 |
$hort-Term Budgeting: Long-Term $avings
In good times or bad, the key to saving money is always this: Stick to a budget. A budget is nothing more than a simple accounting of what you earn versus what you spend. It sounds simple, yet while most of us know how much money we earn, few of us know what we actually spend.
The good news is that budgeting has never been easier, thanks to tools like Mint.com or Quicken online, as well as off-the-shelf products like Quicken or Microsoft Money. A nice benefit of using such tools is that, with many bank accounts, you can automatically download balances and transactions.
Begin by breaking your spending into categories, such as mortgage, taxes, groceries, dining out, clothing, entertainment, car loan, etc. This is your chance to see specifically where your money goes and to make adjustments if you’re overspending in any category.
When budgeting, be sure to:
- Pay yourself first. Include a savings category in your budget, then have your bank automatically move money into your savings account with each paycheck.
- Use automatic payments. Identify recurring fixed payments, such as the mortgage, a car or student loan, the cable bill, etc., and have your bank automatically issue payment. However, do not use this feature for variable payments (such as credit cards, where the balance due varies from month to month).
- Avoid miscellaneous expenses. It’s hard to budget for “miscellaneous.” Put things in their proper category to get a truer picture of your spending.
- Splurge rarely. It’s okay to splurge every once in a while. Tracking your spending will point out where you’ve spent too much in one month so that you can cut back in subsequent months.
If you “blow up your budget”—spending more than you earn in multiple categories—you’re going to have to cut expenses or increase your income so that your numbers are more in balance. But don’t cut out your most important category—your savings! Sticking to a budget that creates savings now will help ensure your financial well-being in the future. Review your budget annually and enjoy the long-term savings.
 |
Buying a Car: There Are Two Sides to Every Deal
The Big 3 are having record sales, Toyota is offering huge incentives and discounts, and zero percent financing is back. To make room for 2011 models, dealers must sell off their 2010 inventory. With such great offers, how can you afford not to buy a new vehicle?
Well before you rush onto the lot with cash in hand, let’s examine “the deal.” Auto dealers make their money primarily in two ways: on the price of the vehicle and on financing. In fact, it’s been reported that almost half of Ford’s $2.7 billion profit last year came from its financing division.
So a true deal, then, has two parts. Thanks to the Internet, verifying a good price is easy. Numerous websites reveal dealer invoice pricing, list available rebates and incentives, and many now offer consumer real-time reporting of price paid for a vehicle. But what about the second part? How do you know if you’re getting a good deal on the financing?
- Get pre-approved. Online auto loan approvals are quick and easy. With a pre-approval, you’ll know your rate, how much car you can afford, and what your monthly payment will be before you walk onto the lot.
- Compare apples to apples. If a dealer offers you a lower rate—possibly even zero percent—but wants to keep the factory rebate, do some math. For example, if a dealer offers you a zero percent loan of $18,000 for 36 months, but wants to keep the $1,500 factory rebate, is that a deal? No, it isn’t. A similar loan at 3.99 percent that applies the rebate to the principal amount will save you approximately $728 (you effectively “pay” $1,500 in the first scenario, but only $772 in the second) and reduces your monthly payment.
- Negotiate—for nostalgia’s sake. Buying a car has certainly changed from just a few years ago. Now, when you’re in the salesman’s office, you have all the power. You’re armed with pricing information. You’re pre-approved with great financing. You’ve even looked online to get a fair value for the vehicle you’re trading in. When there’s nothing to negotiate, you know you’ve gotten “the deal.”