections, like credit freezes, if you believe something has been compromised.
• Shedding discretionary expenses, temporarily or permanently, to open up room in the household budget.

Surviving the Storm

Getting through the actual eye of the storm is mostly a passive process. It involves a lot of sitting and waiting, some sleeping, and some more sitting and waiting. Unlike a tornado or an earthquake, where the event is over in minutes or sometimes seconds, a good hurricane event can last for 24-48 hours.

Nevertheless, when water starts leaking into your house, the wind blows out your window, or the power goes out, you have to react. How do we get through financial storms with minimal damage?

• Rely on the strength of your long-term plan, while reacting carefully to the uniqueness of the situation at hand.
• Avoid burning through your resources too quickly, even when you’re in “panic” mode – you have to make them last.
• Don’t pay for urgency if you can avoid it – deal with the situation in the most reasonable way possible.
• If possible, use cash for your expenses – swiping away on a credit card when you’re under stress is not a good idea.

The Recovery Process

The stronger your long-rage planning, the less damage there is to clean up after the storm. Well-trimmed trees won’t blow around branches, a reinforced roof won’t peel off, and a power outage can be remedied by a working generator.

But even the best planning can’t stand up to a strong storm, and you’ll ultimately have to do some clean-up. In addition, your neighbor may not have been so proactive, and some of his roof tiles went flying through your porch screen. Go figure.

What can we apply in the financial recovery process?

• Evaluate the extent of the financial damage caused by your situation.
• Determine if your pre-planning efforts, like an emergency fund, were adequate to cover any resulting expenses.
• Catch up on anything you’ve neglected in the process, like unpaid bills.
• Channel money back into remote accounts and re-purchase any assets you shed.
• Figure out the extent to which you have to rebuild your reserves and make a plan.
• Write down what you learned through the situation that can help in the future.

Hurricanes are ferocious and unpredictable, much like the financial storms that ravage our lives. With a little planning, we can be better-prepared to deal with the problems and the aftermath.

And when it seems like everything around you is falling down, just remember this classic quote from The Dark Knight -

“The night is darkest just before the dawn.”

Photo credit: PhillipC via CC 2.0

Hurricanes and Planning for Financial Disaster is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal

Let me get something straight before I start. I am not an advocate for buying new cars. However, the reality is that people already have new car loans and will continue to buy new cars, regardless of what I think. Rather than abandoning you altogether, I think I can help.

The process of buying and selling new cars is fairly predictable for the typical consumer. I say that with a grain of salt, because what was typical two years ago may no longer be true after we get out of the recession. It’s quite possible that many more people will be buying used cars, and will be financing for shorter periods of time or paying cash.

I’ll attempt to examine the situation with the best information available. Lagging indicators (perhaps not yet reflecting the effect of the current economy) show the average car loan length to be just over 5 years. 60+ payments is a pretty solid commitment. We’ll also consider the most widely available car warranty length, which is 3 years. Extended warranties of 5 to 10 years are possible, but less common.

With these few assumptions, we can map out the expected financial life of a new car over four distinct stages. Each has unique characteristics and ways to optimize the experience.

Let’s take a look:

Stage 1 – The Honeymoon (Year 0 – Year 3)

As soon as you drive that shiny new car off the lot, you’re in the first stage. Your car expenses are fairly straightforward – a loan payment, high insurance premiums, and gas. Unless you lose your job the day after your purchase, or you were really off on your payment estimates, keeping up financially is comfortable.

If anything goes horribly wrong with the car (mechanically), the warranty will almost certainly cover any repair costs, so worrying about maintenance is not an issue.

The most significant effect of the honeymoon is a huge depreciation of your car’s value. Unless you’re planning to sell immediately, it may only seem like this is a loss on paper. But if you happen to get into an accident and total the car, you may be on the hook for the difference between the street value and your loan. A big down payment and/or gap insurance will help protect you.

If you’re in Stage 1:

• Use predictability to your advantage. If your loan company allows you to, try to pay down your principal early to shave off a lot of interest from the loan. Or, save almost 100% of your extra car money toward repair expenses later on.
• Shop around for car insurance. Your bill will probably be the highest in Stage 1, so it makes sense to optimize it as best as you can.
• Look into gap insurance if your car is worth much less than what you owe. Many dealers offer this as a one-time or monthly payment when you buy, but you can also get it from certain car insurers.
• Don’t skip out on regular maintenance just because you’re under warranty. Cutting corners during the first three years of ownership will bring bad car karma when it comes time to pay the repair bill yourself.

Stage 2 – The Push (Year 3 – Year 5)

You’ve had your car for three years, and the two of you are finally getting comfortable with one another. At month 36, you’ll probably pass that magical mark that sends your baby into the world on her own – your warranty expires.

Usually, this doesn’t mean riches one day and the poorhouse the next. But you need to be careful. Because you’re still making loan payments for the next two years, it’s a difficult proposition to save for potential repairs. If your income has been affected since the loan originated, you may be struggling even more. But repairs are on your dime, so being prepared is better than being sorry.

Equity is slowly starting to stabilize during this period. Drastic declines in value have turned into trickles, and your loan-to-value ratio has become level or even positive as the loan it paid down.

If you’re in Stage 2:

• Start to phase in savings for maintenance. The car has been running smoothly, but even expected repairs like new tires and brakes should start to catch up with you before Year 5.
• Consider an extended warranty. If you’re really strapped for cash and any major problems would be catastrophic to your finances, an extended warranty to get to through this stage may be beneficial. However, it’s just another form of insurance, and you’ll likely lose out money in the end. Do it only if it makes sense for you.

Stage 3 – The Lull (Year 5 – Year 8 )

Finally – making that last car payment feels like victory is yours! It gets even better when the title to the car comes in the mail. After 5 years, the equity locked up in the car is finally yours. You own 100% of it.

With new-found room in your budget, you might be tempted to overspend in other areas. But with discipline, minor maintenance will as affordable as it will be regular (many things will need to be replaced!).

Most people who enter Stage 3 feel like they no longer have a financial obligation to their car. They stop saving because they’re tired of sinking money into something that serves a purely utilitarian function. They’re bordering on mad and resentful.

If you’re in Stage 3:

• Don’t give up on your asset. Not making payments may feel like a huge burden off your shoulders. You feel relieved and you want to forget about it. Don’t fall into the trap of being unprepared for maintenance! Use at least a portion of your old car payment amount and save it for the future.
• Don’t buy a new car. Don’t laugh – you might actually miss your old payment. This new-found room in your budget may have your hands and wallet itching. But the longer you keep your car, the more bang you get for your original buck.
• Negotiate your insurance. Make sure you’re still getting the coverage you need for your car. Perhaps the deductibles can be adjusted, now that cash flow is better?
• Take care of your car’s maintenance and help it last longer. Don’t let little car problems turn into nightmares.

Stage 4 – The Fade (Year 8 – Infinity)

If you get to keep your car past the 8-year mark, you’ll really start reaping the benefits of your original purchase. Your purchase price will be spread over a long period of time, lowering the overall average cost of the vehicle.

As the car ages, major maintenance will become a bigger concern. Things like transmissions, A/C compressors, suspensions, and (may this one never happen to you) – engines, cost a lot of money.

Although buying a new car may still not make financial sense, there are a few situations in which it would be advisable.

If you’re in Stage 4:

• Don’t fall into the trap of buying a new car because of one-time repairs. If you’re saving regularly, you’ll be able to pay for most of them out of pocket. Chances are, your large repair bill is still peanuts compared to a new car payment.
• Monitor the value of your car and cancel your comprehensive/collision insurance when it makes sense. This will bring down your insurance premiums even more!
• Don’t hang on forever. If you need to replace the engine, transmission, and gas tank all in one month, it may be time to throw in the white flag. Consider the importance and value of reliability compared to the money you’re saving by keeping your car.

Buying Used

When you buy used, you typically enter the process somewhere in the second or third stage. Equity will not be an issue because you’re either paying cash or financing on a short-term basis.

Warranties are entirely possible, especially if you purchase from a dealer. And you can take advantage of lower insurance premiums because of the car’s value.

Overall, you’ll bypass a lot of the nastiness of new car buying and jump in at the most advantageous time. The only long-term worry is how well that used car you just bought was taken care of before you got your hands on it.

Getting the Most From This Post

The goal of this post is self-awareness. Once you know where you stand, you can stop feeling sorry for yourself and actually do something productive.

I’ve given you some action items to work with for each stage of your car’s life. Many of you are stuck somewhere in the middle – you have two cars, each at its own point in the time line. You’ll have to find the right balance between the two or treat them as individuals.

Owning a car is one of those things – you know…a necessary evil. You might as well optimize the experience by being smart with your choices!

Related Posts

If this post hit the spot, here are a few more to check out:

• Options for Buying Used Cars
• Getting the Best Car Insurance Rates

Photo by RBerteig via CC2.0

Navigating The 4 Stages of New Car Ownership is a post from Fiscal Fizzle.
The secret book giveaway entry code for Fiscal Fizzle is: Villarreal