Buy A New Car Every Few Years Or Get Rich? Your Choice

Cars in Bella Center 2006Cars are an interesting phenomenon in the United States. I’d say most Americans believe that they are defined by their cars. As such, they want a car that they think fits the image they want for themselves. Whether you’re buying a sports car to make up for something you’re lacking or a luxury sedan to make up for the fact you can’t really afford one, people don’t make the best money decisions when it comes to buying cars.

Why Do People Buy Cars They Can’t Afford?

People buy cars they can’t afford because no one told them they can’t really afford them. Cars are EXPENSIVE. You’re spending a ton more on cars than you think. For example, have you ever thought of the cost of buying your car in the first place, the cost to drive the car, maintain and insure your car all at the same time? Few people have. When they do, it can be an eye opener.

On top of that, most people never take the time to think about the fact that they’re going into consumer debt to buy a newer, fancier, more awesome car. They’re giving up their future money and time to drive a different car than they previously had. Even if that old car worked just fine and the only reason they bought a new car was because they wanted something different.

I hope I can make sure you don’t fall into this trap.

The Real Reason You Own A Car

Most people glance over the real reason why they own a car every single time they shop for a car. The purpose of a car is transportation. It gets you from point A to point B and maybe point C if you’re going on a longer trip.

Corporate America and car makers don’t want you to remember that cars are for transportation. They want you to see cars as a status symbol. They want you to equate your car to your success in life. They want you to be proud of your car and pay a ton of money for completely unnecessary features that are purely cosmetic and serve no real purpose other than increasing the cool factor of your ride.

Don’t let corporate America decide why you need a car and what you need in a car. Remember, cars are for transportation. Anything above transportation is spending more money and time to get places in style or comfort. Some is worth the extra cost depending on your wants. Just don’t let society tell you what is valuable to you. That’s for you to decide.

The Benefit Of Realizing A Car Is For Transportation

Once you realize that which car you buy is a huge choice, you can now determine how much money you truly want to spend on a car. Spend as much or as little on a car as you want, just make sure it fits in line with your values.

If you end up spending less on cars and buy cars less frequently, you can save a ton of money over the future decades of your life. Invest it and you could be shocked by the tens or hundreds of thousands of dollars that could end up in your investment portfolio.

Have you realized how much money you spend on cars? Have you decided it is worth it, or have you decided to cut your transportation spending?

photo by: Maltesen

3 Different Types of Budgets For Different Types of People

Envelope of CashBudgets often get a bad name. Why? Because when people talk about budgets, they’re normally talking about restricting your spending. Budgets don’t have to be all bad and you don’t have to use them to restrict spending if you don’t want to. Instead, I want to share some of the more flexible budgets you can use while still monitoring your money.

50/30/20 Budget

This budget is pretty easy to follow. All you have to do is simply take your after tax income and apply some percentages to it. You guessed it, the percentages are 50%, 30% and 20%.

The first category, your needs, is where you’ll spend 50% of your after tax income. You’ll use this money for things like your housing, basic groceries, basic transportation and your other basic needs. Notice these are the basics only, nothing upgraded or fancy here. Those come in the next category.

Wants are the second largest category of this budget at 30%. Wants are things like cell phones, dining out and other things you don’t absolutely need to live your every day life. People easily get confused here and consider many wants as needs, but if you COULD live without it, chances are it is probably a want and not a need.

The smallest category is the most important. Coming in at 20%, this category is for your savings and debt repayment. Personally, I prefer to increase this category to more than 20% of my budget, but if you’re following this model exactly, you’d only save or pay off debt with 20% of your income. This doesn’t include your mortgage, but instead is debt like student loans, car loans, and other consumer debt.

As you can see, this budget is pretty flexible and allows for you to spend your money on what is most important to you in your life. It adds up to 100% of your after-tax income and doesn’t involve going into debt.

Customized Budget

A customized budget is whatever works best for you. It is even less strict than the 50/30/20 budget because it allows you to base your budget on your personal needs.

If you have a ton of debt, you’ll likely need to use more than 20% of your budget to pay the debt down as quick as possible. If you want to retire at 40, you’ll need to save way more than 20% of your budget to invest for your early retirement.

On the other hand, if you already have your retirement accounts more than fully funded and you never have to put another penny in again, maybe you can spend more than 30% on wants. Just make sure that you’re not spending more than you earn and you’re reaching all of your goals financially.

Cash Envelope Budget

If the 50/30/20 budget doesn’t meet your needs and you’re worried that a customized budget won’t work for you because you’re prone to overspending then the cash envelope budget is likely your best bet. Instead of keeping track of your finances mentally or on spreadsheets, you’ll keep track of your finances visually with cash and envelopes.

When you get your paychecks go to your bank and withdraw your money in cash, just make sure you’re not paying any check cashing fees. Next, take the money home and make an envelope for each category of your budget. Divide your cash into the appropriate envelopes.

Be extremely careful when you do this, because once you put cash in the envelopes, you shouldn’t transfer money between envelopes. When the money in an envelope is gone, then you can no longer spend any more money in that category until your next paycheck. This is a great way to dip your feet into the budgeting waters if you are have trouble controlling your spending.

Between these three budgeting methods, hopefully one works for you. Do you have a favorite way of budgeting other than the one’s I’ve listed above? If so, please share them in the comments below. I’d love to learn from you.

photo by: niXerKG

Money Adventures Around The Web

Money AdventuresHey everyone. I just wanted to drop in a give you a quick update on things! Now that the holidays are behind us and 2014 is right around the corner I’m going to hopefully have more time to spend writing on Adventuring Dollars. I plan on having at least one post per week every week this year, so hopefully you’ll stop by and check for updates!

I wanted to share some of my favorite articles for around the web lately as well, so let’s get straight to it!

Andy at Art of Being Cheap made a calculator to show you if driving further for cheaper gas is worth it or not. Whenever people drive across town to save 3 cents per gallon it drives me insane, because they don’t realize they’re losing money. This calculator will show those people what a waste it is to drive for gas that is only a couple cents cheaper! Check it out here.

Luckily, I’ve never had to pay for a major car repair yet. However, as our vehicles get older, I’m sure I’ll have to at some point. I never really thought about it, but Kevin from Out Of Your Rut shares how much he saved by shopping around for car repairs. I’ll have to make sure I do the same when the time comes. Check it out here.

Laurie at The Frugal Farmer discusses the decision of choosing immediate gratification or long-term success. So many people give in and go the immediate gratification route, but Laurie makes a compelling argument to go for long-term success. Check it out here.

Charles at Getting A Rich Life shares why he wants to be like the Joneses’. The key for him is he picked who his Joneses are and he’s not focusing on their consumption. Instead, he’s focusing on how they’ve learned to grow their income and live a smart life. Check it out here.

Dee at Color Me Frugal wants to talk about mortgage debt and whether it is good, bad or ugly debt. I personally think smart mortgage debt is the best type of debt you can have, but mortgage debt that stretches you thin is pretty ugly. As with all things, it depends on the situation. Check it out here.

Hopefully you guys like those links! Let me know if there are any particular articles you’ve found lately that you really liked. I want to check them out!

See you in 2014!

Photo courtesy of Artur84 at FreeDigitalPhotos.net.

Your Priorities Aren’t What You Think – I Have Proof!

This is the third post in our series about turning your finances around. New here? Start at the beginning!

PrioritiesSo you think you know what your goals and priorities are… I hope you’re right. Unfortunately, I have a feeling you’re wrong about what your priorities really are. Why?

Remember how a couple of weeks ago I asked you to start tracking your spending? Then, last week I asked you to come up with some short, mid and long term goals. Now the true fun begins!

You Don’t Put Your Money Where Your Mouth Is

Ok… I hope you don’t eat your money. That is gross. Do you know where your money has been? Second, it is a waste of money! Back to the point…

Take a good hard look at where you’ve spent your money since we first discussed the idea of tracking your money. Where are you spending the majority of your money? Is it on dining out every day of the week? How about paying off debt for things you’ve done in the past but have nothing to show for it now?

Regardless of what your biggest spending category is, it says something huge about you.

Where You Spend Your Money Shows You What Your True Priorities Are

Take a minute and let that sink in. Your true priorities are where you spend your money! You might be offended by the thought that your biggest priority is “owning”, maintaining, insuring and traveling in two gas guzzling cars or that the most important thing in your life is eating at fancy restaurants.

Another common financial priority is living in an over-sized house that has been decorated lavishly. Mortgages or rent will take up a large part of your income, but they don’t always have to be your number one spending category!

We have a decent sized mortgage payment, but we actually save more for retirement each month than we pay for our mortgage. It is possible.

What is your number one priority according to your spending? Share in the comments below!

The Order Of Your Spending Categories

Another eye opening exercise is to look at the order of your spending categories from the highest percentage of total expenses to the lowest percentage of total expenses. It might be shocking to see that your lavish vacations are more important than your child’s after school activities that you say you can’t afford.

There are some categories that are normally going to be at the top of your list, such as your mortgage or rent payments. However, you can make changes to put your spending categories in whatever order you want.

For example if you have a paid off house and car plus you have a reasonable grocery budget, you can set up your spending categories in the order that matches your true priorities. But is your previous spending that you’ve been tracking in line with those priorities? That’s the real question.

What If Your Money Priorities and Real Priorities Don’t Line Up?

Don’t worry, you aren’t alone if your money priorities and your real priorities don’t line up. It is more common than you’d think and can be fixed with a bit of effort. That’s exactly what I’ll be focusing on next week! Be sure to check back and continue along the journey of turning your finances around!

What is your biggest priority according to your spending that you’ve been tracking? What did you say was your biggest priority? How do you plan to change that?

I have to give credit where it is due. This post was inspired by Jacob at iHeartBudgets.net!

photo by: Banalities

Stop Being A Robot! Evaluate Your Goals And Priorities In Life

Quit Being a Robot!

Quit Being a Robot!

This is part of a series of posts to help you take control of your money. If you missed the first post, check it out here.

Wake up. Jump in the shower. Eat breakfast. Go to work. Do you do the same thing every day without thinking about it?

Goals and priorities are what drive you forward in life. Without them, you’d wander aimlessly. You’d continue doing the same things day after day without ever questioning anything. Sounds like a pretty dull life, doesn’t it?

What you might not realize is that your goals and priorities don’t have to be written down on paper to exist. You may not have consciously decided what they are, but they exist. You might be shocked at what your current goals and priorities are!

Think About Your Goals and Priorities

What do you spend the majority of your day doing? What do you spend most time thinking or day dreaming about? These are all potential goals and priorities. In fact, if you’re spending most of your time doing or thinking about them, chances are they are what your current priorities are.

Whether it is driving to and from the office for an hour and a half each day, sitting in a cubicle for eight hours every Monday through Friday or spending hours every weekend trying to figure out how to make your money last until your next paycheck, you have goals and priorities that you might not have ever thought about before. Are those really what you want your goals and priorities to be?

I challenge you to take some time to sit and think for a few minutes. What do you want your goals and priorities to be in life? They don’t have to be the same things that you’re currently spending all of your time doing now. They don’t all have to be long term goals or things that can be done in the next week.

Just figure out what you want to get accomplished!

Short Term Goals

Now that you have thought up some ideas of things you want to get accomplished, pick a couple that you think you could knock out relatively quickly. Set a time frame for when you want to achieve whatever milestone you have set for yourself.

This doesn’t have to be a one and done goal either, a short term goal can be a stepping stone on the way to a much larger goal. They didn’t build Rome in a single day! You shouldn’t expect that for your huge goals either!

Mid-Term Goals

These are goals you want to accomplish in the next year to as far out as three years from now. You can continue along the path of one of your larger goals or you could have a completely unrelated goal for a mid-term goal. Just have something you’ll be continuously working toward over at least the next year.

Long-Term Goals

I like to think of long term goals as things I want to accomplish in the next 5 years. These are pretty big and make you want to work hard to accomplish them.

It is often best if these goals are aggressive, but achievable. You want to ensure you’re moving forward in your life, and setting a stretch long term goal is a great way to do that.

Why Does This Matter?

I wanted to set up a fun exercise to open your eyes about a crazy idea about your money. In order to do this you MUST know what your goals and priorities in life are, or at least have a good idea.

Are you ready to be shocked? Go ahead and read the next article in the series.

To make sure you get our next update, be sure to subscribe to our RSS feed.

photo by: à voir etc...