Before you even begin talking about how much you’re saving in terms of increased fuel efficiency, you have to determine some of the numbers you’re working with.

First off, how much does a gallon of gas cost? Right now, the gas station nearest to my home charges $3.999 for a non-premium gallon. So, we’ll go with that – $4 per gallon.

You also need to know how many miles you expect to get out of your car after you buy it. It really depends on the age of the car that you buy. If you buy a new or nearly new car, you might get as many as 150,000 miles out of it. For an old car, you might be lucky to get 50,000 more miles out of it. Let’s go with a happy medium – 100,000 miles.

So, what is fuel efficiency actually worth when you’re buying gas at $4 per gallon and intend to cover 100,000 miles in that car? Let’s look at some different fuel efficiency numbers.

If the car you buy gets 15 miles per gallon, that means it’s going to slurp down 6667 gallons over the time you drive that car. At $4 per gallon, that adds up to $26,668 in fuel costs.

If you bump that up to 20 miles per gallon, that means it’s only going to use 5,000 gallons over the period that you own the car. At $4 per gallon, the total fuel cost is $20,000.

Let’s say your vehicle gets 25 miles per gallon. In that case, it only uses 4,000 gallons over that 100,000 mile life span. At $4 per gallon, that adds up to $16,000.

What about 30 miles per gallon? If you’re looking at 30 miles per gallon, the vehicle consumes only 3,333 gallons of gas. At $4 per gallon, that adds up to $13,334 in fuel costs.

What about 40 miles per gallon? In that situation, you’re looking at a consumption of 2,500 gallons over the life span, which, at $4 a gallon, adds up to only $10,000 in fuel costs.

Fuel efficiency is a tremendous savings. If you choose a 40 mpg car over a 15 mpg car, you’re saving $16,668 in fuel costs over the next 100,000 miles (assuming fuel stays at $4 per gallon). That’s enough to buy your next replacement car.

A good rule of thumb to use, assuming you are going to be driving the car for a long while and assuming that fuel prices continue to inch upwards, is that for every single mpg that one car has higher than another car, you’re saving $1,000 in fuel over the lifetime of that car. It’s not a perfect rule and it particularly breaks down for comparing cars well above 25 miles per gallon, but it’s a good one for giving yourself an estimate of the value of fuel efficiency when shopping around.

Fuel efficiency is simply an enormous financial consideration when buying a car. Buying a car that is 10 miles per gallon more efficient in terms of fuel consumption than the other option can easily save you $10,000 over the lifetime that you own the car. Keep that in mind when you shop around.

The post What Is Fuel Efficiency Really Worth? appeared first on The Simple Dollar.

I’m as guilty of that as anyone else. It’s a great way to drastically trim your finances.

Let’s be honest, though: a lot of people simply aren’t going to give up their car. They have too much emotionally tied into the freedom of having an automobile to take them wherever and whenever they want.

So, with that in mind, here are fourteen pieces of advice that will each help you save on the fuel costs of your commute. Every single one of these tactics will improve either the efficiency of fuel consumption on your commute or will reduce the number of miles you put on your car.

1. Air up your tires to the maximum recommended pressure each month.
Tire air pressure is measured in psi. For every psi below the maximum recommended pressure that any one of your tires falls, you’re losing 0.125% of your fuel efficiency. So, if all of your tires are 8 psi low, you’re losing 4% efficiency just because of air. Your 25 mpg car becomes a 24 mpg car just because you haven’t aired up the tires lately. Since airing up your tires is free at many gas stations and it only takes a few minutes, you should take the time once a month or so to air your tires up.

2. If at all possible, telecommute.
If you work at a job that allows you to work from home, even if it’s one day a week or one day a month, take advantage of that time. Every single day that you don’t have to commute to work is savings in your pocket.

3. Minimize every little bit of accelerating and brake usage.
Every time you accelerate your car, your engine starts burning more fuel, and the harder you accelerate, the more fuel you burn. Every time you touch your brake, you’re compensating for too much acceleration earlier on or you’re ensuring that you’re going to have to accelerate more soon, which takes you back to more acceleration. Instead, accelerate slowly out of stops and break as little as possible.

4. Familiarize yourself with gas prices along your route.
Which gas station along your route consistently has the lowest prices? Watch the stations along your route and continually compare them. Often, you’ll find that a station or two tends to have lower prices than others along your commute. Frequent those stations.

5. Use a credit card tied to the gas chain with the lowest prices.
If you’re satisfied with one of those low-cost stations, check and see if they have a credit card tied to the chain that offers rewards for using it for refueling. Many chains offer rather impressive rewards cards. If they do, sign up for that card and use it only for fueling, paying it off at month’s end and using the rewards as often as possible.

6. Minimize your heater and air conditioning usage.
Both of these burn fuel. Simply get your car’s internal temperature to something tolerable and flip it off. If it’s hot out, roll down the windows and use air motion to bring the car’s temperature down significantly before using the air to lower it further (if you must).

7. Use fuel efficiency as one of your big factors in your next car purchase.
When you buy a car, figure out the fuel efficiency of the models you’re examining and use that as one of your major factors. It doesn’t have to be the only factor, of course, but it should provide significant impact on your purchasing decision.

8. Ask about employer programs for commuting, such as a gas allowance.
Some employers offer a stipend or a reimbursement to employees for their commute. Often, it’s a program that’s not shouted from the rooftops to current employees but was perhaps included as a perk in a collective bargaining agreement. Ask the human resources office at your workplace if such a program exists.

9. Use your commute home for reasonable errands along the route.
If you know you’re going to need some specific item when you get home, shoehorn it into your commute. That way, once you’re home, there’s no reason to waste the fuel to drive out of your residential neighborhood again. You already have the item you need. I used to find that a Post-It note stuck to my rearview mirror in the morning was a perfect reminder.

10. Get rid of any and all extra weight in your car.
If you are storing any items in your car that aren’t necessary for the trip, get them out of your car. Your fuel efficiency gets worse with every extra pound that your car is carrying. Toss anything and everything extra out of your vehicle. (Remember, of course, that safety equipment, particularly in winter, is not an extra – it’s essential.)

11. Use the cheap fuel.
Read your manual and find out what kind of fuel is recommended for your car. Most of the time, the manual suggests 87 octane fuel and, if it does, that’s what you should be using. There is very little advantage to the premium fuel – what little there is does not add up to the cost difference for a car that runs fine on 87 octane.

12. Get your oil changed regularly and use the type recommended in your car manual.
Fresh oil keeps your engine properly lubricated, minimizing the work that the parts have to do in order to provide the power needed to run your car. Old oil causes the parts to run with less efficiency. Thus, if you want to minimize your fuel use (and prolong the life of your car), get oil changes according to the manufacturer’s schedule.

13. Carpool.
Carpooling means that some days, you don’t have to even drive to work. Someone just drives you right to your door. It also means that on the days you do drive, you can use the HOV lane for more efficient driving. Even if you’re just giving someone a lift each day, it’s still worthwhile. If you have a HOV lane available to you, you can now access that lane and drive at a more reasonable pace with substantially less stop-and-go driving.

14. Replace your air filter according to your maintenance schedule.
A final tip: change your car’s air filter on a regular basis. Proper clean air flow contributes to the fuel efficiency of your car. Change the filter according to the recommendations of the filter manufacturer.

Keep on top of these things and you’ll get more miles on fewer dollars.

The post 14 Ways to Save Money on Your Commuting Fuel Costs Without Giving Up Your Car appeared first on The Simple Dollar.

Rather than just rehashing my own experiences with auto insurance, I wanted to look at it from a different angle. Obviously, my choices helped define what kind of auto insurance I chose, but how does auto insurance actually alter my choices once I already have it?

What do I mean by that? Most auto insurance policies offer reductions in rate for customers who conform to certain behaviors. In other words, if you do certain things, your insurance rate will go down.

For the auto insurance company, this makes sense. Insurance companies profile you. They look for aspects of people that are found in good drivers because good drivers are the ones who make money for the insurance company. If people are very rarely making claims, then the insurance company is going to clean up on you as a customer.

So, what do good drivers do? They don’t get in accidents, obviously, but there are other factors to consider.

Improve your credit score. Most insurance companies use your credit score as a component in figuring out your rate quote. The better your score, the lower the rate they’ll offer you. Why? As a whole, people with good credit tend to get into fewer accidents.

I’ve witnessed this in my own life. After improving my score in 2006 and 2007 (it wasn’t bad to begin with, but it wasn’t great), I started shopping around for insurance rates again (after my first shopping around in 2004). I was stunned as to how much lower the rates on offer were.

Don’t get pulled over. The impact of a traffic ticket can be painful enough. You can get dinged $100 for even the slightest traffic infraction.

That’s just the first cost, though. Often, the real cost comes with the increase in insurance rates that comes with the traffic ticket. The next time your policy is renewed, brace for a rate increase. It won’t always happen, but it often does.

A similar logic applies when it comes to traffic accidents. Get in an accident and you’re likely facing a rate increase.

Buy a low-profile and reliable car. If you choose a car that’s associated with speed and flashiness, your insurance company will take that into account. So will thieves.

Avoid flashy cars. Avoid cars known for speed. Look for cars that are reliable and won’t attract undue attention.

Drive less. One of the things you’ll always be asked when applying for auto insurance is how much you drive. The less you drive, the lower your quote will be.

If you can, use mass transit to get into and out of the city for work instead of driving your car. Stop for groceries and other items off of mass transit as well.

The fewer miles you put on that car, the lower your insurance for that car will be. You’ll also save money on fuel and maintenance.

Have a good credit score. Drive safely and within the speed limit. Buy a reliable car. Drive less by using mass transit and your bicycle more.

These aren’t just good pieces of insurance advice. They’re good pieces of personal finance advice. Each of these tactics will save you money even without considering auto insurance.

These aren’t just good pieces of insurance advice. They’re good pieces of personal finance advice.

If you take steps to improve your auto insurance rate, you’re likely taking steps that will save you in other aspects of your financial life. You’ll get fewer traffic tickets. You’ll see lower interest rates. You’ll have fewer repair bills. You’ll have lower auto maintenance and fuel bills.

These steps become a “double win.”

The post Car Insurance: Value Beyond Merely “Insuring” You appeared first on The Simple Dollar.

Over the last year, though, lots of little problems have started cropping up. In the last several months, both the brakes and the transmission have been replaced, and my friend reported to me this morning that the car is making a very odd noise that gets worse with any significant acceleration.

The question here is an obvious one: when is it time to sell a car and move to a different one?

From a purely financial perspective, it’s never a good idea to sell a car. One could just keep repairing pieces of it as needed in perpetuity and, over the long run, you’re going to end up saving money.

There are a few problems with that scenario, though.

One, repairs aren’t evenly spaced out. Often, the failure of one system can be enough to push the downfall of another system. Anyone who’s had an old car has experienced the phenomenon of how repairs come in batches.

Two, reliability has value. Once systems on a car get significantly past their designed lifetime, the likelihood of failure at any given moment increases.

Sure, you might get lucky and drive a car without significant repair for a very long time, but as a car ages, the likelihood of a vital system failing grows. If the likelihood of a system failure is elevated, that means the car isn’t as reliable. You’re more likely to walk outside one morning and find that your car doesn’t start.

What exactly is that reliability worth? Let’s say your current car has a 1 in 500 chance of having a failure of some kind when you go out there to start it in the morning. Getting a replacement improves those odds substantially, moving it to, say, 1 in 5,000. Obviously, over time both of those odds are going to get worse.

What is it worth to make your car ten times less likely to fail in the morning?

That value is going to be different for different people. Do they have easy access to public transportation? Is their job flexible enough to work around a car failure like that? Are they responsible for the care of others? Do they have an additional support network that can help them out in a pinch, or are they going it alone?

Is the stress of dealing with unexpected repairs something you can easily handle in your life?

Another angle to consider is your overall financial health. Can you actually afford a car replacement that’s going to significantly improve the car’s reliability?

The problem with statements like these is that, as true as they might be, they don’t really solve the problem of whether to replace the car or not.

To me, it comes down to your gut. If it feels like it’s time to replace a car, then replace that car. As the primary driver, you have a good sense as to when your car is about to experience significant problems and you also have a good sense as to what an unexpected failure would cost you. It’s a calculation that’s very hard to come up with in terms of dollars and cents.

The best preparation you can make for this moment is to actively save for your next car starting right now. That way, whenever you start to have that gut feeling that my friend’s having right now, you’re ready.

Sock away $50 a month if you have an active car payment. If you don’t have one, sock away an amount each month that’s roughly equal to a healthy car payment. Make that savings automatic so that you don’t have to manually think about it (or talk yourself out of it).

If you start preparing now, when that moment comes when your gut starts telling you it’s time to make a change, making that change will actually be quite easy.

The post Putting a Value on Reliability: When Is It Time to Trade In Your Car? appeared first on The Simple Dollar.

Personally, I didn’t really find any of the reasons to be compelling ones for buying a luxury car. Instead, here are six reasons why I’ll pretty much never buy one, even if I happened to have the large stack of money one would require. If the sticker price and the insurance weren’t enough…

1. People will assume things about me that I don’t want them to assume.
As the Forbes article clearly mentioned, there’s a certain level of “prestige” that comes from owning and driving a luxury car. People pay attention to them.

I don’t want that attention.

For one, I don’t want people assuming that I’m rich or that I’m important. Why would I want that? Unless I were on some sort of career path where I needed to intimidate people with my wealth – and the only kind of people intimidated are ones who can’t look past it to more important things – I have no reason to impress people with my car.

As long as my car is clean, not falling apart, and functional, I’m conveying exactly what I want to convey with my car.

2. I become a more obvious target for theft.
An expensive car parked along the street is going to be a much nicer target for theft than an older and less “prestigious” car.

If you’re a thief and you’re looking to try to pop out a window and make off with some electronics or whatever else you find, are you doing to hit the BMW or are you going to hit the low-end vehicle?

Similarly, if you’re into burglarizing homes and you drive down a street looking for potential targets, are you going to run for the house with the new BMW out front or the house with the older Buick in the driveway?

These are risks I don’t want to worry about or take.

3. Depreciation is even more painful.
If you’re dropping $80,000 in a vehicle, depreciation is going to hurt. Even if the car does retain value reasonably well, you’re looking at a 50% drop instead of a 75%.

A 75% drop in a $20,000 car costs you $15,000. A 50% drop in an $80,000 car costs you $40,000. That’s $25,000 more in losses just due to owning that car.

The simple act of owning an expensive car is a larger losing proposition than owning a reasonable car.

4. I have to travel much further to get repairs done.
There are few certified repair shops who will take on luxury models anywhere near me. On the other hand, there are a lot of places for me to take my Honda Pilot.

Not only are my options limited in terms of shopping around for repair and maintenance work with a luxury car, I have to travel farther for many of those options.

That’s more time and more money down the tubes.

5. The normal behavior of children is more costly.
Like all children, my kids spill things sometimes. They make messes. They’re not trying to be destructive. They’re just kids.

If they severely damage the upholstery in my Pilot, it’s a big deal, but not prohibitively expensive. If they severely damage the leather seats in a BMW, it’s going to be a lot more costly.

I could crack down on everything they might do in the car, but that would make any and all road trips more miserable for all of us. I could simply avoid having my children in the car… but then, when would I drive it? I could just not care about it, but then the costs would be tremendous.

None of my responses to this are good responses.

6. I would be scared to breathe in it.
The final factor is that I simply wouldn’t be comfortable in it. I already drive very conservatively. A pricy car would turn me into an even more paranoid driver, making the driving experience even less enjoyable for me and potentially more dangerous for others on the road with me.

I’d be left with the choice of taking beverages or snacks in the car with me on road trips. The cost of potential damage with such choices would be greater than in an ordinary car.

My comfort level from day to day use would decline overall, even if the actual driving experience was better.

Add these all up and there’s no reason for me to ever own an expensive vehicle. It provides very little additional value in most of the areas I care about when it comes to owning and operating a car, while providing some significant drawbacks.

The post Six Reasons Why I Don’t Want a Luxury Car – Ever appeared first on The Simple Dollar.

I’m going to be driving from northern Minnesota to Dallas, Texas for a week this summer, then returning home. I own a 2008 Toyota Corolla with 34,000 miles on it. I’m trying to figure out if it’s more cost effective to rent a car for this trip or to drive my own car.

It’s going to be really hard to find an exact answer for you given the variables, but I can give you a good estimate that should guide you.

First, let’s get some numbers. I’m going to assume that you live in Duluth, Minnesota, so the length of your trip is 1,100 miles. We’ll assume that you’re going to drive 300 miles while in Dallas, so your round trip will be pretty close to 2,500 miles.

A 2008 Toyota Corolla gets 29 miles per gallon, according to fueleconomy.gov, which is my source for such data. At your current mileage (and making some default assumptions about your Corolla), it’s worth $11,282 according to Kelley Blue Book. After the 2,500 miles of driving, your car would devalue to $11,182, which means that the road trip would devalue your car by $100.

You’re also going to be on the hook for half of an oil change if you drive your own car. It also pushes you along on the rest of your maintenance schedule, which is difficult to estimate but does have a significant cost. Commute Solutions identifies the maintenance cost per mile for driving a car as being 5.3 cents, which means that over the course of the trip, you’ll rack up about $132.50 in maintenance costs (including oil changes).

Now, if you’re renting an economy car, you’re going to be paying about $250 for the rental for the round trip. I looked at several different rental companies that function out of Duluth such as Hertz and Enterprise and found several different estimates for a weeklong trip. I did use coupon codes to get those quotes.

A 2011 Chevy Aveo (the “example” economy car that is mentioned on Enterprise’s website) gets 30 miles to the gallon, compared to the 29 mpg of your current car. That means, over the course of the trip, you’re going to eat up three more gallons with your own car, costing you about $12.

Now, if you were to get a 2011 Toyota Prius for that “economy” price, you’d get 50 miles to the gallon, compared to the 29 mpg of your current car. That means, over the course of the trip, you’re going to eat up 36 more gallons than with your own car, costing you $144 (assuming gas prices are at $4 this summer).

In this example, then, the cost of renting a car with a similar fuel efficiency to your own is roughly equal over the long run. The catch, of course, is that many of the costs associated with your own car are delayed. You don’t pay for the maintenance now and the depreciation doesn’t affect you now. Those things impact you later down the road.

However, if you rent a car that’s significantly more fuel efficient than your own, you’ll likely save a little money by renting. Again, the costs of renting are up front, where many of the costs of using your own car are delayed.

Of course, this all depends on the rental rate you’re able to get and the car availability. If you’re able to lock in a highly fuel efficient car in conjunction with a strong coupon or other offer, you may find it cheaper to rent. Otherwise, you’re probably better off driving your own car on this trip.

In the end, there are some factors that make renting a more appealing option: a long trip over a short time period, an increase in fuel efficiency, and the availability of coupons or other discounts makes renting compelling. Without at least some of those factors, though, I’d lean toward driving the car I already had, and if the costs were close, I’d use my own car because of the lower hassle.

The post Is Renting a Car Cheaper for a Long Road Trip? appeared first on The Simple Dollar.

My wife, Sarah, does commute to work, though. She drives about 35 minutes each way every weekday. Even though she’s driving a Prius that gets her nearly 50 miles per gallon, the price of fuel adds up, as does the price of car maintenance and other concerns.

It’s not exactly a secret to know that gas prices are inching upwards. The nationwide average is $3.67 a gallon as of the writing of this post.

So, let’s say you have a commute similar to Sarah’s (say, 20 miles) and you’re driving a typical automobile that gets 25 miles per gallon. If you drive to work five days a week, forty eight weeks a year, you’re going to gulp down 384 gallons of gas a year. Under current gas prices, that’s $1,400 a year just to commute to work – and that’s just for gas. It does not include maintenance, parking costs, or insurance.

If you compare this to gas prices even a few years ago, you’re talking an extra $700 a year just for the commute. If you’re making an average salary of $35,000 a year, that’s 2% of your salary gone. That’s the real cost of higher gas prices for the average person.

There’s also the secondary cost, which pops up (for example) in the form of increased prices at the store as companies pass along the increased price of shipping to you, the customer.

The “Band-Aid” solutions for this problem are well known. Carpool. Use public transportation if you can. Buy a more fuel-efficient car. Ride a bicycle to work.

What are the long-term solutions to the problem, though? To me, high fuel prices are a good motivation to start considering some other changes in your life.

For starters, consider job opportunities or career shifts that require less commuting – or none at all. Telecommuting works in some professions, but not nearly all of them. For many jobs, a more local option is well worth investigating.

One of the motivations for my own career switch to self-employment was the cost of the daily commute. I estimated that between the fuel costs, the maintenance costs, the parking costs, and the vehicle depreciation, my daily commute to work was costing me about $3,000 a year. That was after-tax money, too, meaning that the actual impact on my salary was around $4,000 per year.

In other words, I could get a job paying $4,000 less per year that was very close to home and see no negative impact in my financial life. I would see a positive impact in terms of my daily time, though, because I would no longer be investing the time in my commute.

One effective way to do this is to start developing a side business right now that can supplement your income, but don’t give into lifestyle inflation.

When I started The Simple Dollar in 2006, it slowly built itself into a side business that I channeled into debt repayment, a house down payment, and other needs. Our lifestyle did not inflate at all – if anything, it deflated. It was because of this reasonably strong income stream from a side business, our vastly improved debt situation, and our lack of additional spending that I was able to start working from home. Nothing more, nothing less.

Working from home has made our family feel the pinch of the gas price increases far less than other families. We’re affected by it, sure, but the impact is pretty small. We have one person who commutes and that person commutes in a very fuel-efficient car. We have the effort put into building a side business to thank for that.

Another option is to consider moving closer to your place of work. If you’re living in an apartment, this move is actually rather easy, as you just need to find a rental unit closer to your workplace.

Flipping the calculations above on their ear, if I found a place near my work, I could actually spend $300 a month more on my monthly housing bill and still break even because of the savings due to the minimized (or eliminated) commute. This likely would have resulted in much improved housing, particularly if I liked the area, plus it would have meant less time commuting.

The only thing that held me back from this solution is that our housing location was central between my workplace and Sarah’s. We commuted in opposite directions, so a reduction in my own commute meant a direct increase in the length of her commute.

In the end, the best financial solutions are the ones that leave you less reliant on the fluctuations of prices around you. The less driving you do, the less you’re impacted by changes in fuel prices. The same is true for other things: the less heating and cooling you do, the less you’re impacted by fluctuations in home energy prices, for example.

Carpooling, using mass transit, and telecommuting are strong steps you can take immediately, but don’t disregard longer-term solutions like these. They provide savings in terms of both money and time, and those savings often last for much longer.

The post Some Thoughts on Higher Gas Prices appeared first on The Simple Dollar.

Gayathri writes in: Driving 1mph slower than posted speed limit. Yeah, that’s a myth.

Actually, it’s not a myth. Most cars made in the United States maximize their fuel efficiency at about 55 miles per hour and drop off rapidly above that limit (this is actually from a study – West, B.H., R.N. McGill, J.W. Hodgson, S.S. Sluder, and D.E. Smith, Development and Verification of Light-Duty Modal Emissions and Fuel Consumption Values for Traffic Models, Oak Ridge National Laboratory, Oak Ridge, Tennessee, March 1999).

This means that if you’re tooling along on the interstate at the speed limit of 65 miles per hour and drop that back to 64 miles per hour, you’re actually improving your gas mileage by about 1.5%, according to fueleconomy.gov.

So, let’s work out what that’s really worth.

Let’s say you have a typical car that gets 25 miles per gallon at 55 miles per hour. At 65 miles per hour, it’s going to get roughly 15% worse gas mileage, or 21.25 miles per gallon. If you trim that back to 64 miles per hour, your gas mileage is a bit better – you’ll be getting 21.625 miles per gallon, more or less.

Now, let’s say you’re going on a 400 mile trip on the interstate and that gas is available for $3.25 a gallon.

If you go 65 miles per hour, it will take you 6 hours and 9 minutes to make the trip. You’ll burn through 18.82 gallons of gas, which will cost you $61.17.

If you go 64 miles per hour, it will take you 6 hours and 15 minutes to make the trip, six minutes longer. You’ll burn through 18.5 gallons of gas, which will cost you $60.13.

In short, driving one mile per hour slower will add six minutes to the trip and save you $1.04 in gas. Your savings simply by driving one mile per hour slower is $10.40 per hour. That, of course, is after-tax money.

That figure, as mentioned above, assumes a 25 mile per gallon car, but other mileages have similar savings. It also assumes that you’re slowing down a bit from a speed above 55 miles per hour.

So, should you just go 55 on any road you’re on? I wouldn’t do that. Instead, I’d stick to the posted speed limit and maybe go a mile an hour or two below that in the slower lane on an interstate.

Doing this serves three purposes. One, you’ll put cash in your pocket for the extra time you spent driving. Two, you’ll never get a speeding ticket. Three, you’re sticking more or less with the flow of traffic (going much slower would disrupt that), so you’re not disrupting traffic flow and endangering yourself that way.

The next time I’m rolling along some flat four lane road in southern Iowa, I’ll just set the cruise to a couple of miles per hour below the speed limit and roll along. Sure, I might get there five minutes later, but I know I won’t get pulled over for speeding, I’ve got something entertaining on the radio, and that bit of extra time will put a bit of money straight into my pocket.

The post Saving Pennies or Dollars? Going Below Speed Limit appeared first on The Simple Dollar.

I rarely do. Taking out a loan for a car is only a good move if (a) you’re buying your first or your second car and absolutely need one today to commute to work – and even then, you should be buying a used one or (b) you have enough cash to buy the car you want but you’re offered 0% or extremely low financing, making it cost-effective to take out the loan and then sit on your investment (a pretty rare case, but one we found ourselves in recently).

We fully own both of our automobiles and don’t intend to replace either one of them for years. Of course, we’re slowly saving up for their replacements at a reasonable rate, but we’re not paying interest – interest is working in our favor.

Let’s run the math so that you can see, in real dollars, how much is saved by paying cash. You have no cash at all, but you need wheels. What do you do?

Option 1 – Buying New Now
You go to the dealership and take out a $25,000 loan on a new car. That loan is offered to you at 6% for five years, meaning you have a monthly payment of $483.32.

You drive this car for seven years. Each month, you pay $483.32 as a car payment. After five years, you own the car, but you’ve paid out $28,999.20 for the loan – $3,999.20 of that being pure interest. You then start saving $483.32 a month for your next purchase – after two years, your savings account totals $11,715.68 ($11,599.68 in savings, plus $16 in interest).

At the seven year mark, you trade in your used car for $6,000 in trade in and also make an $11,700 down payment on your next $25,000 car. You’re still borrowing $7,300 to buy the car, which means monthly payments of $141.13 over the next five years, totaling $8,467.80 – $1,167.80 of that being pure interest.

At this point, you also need to save $285 a month so that you have $25,000 in cash ready for your next car purchase at the fourteen year mark – seven years after this one. $23,940 of the savings will be cash and the rest will be interest – $1,104.64.

So, after all of this, you wind up paying out $73,006.68 over the course of these fourteen years and find yourself with a new car at the end of it.

Now, let’s look at fourteen years starting in a different fashion.

Option 2 – Buying Used Now
You go to the dealership and take out a $5,000 loan to buy a used car that will work for five years. You make monthly payments of $483.33 each month. For the first year, $430.33 of it goes towards the loan payment, while the other $53 goes into savings. For the remaining four years, the whole $483.33 goes into savings.

At the five year mark, you have just shy of $25,000 saved and the trade-in on your junker puts you over the top. New car time, paid for in cash. You then start saving for your next new car in seven years, saving $285 a month.

At the twelve year mark, you replace that car and keep saving the $285 a month. At the fifteen year mark, you have a three year old car and $10,414.67 in savings.

Over the course of all of this, you’ve actually only shelled out $63,199.80 out of your pocket for these cars.

Comparing These Two Scenarios
Here’s the real take-home message here: simply by buying a low-end used car at first in the second scenario and driving it until the owner could pay cash on a new car (at the five year mark), that owner saves $10,000. In other words, choosing to take out a loan for a new $25,000 car means that $10,000 is simply evaporating out of your wallet.

Remember that from here on out, both scenarios are going to be saving the same amount of money in their savings account to keep up with future car replacements, which essentially means that the money is a car payment.

I like to look at it this way: the owner of the second option is essentially paying himself $2,000 a year to drive a used car instead of a brand new one.

There are a few additional things to point out as well.

First, the insurance costs in the second scenario are lower as well. For those first five years, the person owns a used car which will have lower insurance costs than a new automobile.

Second, considering used cars in your buying decision can save you money. When you run the numbers on your car purchase, always include used cars, particularly ones from model years with a good reputation. Sometimes, those cars can save you significant money over the long haul through insurance savings, plus they allow you to retain some of your cash savings for your next car purchase.

Finally, having the money in the bank puts you in control. If you can buy the car in cash, you’re no longer worrying about your credit history or about whether a bank will offer you a good rate. You have your cash, you find the best deal, and you buy. Simple as that.

I’ll say this much: every time I run the long term numbers with regards to paying cash or taking out a loan for a car, I further reinforce my own plan to never again borrow a dime for a car (unless, as I mention above, I have the money in an investment that offers a better guaranteed return than the interest rate of the car loan).

The post Doing the Math on Paying Cash for Cars appeared first on The Simple Dollar.

Of course, when you’re traveling during the holiday season, you’re opening the door to some potential challenges. Winter weather, overcrowded roads, long road trips, expensive stops – it all adds up to some serious time, some serious cash, and some risk for much more time and cash as well.

With that in mind, I thought I’d share with you some of the preparations we’re doing for this year’s road travels in order to save money and minimize risk.

Air up tires Take the car to the local refueling station. Use a tire pressure gauge to check the pressure in each of your tires (if you don’t have a gauge, ask inside). If there’s inadequate air, use the air pump there to refill each tire up to the recommended maximum found in your manual. If you’re unsure how to do this, most car manuals offer a very useful step-by-step guide for taking care of it.

Perform any scheduled maintenance If I’m going to significantly surpass a scheduled maintenance on the road trip, I get it done before I leave. This usually involves getting a mileage estimate from Google Maps, adding that to my current odometer, and seeing whether or not that new number exceeds when my next maintenance should occur.

Caravan If you possibly can, travel with others in a “caravan” so that, if one individual vehicle has problems, there’s support all around. Driving in a caravan has helped me out more than once – I remember one awful road trip where my son got extremely ill along the way.

Provide an ETA to your destination This way, if you don’t show up on time, they can be aware of your delay and attempt to contact you. Again, this has helped me in the past, as people at my destination were able to realize something was wrong and eventually offer assistance.

Visit the restroom before you leave It’s the Murphy’s Law of road trips: when you think you’ve got everything covered and are making good time, someone has to use the restroom. Remember, as I mentioned above, the more unnecessary stops you make, the more expensive (and longer) your trip becomes, so make sure everyone has used the restroom before you leave.

Pack blankets, sand, hand warmers, and a shovel This is more important for Christmas travel, but I also do it for this trip. I pack blankets to help with situations where we’re in an accident or trapped in a storm – same with the nad warmers. I pack sand and a shovel to help with situations where we might need to get out of a ditch.

Pack hearty meals We pack meals before we leave so that we can eat in the car without having to stop for expensive fast food. We often pack an abundance of food, particularly healthy snacks like unsalted nuts, raisins, and the like, because these serve the dual purpose of sating hungry children while also providing rations in the result of an accident.

Pack a charged “911 phone” (and charge your phone) A “911 phone” is a cell phone without an active contract that is only able to dial 911. Keeping such a phone in the car with you helps in case of a roadside emergency.

Pack a change of warm clothes After a winter trip in which I had to walk almost a mile in sub-zero temperatures without adequate clothing, I’ve started making sure I have at least one change of very warm clothes, preferably coveralls. This is particularly important if you’re traveling in the country on less well-traveled roads.

Make a map and check road conditions This is a tactic that’s more important around Christmas but can still be relevant at Thanksgiving – we’ve been caught in Turkey Day blizzards in the past. Also, before you leave, make sure you know exactly where you’re going and the route to get there.

Travel when the roads aren’t busy We’re traveling during the morning hours for most of our driving, which will avoid most of the traffic outside of towns. If you can, avoid driving on Wednesday evening and Sunday, which are extremely heavy traffic days.

Gas up This isn’t so much a money-saving technique on gas as it is a method to avoid an unnecessary stop at a roadside gas station where, after being cramped in a car, you’re tempted to run inside and, because you’re a bit hungry, you find yourself buying unnecessary stuff. Just avoid the stop entirely and make better time on the road.

The post Minimizing the Cost of Holiday Car Travel appeared first on The Simple Dollar.

I love your cost breakdowns when you calculate the real truth behind some financial choice. I’ve got one for you. Is it really cheaper to ride public transportation to work? I have a bus stop about a block from my house. For about $2 each way, I can use public transportation to get to work, which is about fifteen miles away. But I have a car that gets about 28 miles per gallon and gas is about $3, so I’m breaking even to make the commute and I have a lot more flexibility. I just don’t see how the numbers add up.

In the numbers you give above, you’re neglecting a whole bunch of factors.

First of all, your car costs a lot more than you think. Gas is just the start. You also have maintenance, tires, insurance, license, registration, taxes, depreciation, and finance charges (if you have a car loan). According to AAA’s estimates on driving costs, if you drive a medium sedan 10,000 miles per year, the cost per mile figuring in all of those factors is 70.2 cents per mile.

So, your commute is 30 miles long, round trip. Your cost for that commute in a medium sedan that you drive 10,000 miles in a year (a guess based on the info you provided) is $21.

This, of course, doesn’t include things like parking costs, traffic tickets, and so on.

Of course, if you’re going to own a car anyway, the cost per mile for a medium sedan goes down to $0.39 (according to those AAA statistics, adding together maintenance and depreciation per mile). Your round trip in this case is about $12 in depreciation and fuel costs, with the other $9 coming in as costs related to the fact that you own a car, regardless of how much you drive it.

Another factor to consider is the savings of buying a public transportation pass. I’ll use San Francisco’s BART as an example. If you commute every day for a month (let’s assume 24 days), you’ll spend $2 each way on a commute if you don’t buy a pass, totaling $96. Alternately, you can get a monthly pass costing only $60, saving you $36 a month.

If you commute each day in your car, one that you would own anyway, your depreciation and maintenance costs would be roughly $288 ($12 per day over 24 days). If you only have a car for commuting, the total cost over that month is $504 ($21 per day over 24 days).

The case for saving money on public transportation is pretty clear, in my book. The big argument against it, of course, is speed and convenience, which is what you’re really paying for if you own a car in a large city with good public transportation.

If I lived in a large city, my family would own one car at most (and possibly no cars at all). We would use public transportation as much as possible and, if it worked out, we would simply rent a car for the rare occasions we needed one. If you only actually need a car a couple times a year and can use public transportation the rest of the time, it is far cheaper to go that route.

Remember, that extra cost per month for driving yourself to work is all about the flexibility and a bit of time-saving. How valuable is that to you? A few hundred dollars a month?

The post Is It Really Cheaper to Ride the Bus? appeared first on The Simple Dollar.

We purchased it a few weeks ago, paying cash, while simultaneously selling off our truck. Perhaps most interestingly of all, we found the vehicle on Craigslist, bought it locally, and got a very good deal on pretty much the exact vehicle we wanted.

Why Did We Buy?
Our 1997 Ford F-150 was approaching 200,000 miles and was having quite a few issues, including some significant rusting, engine problems, starter problems, a damaged flywheel, and a few other things going on with it. Not only that, we had a third child on the way, so we knew that we would need at least one vehicle that would comfortably seat all five members of our family, as neither of our vehicles did this really well.

Our primary buying concerns were space and reliability. We wanted a model that had a track record of reliability that also afforded the space for three children at a minimum (and perhaps one or two more).

Deciding What to Buy
We started by looking at Consumer Reports, J.D. Power, and other consumer publications that offered survey-based ratings of both new and old models. We actually began our search in late 2008 (!) by simply collecting data on all vehicles that could seat six or more and were made between 2000 and 2009. This pretty much restricted us to vans and SUVs.

We then began to rate them based on other criteria. How reliable were they according to the survey data? What was the gas mileage like? Does the brand or the model have a history of expensive repairs?

We wound up developing a spreadsheet of various van and SUV models, which I separated into three classes – Strongly Interested, Possibly Interested, and Avoid. The “strongly interested” models (of which the Honda Pilot was one of the top entries) were ones that had a history of reliability and at least passable gas mileage. The “possibly interested” ones had a few question marks but would have been acceptable purchases. The “avoid” models were ones that just weren’t up to snuff.

We then used various pricing sites to come up with prices that we were willing to pay for the models, particularly the ones we were interested in. We did not anticipate much value for the truck – we were largely assuming we would just buy the replacement and find the best way to offload the truck, even if it meant simply throwing a sign in the window and parking it somewhere.

The Search
We then spent fifteen months looking regularly for the right vehicle. We received lots of calls from local dealerships. I test drove quite a few vehicles along the way, as did Sarah. (One lesson learned – I don’t fit well in a Dodge Grand Caravan.)

As time went on, we started to look more and more into “alternative” pathways for buying a car. I discussed the ins and outs of this with a friend of mine with some legal expertise who advised me that I’d largely be fine with direct buys as long as we researched the vehicle ourselves and had a notarized and well-worded bill of sale.

Along the way, we saved diligently for the purchase, putting more than a healthy car payment away each month so that we could pay for the right vehicle completely out of pocket when the time came. We kept this savings entirely separate from everything else and never looked at it as part of our emergency savings.

One weekend, Rachel (click that link to find out more about her) showed us a local Craigslist entry for a 2004 Honda Pilot. The owners seemed to be asking a very reasonable price for the mileage and condition claimed, so my wife elected to give it a look.

My wife inspected the vehicle, test drove it, got the VIN number, and had it inspected. She reported to me that the previous owners were seeking to sell mostly because they needed to improve their monthly cash flow and debt situation – meaning, of course, that they still owed money on the car. She also reported that the vehicle was in stellar condition, as it turned out that the previous owner actually worked on automobiles for a living.

We obtained a vehicle history report for the VIN and didn’t discover any obvious red flags. We met again, where the owner expressed interest in buying my truck at the same time, in effect turning it into something of a vehicle swap with cash added to it. He wanted a vehicle for some very local commuting and, after driving it a bit and poking around under the hood and under the vehicle for a while, said he thought he could patch it up for a year or so and then he would probably sell it for parts.

The Sale
I contacted a lawyer about what steps to take to ensure that this purchase would be successful. He advised us to draw up a very specific bill of sale which indicated the specifics of the sale, that we do the transaction at the bank where the owner’s loan was held, and that we get the bill of sale and a lien release both signed and notarized while there.

So that’s exactly what we did. We conducted the full transaction at the bank, handed over a check, signed the papers, and drove off on our new Pilot. We wound up paying about $1,500 under the blue book value for the vehicle. We received the title within two weeks of the sale and I paid the appropriate taxes and fees at the county offices shortly thereafter.

Are We Happy?
Absolutely. The vehicle has run wonderfully since the purchase and has met our every need. It has plenty of space in the second row of seats for our three children and enough space in the back to haul bicycles (which we’ve already done). We received a full maintenance schedule with the vehicle and figure that we’ll be due for our first significant maintenance in late summer.

In short, we’re thrilled with the purchase. Our patience and diligence paid off – we got the vehicle we wanted for a great price and we were able to just go write a check for it, easy as pie.

The post Our New Car: A 2004 Honda Pilot (Bought Off of Craigslist) appeared first on The Simple Dollar.

For the first time in my life, I have a daily commute to work. I drive about 45 minutes each way to work each day of the week. According to my math, I’m going to be spending about $125 a month just on gas, let alone maintenance, upkeep, and so on. When I look at it that way, my new job isn’t as awesome as I thought it was! What can I do to trim that amount?

Here are ten things I would suggest for anyone who is seeking to optimize their commute and minimize the financial cost of it.

1. Start (or join) a carpool. I wrote an article recently on how to start a carpool, but if you can find one that already exists, join that one instead. It not only reduces the number of days per week that you have to drive, it also allows you to use the more efficient HOV lanes during the commute.

2. Properly inflate your tires each month. Few things damage your gas mileage than poorly inflated tires. Think of a bicycle and how much extra effort you have to exert when your tire is even a little bit flat. The same is true for your car – it might be plenty inflated to make the trip, but if it’s even a bit under the recommended maximum level, your car is working harder to go the same distance, and that eats gas.

3. Find the optimum route. Unless the route to your job is incredibly straightforward, there are several different routes you could potentially take to your job. Spend some time to figure out the optimum route – the one that eats the least amount of gas, in other words. Use Google Maps to help you in this regard. Finding a more efficient route will simply shave transportation costs (and possibly time) off of your daily commute.

4. Identify the low-priced gas stations along your route. Take note of the gas stations available to you along the route and identify the ones that consistently have the best prices (if there is variance – usually, there is). Then, make that station (or stations) your regular stop to fill up your tank.

5. Use a “gas card” for that chain of stations. Once you’ve identified the inexpensive station, sign up for their gas card. Use it just for gas – nothing else – and pay the card off in full each month. The rewards on such cards are often quite nice and can add up to a free tank of gas every few months or so.

6. Examine public transportation options for all or part of your commute. Just because there isn’t a train straight from your home to your place of employment doesn’t mean public transportation isn’t an option. Perhaps you can drive to a nearby station and take a train/bus combination to your place of work. If there is a combination that can strongly reduce (or even eliminate) your commute, you should take it.

7. Use your A/C and heater less. Just use them to get your car to the right temperature then turn them off. You don’t need to leave them running during your entire commute – they just eat fuel. If you find the temperature getting uncomfortable again, just flip the A/C or heat back on.

8. Ask about subsidies at work for commuters. Some places of employment offer benefits for commuters, such as reimbursement for miles driven. Don’t be afraid to ask your human resources contact about it, just to see if it’s available. If it is, it’s cash in hand for you.

9. Leave a bit early to avoid the rush and to avoid the need to speed. In the morning, get in the swing of leaving a little bit earlier. This way, you can avoid speeding (which conserves gas and also helps to ensure you don’t get a ticket) and also potentially avoid the worst part of the rush hour traffic.

10. Look into telecommuting. If your job allows it (and the workplace allows it), consider telecommuting a day or two a week. Those are days where you’re not commuting at all, which means a nice net savings for you.

Beyond these tips (which are things you can do right now), I would suggest car shopping with fuel efficiency in mind when you go car shopping the next time. It’s okay to pay more for a more fuel-efficient car. For example, let’s say your commute is 40 miles each way, which totals up to 2,000 miles a month. Assuming gas is $3 a gallon, if you get a car that gets 20 miles to the gallon, you’ll be spending $300 a month on gas. On the other hand, if you buy a car that gets 40 miles to the gallon, you’ll only be spending $150 a month on gas. That’s a $150 savings each month, more than enough to make up for even a sizeable difference in car payments.

Good luck with your new job!

The post Optimizing the Value of Your Commute appeared first on The Simple Dollar.

I work at an office park about forty five minutes from where I live. I live in a highly populated suburban neighborhood.

In order to save some money on gas and wear and tear on my car, I want to start a carpool, but I don’t know anyone who lives near me who works in the office park. I don’t mind stretching my hours a bit to make this work, as I could go in with them a bit earlier and do some busywork (email and the like) to start the day or read a book at the end of the day.

The only problem is I don’t know how to get this kind of thing started and I don’t have any obvious people to ride with. Any ideas?

Carpools are a tremendous way to save money. My wife is in a (semi-functional) carpool with a coworker and often has a ride to work two days a week. We estimate that it saves us at least $100 a month in gas and maintenance costs. It would be truly great if she could get another person or two into the carpool.

How can Jenny get a carpool started in her situation? Here’s the game plan I would use.

First, I would make up a very clear flyer that stated my first name, my cell phone number, and the fact that I wanted to start a carpool from the neighborhood or city where I lived to that office park. I’d probably make some “tear-off” tabs on the right hand side of the flyer so that people could yank the number off and put it in their pocket. Put “car pool” above the number.

I would then take a copy of this flyer to each office in the office park. There may be a lot of offices there, so you may need quite a few copies. Ask for permission to hang the flyer on the office bulletin board in each of those offices. Given your situation, I would imagine most would let you do this.

Ideally, you’ll get a few calls within the next few days. You’ll need to get some key information from each person, so you may want to carry a notepad with you.

From each caller, get the following:
+ their name
+ their cell phone number
+ their address (so you can map their location)
+ their approximate work schedule (so you know when they would need to depart/arrive)
+ any “special” days they have (like my wife’s carpool, where it doesn’t happen on Fridays due to a special need of her carpool mate)
+ what types of vehicles they have and how many it can seat

Once you have this information from a few callers (give it a few days), set up a schedule. Figure out a departure time (both from your town and from the office park) that works for everyone (or at least for the largest number of participants). Also, figure out a rotating driving schedule.

Once you have this information, call each person in the pool back and let them know when the pool will begin. I highly recommend you drive the first day.

When you do the first day, pick up the other people on the route and give each person a list of addresses, phone numbers, and schedules for everyone in the pool. I recommend that you make the schedule as simple as possible, even if it inconveniences you. The best way to do this is to say that Person X drives on Mondays, Person Y drives on Tuesdays, Person Z drives on Wednesdays, and Person A drives on Thursdays, with Fridays handled on a rotating basis. If you have five people, this is really easy. If you have three people, have Thursday and Friday rotate. If you just have two people, have each person drive two days and have Friday rotate.

Yes, this is a lot of set-up work. But you’re the one who has the initiative to start the carpool and you will save a lot of money on it. It may take a bit of extra effort in setting it up and an occasional headache when someone is sick, but it will be worth it in the large savings you get, especially with a four or five person carpool.

Good luck!

The post Starting a Carpool appeared first on The Simple Dollar.

Transportation – gasoline, motor oil – $2,384

The average American family drops $200 a month on gasoline and motor oil – and that’s at early 2009 prices for gas, which were significantly lower than prices today.

However, this is one of the easiest numbers to trim in your entire budget. There are several simple steps anyone can take to reduce their gasoline usage without making radical lifestyle changes. Here are twelve options.

Form a carpool (or join an existing one). Even if this is an irregular carpool – my wife, for example, carpools with a friend two days a week, saving her one day of driving – it still saves you signifcant fuel costs on your commute and wear and tear on your car. In some localities, you also gain the option to use HOV lanes, which can add to the fuel efficiency of the drive.

Use public transportation. If you have easy access to public transportation, it is almost always a fuel saver, particularly if you can use such transportation routinely. Even if you can just occasionally use the bus system or the subway, it still leaves gas in your tank.

Use a bicycle – or your feet. Alternately, use a bicycle – or your own feet – to reach nearby locations. I often walk to the post office instead of driving there – it takes substantially longer, but if I use a brisk walk, I can get a moderate workout from the situation, making me healthier, while also saving money on the fuel.

Buy a more fuel-efficient vehicle. If gasoline is $3 a gallon, moving from a 20 mile per gallon car to a 25 mile per gallon car saves you $360 a year (assuming you drive 12,000 miles a year). If you’re buying used, such a savings can make it well worth your while to invest a bit more in a more fuel-efficient car.

Change your own oil. Not only will you save on the maintenance costs if you’re not paying someone to do it, but it also gives you much more control over the actual oil that goes into you car – and much more power when it comes to comparison shopping for that oil. Study up on the type of oil that’s truly best for your car, then shop around for it. You’ll find a great price on the best thing for your vehicle – a win all around.

Drive the speed limit, especially on the interstate. Stick in the slow lane and stick with the speed limit and you’ll find yourself saving quite a lot on gas. “But everyone’s going 90!” If that’s the case, and you still choose to drive there, then you’re paying a substantial amount to drive at that pace. And you’ll avoid tickets that will raise your insurance rates.

Keep your windows closed – or your air conditioning off. If you’re driving in town at low speeds, keep the windows down and your air conditioning off. However, if you’re out on the open road, do just the opposite. The wind drag when you go at higher speeds becomes significant, exceeding the fuel costs of running an air conditioner. Alternating between the two will save you the most money.

Minimize the “stop and go” when you’re driving in town. Instead of gunning it out of a stoplight then just slowing down again to a complete stop at the next stoplight, accelerate more slowly out of a stoplight and slow down gradually well before the next one. You’ll maintain much more momentum (and thus retain fuel) by slowing gradually rather than slowing quickly, stopping, and then accelerating from a stop.

Re-evaluate your routes. Are you taking the most efficient route to your regular destinations? Many people lock themselves into the first route to their destination that they discover, not bothering to investigate further and discover shorter routes. Doing so saves on fuel costs, wear and tear, and your valuable time.

Keep your tires properly inflated. Ever tried a bicycle with partially deflated tires? It’s hard work to pedal. Improperly inflated tires on your car cause your car to burn a lot more gas to get going. Given that it’s really easy to properly inflate your tires at your local gas station, you should take advantage of the free air to save yourself some cash.

Remove excess weight. If you’re carrying items in your car without a good purpose, remove them – they’re just slowly milking your fuel efficiency. Go through your trunk, your back seat, and the bed of your truck and look for items that don’t need to be there. (The same goes for fuel itself – you’re better off refueling when you’re close to empty than when your tank is mostly full – though the effect is tiny.)

When you’re stopped, turn off the engine. Whenever you’re going to be idling for more than fifteen seconds or so, turn off the engine on your vehicle. Idling just causes your car to burn gasoline without providing any forward motion for you – and even just a few seconds’ worth of idling eats more gas than is eaten during ignition.

I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.

The post Trimming the Average Budget: Gasoline and Motor Oil appeared first on The Simple Dollar.

Transportation – other expenses and transportation – $3,130

This unlclearly-defined category includes vehicle finance charges, maintenance and repairs, vehicle insurance, public transportation, vehicle rental, licenses, and so on. In other words, besides buying a car and putting fuel in it, every automobile expense goes into this category.

With such a varied caetgory that speaks to the wide variety of lifestyles people have, there are many ways to save money within this category that really work well for some people – and don’t work at all for others. Thus, use these tips with that in mind – look for the ones that work for how you transport yourself.

Learn how to do basic auto maintenance yourself. Changing your oil and checking your fluid levels isn’t that hard. Your car’s manual explains how to do all of these things. Instead of paying someone else a ridiculously high hourly rate to do it, spend that time teaching yourself how to do it. Once you know how, it’ll take you less time than dealing with taking your car to a maintenance shop.

Don’t skip the maintenance. Follow the maintenance schedule in your car’s manual to the letter. Why? Skipped maintenance inevitably leads to more repair costs and a shorter lifetime for your vehicle over the long run. The fluids in your car don’t last forever, and when they start to become dirty with wear, they can cause real damage to your car. Take care of business.

Get a bus or subway pass. If you find yourself dropping coins or bills into the till on the subway or the bus every single day, get a pass. Yes, it looks expensive, but if you’re riding every day, do the math. The pass is almost always far cheaper than the cost of paying the fee every day.

Shop around for auto insurance. This means more than just using Progressive and their “comparisons.” Actually get yourself a quote from several different insurers and study their customer service and reputation a bit. You might be with the insurer that was the cheapest a decade ago, but now it’s one of the more expensive ones.

Raise your auto insurance deductible. Honestly, over the last ten years, how many claims have you made on your insurance? Instead of paying more to have a $250 deductible (for example) only to find out you’ve only made four claims over the last decade (the average of the people I polled), bump it up to a $500 deductible or even a $1,000 deductible. Then take the savings on your premiums and put it in your emergency fund. Over the long run, you’ll almost always be cash ahead.

Don’t buy cars on a payment plan. This was somewhat covered in the “buying a car” part of this series, but some of the money lost to making car payments is categorized here as well. Instead of making a down payment and shelling out cash out of pocket for the payments, pay cash for the whole thing up front.

Never sign up for a car rental at the airport. Doing so puts you completely at the mercy of the rental agencies – and you will pay for that. Take the time to reserve a car in advance.

Shop around on car rentals, too, even after making a reservation. When you’re considering making a reservation in advance, spend some time shopping around for the best rate at your destination – and keep doing it when you have a few free moments, even after you’ve made a reservation. You can always cancel the first reservation if you find a better deal – and more often than not, you will.

I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.

The post Trimming the Average Budget: Other Transportation Expenses appeared first on The Simple Dollar.

Transportation – vehicle purchases – $3,244

The average American family spends almost $300 per month simply on car payments. What’s stunning is that this is the average, since $300 per month would be roughly the payments on a brand new car without a down payment.

This is a number that can easily be cut with some careful planning and foresight when it comes to buying vehicles.

Focus on the cost per mile. If you’re looking to minimize the impact of a car purchase on your family’s budget, the real factor you need to focus on when making a purchase is minimizing the cost per mile of driving that you get out of the car. This means that a $2,000 car that you think you can get 30,000 miles out of is a far better value than a $20,000 car that you think you can get 200,000 miles out of.

Buy used – or at least include them in the search. If you’re focused on minimizing cost per mile, quite often, this means purchasing a used car, and that’s where most car purchases should begin. You might not necessarily wind up with a late model used car, but such cars should absolutely be an essential part of your search.

Drive the car you have for longer. Instead of trading in regularly for something better, drive your car for longer. Ideally, keep driving it until it reaches a point that the consistent problems are causing excessive financial strain and personal stress. That’s the sweet point for getting rid of a car, not the moment where you’re in thrall with the new features of the latest models.

Make your car payments to your bank account – in advance. While you’re driving that car for longer, start making the payments on yoru next car now while you don’t have a real car payment. Set up an automatic savings plan with an online bank account to keep withdrawing the amount of your car payment when your car is paid off. Keep driving for a few years while you have no car payments. Then, when you go to buy, you’ll have a fat wad of cash with which to buy plus the interest accrued in savings. Alternatively, you could buy a car on payments and then pay finance charges straight to the dealer. One of these options puts you in a better financial place – can you guess which one?

Start shopping long before you buy. Never rush into a car purchase. Start considering what your actual needs are, researching those needs, and looking for automobiles that match those needs lnog before you buy. The person who pays the worst price for a car is the person who is up against a deadline to make a purchase.

Never buy a car during your first visit to a dealership. Sure, you can negotiate, but the number they give you is never the bottom line. Walk away. Leave your number with the salesperson. Unless the car is sold quickly, don’t be surprised to get a phone call from that salesman in a few days “reconsidering” the situation and giving you a better price.

Never be afraid to walk away from a deal. If you’re simply not getting the price you think you should pay on a particular car, don’t be afraid to walk away. If you’ve given yourself plenty of time for a purchase, you’re fine. There are plenty more fish in the sea.

Hit your social network. If you’re shopping for an automobile, mention it to your friends and family and see what they’re aware of. They might just know of someone who has a car for sale by the owner or some other arrangement that takes place far from a car dealership. These types of arrangements usually provide the best deal for both the seller and the buyer.

Avoid leases, even if the sticker price seems good. Leases do allow you to drive a shiny new car for a lower price than a full car payment, but at the end of the lease, you’re left with nothing (except for perhaps an opportunity to buy that leased car – that is, after you pay plenty of fees). Avoid that rat race and focus on actually buying a car for yourself and keeping it until well after the payments run out. It’s those payment-less months that really make buying a car into a much better deal.

Know your needs (distinct from your wants) and be open-minded. You might know the exact model you’re looking for, but be open-minded about it. Keep your eyes and ears open for strong deals on other models. Be aware of a long list of models that you would find acceptable and don’t be afraid to jump on bargains that appear from that list.

I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.

The post Trimming the Average Budget: Buying a Car appeared first on The Simple Dollar.

I’m in the market for a late model used car. I’ve narrowed my desired model down to a handful of choices, each with different gas mileage data. How can you really figure out how much fuel efficiency is worth in terms of dollars and cents? I know how to do the basic math, but it seems artificial. How would you do it?

It’s pretty easy to see how better fuel efficiency saves you money. If gas is $3 a gallon and you have a car that gets 30 miles per gallon and a car that gets 40 miles per gallon, over 100,000 miles, the more fuel-efficient car will save you $2,500. That’s real cash in the pocket.

The only problem with that is the number of variables in the question. How much will gas cost in the future? How long will you drive the car? Does your personal driving habits have anything to do with it?

Let’s look at each factor and see how it affects the importance of fuel efficiency in a car purchase.

How Much Will Gas Cost?
You can usually get a solid estimate of where the price of gas will go over the next year by paying attention to the short term energy forecast from the U.S. Energy Information Administration, but anything beyond that is basically tantamount to gambling. Even within that year, unexpected events can disrupt the price of gas – like 9/11.

So what can a person do when it comes to figuring out the future price of gasoline?

My first piece of advice is to estimate high if you’re in doubt. A high estimate of future gas prices simply means that you’re putting a bit of extra value into fuel efficiency. If fuel prices really are high, you’ll be glad you did it – even if they’re not, you’ll still reap some rewards from fuel efficiency. This is a better scenario than estimating low and being stuck with a gas guzzler if prices spike.

Beyond that, I would assume the trend in the one year forecast will continue for several years. Since it’s the only real “future” number you have to go on, just assume that trend will continue for however many years you intend to own your car.

So, let’s say you’re buying a car and you intend to drive it for about seven years. The fuel estimate report says “crude oil prices contribute to an increase in the annual average regular-grade gasoline retail price from $2.35 per gallon in 2009 to $2.83 in 2010.” That means that a one-year increase will be about $0.48 per gallon.

So, if you’re going to own the car from 2010 to 2016, you’d assume $2.83 a gallon for 2010, $3.21 a gallon for 2011, $3.69 a gallon for 2012, $4.17 a gallon for 2013, $4.65 a gallon for 2014, $5.13 a gallon for 2015, and $5.61 a gallon for 2016. This averages out to $4.17 a gallon over the time you’d own that car. That seems like a high-end calculation to me. However, recall that in 2000, gas prices were often below $1 per gallon, for comparison’s sake.

How Many Miles Will You Put On The Car?
This is a fairly personal calculation, but we’ll stick with the above premise that you’re intending to drive the late model used car for seven years. This is comparable to how long I’ve driven my truck – and it’s very near the point of needing to be traded away.

How many miles do you put on a car in a year? If you have some mileage data, that calculation becomes much easier. Look at your own records and see if you have some data from a year or two earlier that indicates your mileage on a specific date. Calculate how many years ago that was – for example, you might note that the number came from 1.3 years ago – and then subtract that mileage from your current mileage. Divide the difference in mileage by the years since that number and you have a rough yardstick of your annual driving needs.

For the sake of calculations below, we’ll assume that you’re going to be driving 12,000 miles a year. Over seven years, that’s 84,000 miles on the car. Again, this may change based on your own plans and your own auto usage.

How Is Your Driving?
You can use FuelEconomy.gov to find out the fuel economy of nearly every make and model sold in the United States over the past decade or two – it’s an invaluable resource. However, the government uses certain standards to minimize the variation in fuel efficiency from car to car, and your driving is almost assuredly different than those standards.

Here’s a quick test. Fill up your car as much as you can, write down the mileage, then drive it normally for a while. Fill up again and write down how much gas you put in. Fill up again and write down how much gas you added, plus your current mileage. Add up the two gas totals. Subtract your old mileage from your current one. Divide the difference in mileage by the amount of gas you put in, and you’ll get a good estimate of your real world mileage for your current car. It’s not perfect, because it doesn’t vary across seasons too much, but it at least provides some variance for your use.

Now, go look up your current car on FuelEconomy.gov and see what average fuel efficiency your model should get. Then, subtract your calculated fuel efficiency from the government-estimated efficiency and then divide that difference by the government efficiency. That’ll tell you by what percentage your driving habits – plus the conditions you drive in – vary from the government tests. Subtract that from 1 (or from 100 if you’re using percents).

Then, look up the models you’re considering buying and multiply that by the fuel efficiency percentage you just calculated. That new number should get you pretty close to the fuel efficiency you should actually expect to get from the car on the road.

Why do all this? A person who drives aggressively will simply be less fuel efficient than a person who drives conservatively. Thus, an aggressive driver gets less benefit from buying a fuel efficient car. Doing this just calibrates things based on how you drive – and the conditions in which you drive (as winter driving often has a negative effect on efficiency).

So, let’s say that ol’ lead-footed Jim finds that he only gets about 80% of the government numbers out of his car.

A Calculation Example
Jim is looking at a 2007 Toyota Corolla and a 2006 Ford Focus, for example. He looks them up on FuelEconomy.gov and finds that the government estimates that the Corolla gets 31 miles per gallon and the Focus gets 26 miles per gallon. Jim estimates that he drives at about 80% of that efficiency – he drives on the interstate a lot and is a bit aggressive – so that modifies things to about 25 miles per gallon for the Corolla and about 21 miles per gallon for the Focus.

Jim wants to drive the car for seven years and puts about 12,000 miles on it per year. As above, he calculates that the average gas price will be $4.17 a gallon for those years, and he’ll put 84,000 miles on each car.

So how much will the Corolla save him?

In the Corolla, Jim will total up about 3,360 gallons of gas used. At a cost of $4.17 a gallon, that’s $14,011.20 spent on gas over the period. In the Focus, Jim will total up about 4,000 gallons of gas. At $4.17 a gallon, that’s $16,680.

The Corolla would save Jim $2,668.80 in fuel costs over that period, using the estimates we came up with above.

Wait, I Don’t Agree With That One Assumption, So Your Entire Post Is Bogus
The real challenge in making such prediction-based calculations is that they’re based on assumptions, and almost all assumptions about the future are up for debate. The best anyone can do is rely on the best data available and make reasonable leaps based upon that data – and have a rational reason for explaining those leaps.

If you don’t agree with one of the assumptions – or two of the assumptions, or more – change them. Just be sure that you have a valid, intelligent reason for changing it that’s based on some real data or logic. I’ve done my best to explain the logic behind the calculations and information I’ve shown here so that you can use it in your own calculations, or at least have a good starting point for finding your own assumptions.

Good luck.

The post How Much Is Fuel Efficiency Really Worth? appeared first on The Simple Dollar.

The first step in that journey is to make sure that we have everything we need in the car in case of an emergency of some kind. These supplies are the ultimate form of insurance – they help ensure that we’ll get through a real emergency safe and sound. Here are fifteen things that go into our automobiles in November and stay in there until April.

Blankets are the most important thing you can possibly have with you. If you bury your car in a snowdrift and it won’t start, the ability to keep yourself warm is going to be absolutely vital. Blankets are the best way to do this. I also keep a few hand warmers, too.

A spare charged cell phone will allow you to call 9-1-1 in a pinch. Keep this wrapped up in the blankets so that it’ll be likely to survive a crash without suffering irrepairable damage.

Flares will help rescuers see you. If they’re searching and all they can see is white, a flare will make all the difference in your discovery.

A wind-up radio lets you keep tab with the weather regardless of whether or not you have electricity in your car. A simple winding will do the trick and let you know when conditions have improved and what the state of roads are.

A first aid kit will be vital if someone is hurt in an accident. Perhaps just as important is knowledge of how to use it, because knowing how to apply a leg splint can be very, very important in such a moment.

Extra winter clothes will help you keep warm, especially if you need to leave the vehicle. Layers are key – the more layers of clothes you can put on, the warmer you’ll be down at the surface of your skin.

Jumper cables come in extraordinarily handy on cold mornings when your car doesn’t start. Quite often, it’s the result of a battery that became overly cold overnight and can be started with the help of another vehicle and some jumper cables.

A bag of sand not only adds weight to your car (improving traction) but can be spread to help you get traction if you get stuck in a bad position.

An ice scraper – preferably one with a brush to help remove snow – comes in constant handy throughout the winter. Without it, it will be very difficult to keep your windows cleared.

Dried foods like beef jerky and granola bars are perfect for this type of situation, as they’re energy dense. Don’t keep water or other liquids in your car – they’ll explode if stored below freezing for a long period and you can likely get plenty of liquid in a blizzard – just look outside.

Emergency tire sealant can enable you to get to the next twon in a pinch rather than being stuck beside the road with a flat tire.

Flashlights allow you to see what’s going on and also aid in signaling help. Although flashlights operated by human action exist, they’re not very bright – get one with a very bright bulb and make sure it’s charged.

A shovel will help you to dig out in a pinch. I used to keep one in my truck when I commuted – there simply isn’t room in the car, however (I wish we did have room).

A small tool kit can allow you to fix minor problems yourself on your car. Make sure you have everything you need to (at least) change a tire and loosen or tighten some bolts.

Extra batteries for the flashlight and the radio (assuning you don’t have a wind-up one) are vital. The last thing you want to do is to get stuck, pull out the radio or the flashlight, flip ‘em on, and find that they don’t work.

These tools will help you survive almost any winter weather accident, no matter how bad the storm. By keeping warm and safe and making sure that you can signal to help, you’re doing everything you can to ensure your future.

The post Fifteen Things to Have in Your Car This Winter appeared first on The Simple Dollar.

As I shop for the minivan, I keep coming back to one central question: what exactly am I buying here? On the surface, it seems obvious – I’m buying a minivan. But that’s not what I’m really buying.

First of all, I’m buying something that will get me, my wife, and all three of my children from point “A” to point “B”. The entire point of buying such a vehicle is for transportation.

That being said, I am not buying a status symbol. As long as it’s clean and safe, I really don’t care what it looks like. It doesn’t have to be shiny, new, or top of the line. I don’t really care what the opinions of the people around me are about the minivan I bought. Does it meet my needs? That’s what matters.

Is a status symbol a need for you? Probably not. Is it a want? Probably. The question you have to ask yourself is how much extra money you’re willing to pay for a status symbol whose luster will fade in a year or two.

I have three primary concerns when buying this car.

First and foremost, it must be reliable. Next April, I will have three children under the age of five. I don’t want a vehicle that has repair issues bubbling just under the surface. For me, reliability is more important with this vehicle than it was with my wife’s commuting car that we bought earlier this year, in which our priority was fuel efficiency. I’m using Consumer Reports as my primary guide for this, which is pointing me towards the Toyota Sienna or the Honda Odyssey.

Second, it must be safe. I require a vehicle with good safety ratings and a history report that shows that it’s never been in accidents. Again, my concern in this area is raised by my specific requirements – this vehicle will be used to transport myself and my children.

Third, it must have storage space. We often go visit family for a week two or three times a year. In order to accomodate two younger children, a baby, and two adults for a week, there’s going to have to be some significant storage space in the vehicle. On top of that, It’s this need for additional space which is pushing us toward a minivan instead of a large car.

Beyond that, fuel efficiency is a secondary factor, as is ergonomic seating (chairs that provide lumbar support and don’t result in numbness and back pain after a long drive).

I do not care about having a drop-down Blu-Ray player. I do not care about leather seats. I do not care about having a perfectly silent ride, nor a perfectly smooth one. If those features came for free, I would take them, but I’m not about to pay much for them at all.

I am the one buying the car. Because I’m buying early, I can wait until the right vehicle comes along. I don’t merely have to choose whatever is available on the lot. This enables me to look at other options, such as what’s being sold on Craigslist and other sources directly by individuals. Given what I want, I have the cash on hand to buy pretty much anything within those requirements.

What are you buying when you buy a car? Do you know what you want? Do you know what you don’t want and aren’t going to pay for? Have you planned ahead enough that you have the time and ability to explore lots of options to find what you want?

After all, the last thing you want to do when buying a car is to find yourself on a car lot needing to make a purchase and having no idea what you really want or need. Such a situation is delicious prey for car salesmen.

The post What Are You Buying When You Buy a Car? appeared first on The Simple Dollar.