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Buying a new(ish) car

20130530-232506.jpgKJ: One discussion we’ve had several times over the years has actually been a little contentious at times: how long do you keep a car before you call it quits? The answer is seldom clear. Unless you have a crystal ball to know exactly what the future may bring (please tell me if you do as that would be quite valuable), you can’t really answer this question with certainty.

    Do you drive it into the ground until it no longer gets you from point A to point B regardless of repair costs?
    Do you replace it when you’ve paid off the loan (provided you didn’t plan and pay cash…)?
    Do you replace it when the repair costs start to get close to the carrying cost of a new car?
    Do you replace it when the warranty expires?
    Do you replace it predictably every three, five, or ten years?

Weighing repair costs with monthly savings (or loan costs)
Having replaced our two cars in the past five years (one was owned about five years before being replaced – longevity of about 7 years, and the other car almost hit the ten year age mark), we’ve had a bit of a discussion of how much is enough when it comes to repair costs. My car was great for the majority of its life. We had very few repairs that needed to be done (some could be done at home quite simply with a headlight going out, worn out fuse, etc.) and not too much ongoing maintenance was needed either. However, the last couple years of my car’s life with our family involved a little over $1,000 in repairs/maintenance. Was it cheaper than buying a new car? Most certainly! When you look at the cost of a new car, the monthly payment is likely to run about $200-500+ per month even on the low end of the spectrum (again, whether that’s through a loan or through building up cash ahead of time). Are you spending less than $2,400-$6,000 per year on maintenance (I sure hope so!)? Then, maybe it’s not quite at the point where it’s economically worth getting a new car. A car is not an appreciating asset. In fact, it loses value each month (and sometimes quite significantly when you look at how quickly it loses value in the first five years), so you have to weigh the market value loss of the asset in conjunction with any other expenses you may have.

Throwing good money at bad?
Sometimes that open-ended commitment of an aging car that could potentially need a new transmission ($$$$ anyone?) or other significant expense might not be worth the stress it can bring, so learn to find that delicate balance about throwing good money at bad and see if it’s about time to replace that aging car. With the average age of cars on the road in the U.S. around 10 years, you are likely to be in the camp that replacing one of your cars is on the table. Most people don’t want to spend money when they don’t have to – and if you did, you probably wouldn’t be reading this blog – so it may be a tough decision that involves shifting your goals a bit. I REALLY don’t need to get a new car, but I’m willing to push getting some new furniture for a few months or I’m willing to shift our dining out expenses for a little while to make sure we stay on track.

Large, unexpected expenses can be scary
There are few things that are scarier than a large unexpected expense. You can’t possibly plan for EVERYTHING, so learn to adjust and adapt. Change can be scary, but it’s not the end of the world, so cope with the change and make it a positive event. I wasn’t quite ready to part with my car (especially being SO close to the 10 year ownership mark), but I’m happy to have a new-to-us car we can call our own.

Start your search with used cars
Especially with so many dealerships offering extended warranties on used cars, used is the new new, so you can often live with the comfort and certainty of a new car, but without the price tag. Win-win in my book. And, with how much a car loses its value in the first several years of its life, searching for used cars can help your financial picture in the long-term. We’ve both happily taken advantage of certified pre-owned vehicles that have just as great (or better) warranties than when you buy the same vehicle new from a dealership. Kirby’s car literally had less than 5,000 miles on it when we bought it certified pre-owned, and now we have an awesome warranty and an essentially new vehicle. Win-win indeed!

    What is your take on getting a new car?
    Did you get it out of choice or were you forced to make the decision (wreck, stolen, etc.)?
    Tell us about your experiences!

Buying a new car is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Managing a variable income

KJ: If you’re like most Americans, your income is variable (in some form or fashion). Realistically, not all that many people have a fixed income that is unchanged from month-to-month. So, how do you budget or plan for each month when you don’t really know what your income is?

Well, it’s all the more important to make sure you first have an emergency fund that has about 3-6 months of regular living expenses covered in case something happens. Then, consider the following methods for planning:

Prepare your budget for last month’s income
KJ: Look at your income from last month and subtract out your main savings goals (establishing that emergency fund, children’s education, retirement, car purchase, home downpayment, etc.). Use the remainder not used to meet your goals, and set your budget categories for your next month’s expenses. Sure, this method is cumbersome at first, but the more you live with a variable income and the more you consciously watch your expenses, the easier and easier it will be to determine your “baseline” each month for what you spend on food, utilities, etc. This method helps ensure you do still have enough money in your checking account to cover expenses if you’re always simply spending last month’s income.

AJ: This concept is still one I occasionally struggle with. It’s challenging for me to plan month-to-month sometimes when I forget those rare changes in our “everything else” category in months where we have an extra paycheck or an annual insurance payment. I’m a total creature of habit and were it not for our regular check-ins regarding our spending I would surely blow the budget some months. It’s helpful to me to keep a list of how often I purchase certain things or how often some expenses hit. We buy pet food in huge quantities but only buy it about every 2 1/2 months, so it’s important for me to pay attention to when that will hit. Similarly, having an extra paycheck in any given month might distort the amount you think you actually have to spend. Knowing what you made last month will hopefully help keep you on track!

Prepare your budget on a “regular” income
KJ: Although it may be challenging to find what a “regular” income is, this method can be good if your income from month-to-month is really quite variable. You might consider taking an average of your last three months (or six months) of income, subtract out the cash needs for your most important goals, and look at how to spend the rest. The main problem you run into with this method is what happens if the last three months of income aren’t an appropriate expectation for what your next three months of income would be. Not that you can predict the future, but be realistic about what your next months may look like (especially if you are in a cyclical industry with weak income months in the summer and strong months in winter), and don’t just project increase, increase, increase forever into the future.

AJ: Neither Kirby or I have ever held a job that had truly variable income – server, waiter, free lancer/contractor but we could absolutely manage the ebb and flow through tracking and planning. If you are on a fully variable, completely unpredictable earning schedule play it safe and always plan to spend only the lowest amount that you have made in any given month. Over extending yourself in one month means taking especially deep cuts in variable expenses the next month, which is incredibly difficult and often results in people continuing to spend at a normal level without actually recouping some of their savings they took away from.

Experience helps
KJ: The sooner you start planning, and the longer you track, the better you will be at predicting those unexpected expenses, your “regular” expenses/income in a given month, as well as figuring out how to creatively fit the curveball expenses into your ordinary month. The best part of it it all is there are programs like Quicken or Mint.com that can help you with all of this. There are lots of other tools available too – with many of them free – so find what works for your lifestyle and technological needs and get to tracking!

    Do you have an irregular income?
    What do you do to plan for your income and expenses each month?
    Tell us about what works (or doesn’t work) for you and your family.

Managing a variable income is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Traveling part three: after arrival

This is the third and final post of our series on travel. If you missed the first and second posts, please check them out at: traveling part one: before departure and traveling part two: during the trip.

You’re finished, now what?
KJ & AJ: Now that you’re back and you have officially planned and completed your travel goal, what’s next? Well first for us is always catching up on e-mails, snail mail, and addressing items we had been putting off until our return. We tend to go all-in on vacation, so the coming back part is always tough. It takes us a few days to settle back into making meals at home and not indulging every minute of the day but when we do settle down, we re-focus our attention and get back to work.

Take a final inventory
You spent months planning your trip but great travelers and savers don’t walk away from a trip until a full check-up has been completed.

Did you finish where you wanted from a financial perspective? Of course you’re relaxed, happy, possibly tan, but were you over budget? Were you under budget? We mentioned in our last post (traveling part two: during the trip) that we monitor our budget closely each day as we progress along our trip because it is helpful perspective (but that method doesn’t work for everyone). If you’re not tracking as you go, now it’s time to dig your heels in, sort your receipts, check your credit card statement and start analyzing.

Leverage your planning for your next destinations
Hopefully you were under budget, but either way, there’s always a take-away for your next trip on what you could do better or differently. If you spent half of your budget on things you didn’t plan for (cabs for long hikes you underestimated, bottles of water at every tourist trap, meals at super trendy spots, etc), maybe it’s time to designate a trip planner within your group who helps anticipate and map out the trip (down to buying cases of water at the grocery store and mapping out a route with places to sit and rest). You don’t have to specifically list each of these items, but simply being aware that these extra costs may arise speaks volumes for how prepared you are for the unexpected and how you can manage around it when it does happen. Analyze which budget categories you were over on and which you were under on to help you plan for your next trip. It’s so much easier to do this when it’s still fresh on your mind than a year later when you’re ready to plan your next big rendezvous. Try not to fret about the nitty gritty details of why you had that extra drink, but try to at least keep good enough records to know how you ended up, so you can keep that information in mind for your next journey. The more you plan, the better you can plan, and the more you can fit those “must have” expenses into each trip. Be creative!

Have some wiggle room
The best kind of vacation for us is always one where we’re under budget and have a little extra left over to take care of small things we’ve been putting off buying. Not splurging on every meal might mean buying new patio furniture or spending a great night out with friends once you’re back home. We love to enjoy every bit of our vacation to the fullest but over planning by a small margin allows us a little breathing room when we’ve underestimated expenses and allows us a little slush fund when we’re acclimating back to everyday life.

Be realistic
What happens after you get back from your trip and (hopefully) don’t have anything trip-related left to pay off (since you planned well and saved prior taking your trip, right?)? For us, we keep moving down the list of future goals and adjust the savings we were previously putting towards the trip monthly into buckets that meet other priorities. Most trips for us are many months in the planning and we’re constantly looking forward to what we’re going to do while on the trip without considering fully the time after we return. Coming back to reality is sometimes tough. Paying bills, running errands, doing yard work, etc aren’t always things that make you want to immediately snap back into focusing on watching what you spend but refocus your efforts on the greater good and dig your heels back into planning.

Plan your next trip
Just because you just got back from an amazing trip doesn’t mean you should feel guilty about planning the next one (regardless of how far off it is). See what’s next on your bucket list and what it will take to get there. Maybe it will be six months from now or maybe it will take a couple years to get there, but planning early leads to success. The further out you plan, the more ahead you can get provided you maintain the discipline to stay on track! Years ago we started a list of places we both want to visit. It’s really more of a list of countries than it is cities or actual locations but when we’re in need of a getaway it’s a good reminder of places we’ve always wanted to go. Continue to dream and think about your next adventures. Dreaming and thinking about your future keeps you young and spry, so dream on!

    How do you plan for your trips?
    How did you adjust your saving to get to that goal?
    Tell us about the joy (or struggle) you had in accomplishing that goal.

For parts one and two of this series, direct your browser to: traveling part one: before departure and traveling part two: during the trip.

Traveling part three: after arrival is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Traveling part two: during the trip

And here starts the second post in our travel series. If you missed our other posts, check them out at: traveling part one: before departure and traveling part three: after arrival.

Keep your goal in mind
KJ: Just because you’re on vacation to get away from it all doesn’t mean your goals and planning should go out the window either. $20 here, $20 there, $40 more in dinner, and a $30 extra taxi ride can all add up very quickly. Don’t be too proud to say, “we don’t have the funds for that” or, alternatively, find creative ways to shift your expenses around on vacation to make that a new goal. We had a meal in Amalfi (probably one of the most notable meals of my life) that cost us more than 2X what we budgeted for the entire day! Woah! Well, we planned around it, and made slight adjustments to our dining plan on the days before and after. Nothing significant, but cut out a few groceries here, cut out a few beers and unnecessary snacks there, and you can find out how easy it can be to do the things you really want to do even if it seems out of reach. Now, we not only shifted our budget, but we had the best meal of a lifetime (Hosteria Il Pino in Praiano, Italy), and we have memories to talk about for a long time (you know, in five or ten years when we’re too old to remember anything).

AJ: This goes back to what we’ve mentioned many times before with regards to how we enjoy our lives. We love a great meal and most times it’s worth it to splurge on one incredible meal a month in exchange for things other people might prefer.

Back to pen and paper
KJ: We’re tech savvy, but when it comes to budgeting and traveling, we can be quite rustic. Back to the good old days with only a tablet and chisel…oh wait…not that far back. With relatively little extra work, we keep track of our expenditures (no matter how large or small) to see where we’re at from where we planned. Under budget, yes-siree, I think we’ll grab an extra pitcher tonight!

AJ: I’ve said it before and I will say it again. Buy yourself a Moleskine notebook and don’t ever look back. We traveled for two plus weeks with me tracking every expense and collecting every receipt and many keepsakes in the back pocket. The elastic strap keeps everything securely inside, and it helps organize my extremely cluttered mind within its beautifully lined pages. Without this notebook we would have been scrambling to remember how much we spent where. With the notebook it was easy to sit down each night and track that day’s expenses and compare them to our pre-trip daily estimates.

Don’t forget to enjoy yourself
KJ: The reason you’re on vacation is not to stress yourself out and worry about every little item. If you did your planning and research before you set out, you should have plenty to let yourself relax for, now enjoy the trip you spent so many hours, days, weeks, months planning!

Is frugal the same as not being wasteful?
KJ: On our most recent trip, we made a couple decisions, less out of ‘got to stick to the budget’ than they were out of just good practical, non-wasteful sense. There are two illustrative takeaways from our trip that might help you realize that your little quirks aren’t as crazy as you thought (see also our frugal series wherein we discuss reusing coffee). Before we got to the villa in the Amalfi region, we stocked up on toilet paper and paper towels (among other necessities) only to find out there were plenty at the place we stayed. So..instead of simply leaving our toilet paper behind when we left (that stuff’s expensive), we packed it up in our large suitcase and took it home. No point in being needlessly wasteful! Another example of our ‘don’t waste anything mentality’ is the wine. We had two perfectly good boxes (yes, you ready that properly boxes – not bottles – for which we paid E1.60) of wine that we couldn’t leave behind, so we took them with us. Lo and behold, our flight in Naples was rerouted with our flight being pushed back five hours, so thank you very much, we enjoyed those boxes of wine while we played our cards and laughed at the entertaining people watching…it doesn’t matter what town or country you are in…this can provide hours of fun!

    Do you keep track of your expenses while on a trip?
    What methods do you use?
    Tell us about your travel goals you have set and accomplished.

Oh, and if you haven’t already, check out our other posts in our series on travel: before departure and after arrival.

Traveling part two: during the trip is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

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