Thursday, January 10, 2008

How Much to Spend to Buy a Car

The other day I was having dinner with one of my good friends and knowing that I'm into personal finance, he sought my advice about buying a car.

My friend, "Car Fanatic", has always been a big car enthusiast, in fact he's the only one I know who every month goes to a different car show. However, ever since I've know him he's always driven the crappiest car of the group. (Keep in mind I've known him since we were freshman in college -- so most college students, or at least the one's based in reality, drive crappy cars). Anyway he used to drive a 1981 Mitsubishi and then about two years ago when he graduated from college he upgraded to a 1992 Honda Civic. Well now "Car Fanatic" is looking to get a "real car" in his words and now that he's financially stable wanted my advice on what he could afford.

I know he was looking for something like "$20,000 max" or "no more than $250 a month" or any other solid dollar figure. I'm usually rather opinionated and am always willing to contribute my two cents and sometime even twenty-five cents, so "Car Fanatic" was taken back when I said that I really couldn't give him a firm answer and it really depends on him. He said no, Future Millionaire, seriously what can I pay a month for a car payment?

First off the idea that he has to finance it, doesn't sit well with me, especially since I know he paid cash for his other two cars. But none the less, I'm not one to judge (okay I take that back, I judge but tell myself I shouldn't). So the best advice I could give him was:
It really depends on how much you value a car and what you're willing to sacrifice for it, for example would you rather have a rockin' ride or be able to go to a nice dinner with friends every week? etc. In the mean time while you're figuring out how much you value a new car, you should start playing house by setting aside whatever amount of money you feel you can a) afford and b) would align with a car payment for your future car. And play house for several months (at least 4-6) to see if this is a realistic amount of money and on top of that when you go to buy your call you'll have a nice down payment already set aside.

On top of that I advised "Car Fanatic" to avoid at all costs going into a dealership when he was ready to buy a car with the attitude that he could only afford X amount of dollars per month as many times they will fluctuate the interest rate and length of load based on this information instead of dealing strictly in the lump sum price of a car. With an attitude of money per month the dealership can really end up having you pay more for a car than you were ever intending.

Well that's my 2 cents on buying a car, and my no means am I an expert car buyer so for your used I've listed several good car buying advice articles that may be of help: --- check out the real price of cars
Inside Car Buying Secrets

How Stuff Works : Buying a Car
Car Buying Tips

Wednesday, January 9, 2008

Spending Money to Save Money

Its nearing the end of January which means W-9's are on their way and I'm starting to think about preparing my taxes.

2007 was the first year I've ever been eligible to contribute to a 401k account, which will complicate my taxes and make me uncertain. In the past my taxes have been pretty straight forward; W-9 + Bank Statement with Total Interest + Standard Deductions means complete in about 30 minutes. Now that I have the 401k complication, I've tried to investigate on my own how to impute this data into my return but if you've ever read the IRS info on 401k its about as clear as mud. If you'd asked me even two years ago if I'd pay someone to do my taxes I'd have said no way -- I was frugal and could do them on my own.

I used to think I was a frugal person but really I was just cheap. I'd buy the cheapest of any product I needed, I needed paper towels I'd buy the el cheapo brand, I need a pair of black pants and would also get the store brand that was on sale for 75%. Its only within the last couple of years that I've realized that I wasn't being frugal, I was cheap because it was taking me 5 paper towels to complete the same job that the bounty brand (or whatever you preferred brand is) and that those pants I thought I got a steal at for $20 only lasted about 2 wearings.

So this year I'm biting the bullet and spending the money to get my taxes completed, but at the same time I'll ensuring my return is correct and more importantly learning how to complete my taxes with these complications.

Monday, January 7, 2008

8 Smart Money Moves for 2008 includes Rent, Don't Buy

I was doing my usual daily reading of financial news and came across US News 8 Smart Money Moves for 2008. One of the 8 smart moves was to "Rent, Don't Buy" which helped reinforce my hesitation to buy a house this year. I then started searching more about Renting instead of Buying and found these great articles: Why rent? To get Richer at MSN Money, 6 Money Dilemmas including Buy or Rent at Money, and Rent, Grow Rich, Be Free at Millionaire Mommy Next Door Blog.

I'm really struggling on whether I should buy a house or not this year. I'm starting to think that if I'm struggling this much then maybe now is not the best time for me to buy but on the same token if I'm going to buy a house within the foreseeable future I feel like now's the time. In the next 3 months I'm being transfered back to Atlanta after working and living out of town for the last year. Now that I'm finally settling in one location for the long term, have a sizable down payment (well over 20% of any house I'd choose), and with real estate prices falling it would seem that in the coming months would be the ideal time to buy a house for me.

Here's my hesitations for holding off buying a home:
I'm not sure if I'm ready to make the committment of owning a home and all of the work it entails. I don't think I'm ready to start giving up a potion of my weekends to maintaining a home, I do work in construction so I enjoy building things but I enjoy my current maintenance-free lifestyle. Every time I visit my mom I end doing her "Honey Do List" it always feels like she's got to have something done, yard work, HVAC cleaing, etc etc, and I just don't know if I'm ready to take on that. That's strike 1 against home ownership right now.

I also don't know if I'm readying to stay put for several years. Committing to one location and one house for years seems scary. Heck, I have a hard time committing to watch a movie from start to finish half the time, who am I kidding trying to buy a house that according to this great calculator by KJE which compares the financial aspects of buying vs. renting I need to own and stay put in the house I buy for at least 6-8 years to break even. At this point in my life 6 years seems like a really long time. That's strike 2 against homeownership.

On top of that I'm still a single woman, who at some point in her life would like to settle down and have a family and I can't see the home I buy this year to be the same one I'd want to have a family in. So it makes sense to wait, although I think its some what silly ---- its not like I want a knight and shinny amour to come and "save me" and then support me, I think I'm perfectly capable of taking care of my self and possibly a future family - its just that the cute little townhouse or house that's small enough for just me to take care of right now probably won't work with fido, junior, and hubby in toe. That's strike 3 against buying a home -- I guess three strikes and home buying gets put on hold.

I think for at least the next year I'm going to hold off on the house and continue to rent, we'll see where I am financially and mentally next year and reevaluate my decision then. I'm not planning to never buy a house, eventually I want to have my own place I can take pride in, but whether this home comes into my life now or in five years remains to be seen.

Sunday, January 6, 2008

Financial Blast from the Past

Well I'm back from a long hiatus called Christmas vacation with my Family.

During my vacation I decided to clean out my closet at my mom's of stuff I'd left from high school, when sorting through old purses I stumbled upon an old bank statement and pay stub from when I was in high school. It surprised me how far I've come from then net worth wise. The statement was for my regular free checking and for my Money Market. In the checking account I had $19.48 and in my money market I had $4,708.21 and I know that was all the money I had in the world and it was being saved for car insurance, car repairs, and of course college. To think that in the last 6.5 years I've gone from that to where I am today plus paid for college along that way is amazing to me. This means I "saved" (including compounding interest earned) over $12,000 a year and increased my net worth by over 20 times. It makes me very excited about where I'll be in another 6.5 years.

Well now I'm off to donate the purses to goodwill.

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