My Personal Finance Journey

All posts by Jacob A Irwin

Psychological Tricks Retailers Use to Make You to Spend More – The Importance of Smart Shopping in Today’s Society

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post. Enjoy!

Psychological Tricks Retailers Use to Make You to Spend More – The Importance of Smart Shopping in Today’s Society

The Problem

 

We have all had the experience of walking into a store to purchase a simple carton of milk and coming out with a shopping cart full of other items! It may be funny when this occurs, but it is not by at all by accident. This is due to the fact that malls and stores alike are deliberately set up to entice you into buying more than you need or want.

This is different than shopping for items online. Take looking around the Internet for a credit card for example. At least when it comes to this exercise, you can research online and spend time finding the most suitable card for you. You can use a reputable and informative site to view a whole range of cards offering low APR, rewards, and cash back features.

On the other hand, malls and stores have spent millions of dollars researching the psychology behind shopping. Everything is done for a purpose, and many of these strategies are subtle but effective. The atmosphere, the lighting, the carpeting, and the shelves are all set out within a store to achieve maximum sales of the most profitable goods and to keep shoppers in the store for longer periods of time.

Strategies Behind Store Layout

Have you ever wondered why the toy departments or washrooms are placed at the back of the store? It is because customers have no choice but to walk through other departments to reach them. In this way, customers are exposed to goods they may not have otherwise seen, and therefore, this creates a sales opportunity. It is a clever and common technique employed by most retailers.

Strategies Behind Shelf Placement

High-priced goods are displayed on shelves which allow easy access, whilst their lower-priced counterparts are placed on lower or higher shelves which are not as convenient. In the busy rush of daily life, consumers will often just reach out and take what is there without seeing the cheaper alternatives.

Some manufacturers pay stores more for their goods to be placed within easy reach. Often time, products will be put in some sort of bin or in a particular area to suggest they are a bargain. Check carefully before trusting that this is true as sometimes it is simply a psychological trick. Many times, the items are reduced, but only minimally.

When purchasing perishable goods especially, think about how long they will last. It can be what is known as a ‘false economy.’ You may save a dollar on fruit in the reduced aisle, but if this has to be eaten within 24 hours, it may not be such a bargain. Check the price against regular fruit that will not spoil so quickly.

Sensory Strategies

Psychological research shows that when shopping, consumers are more likely to purchase an item if they touch it. This is why you will find soft cashmere sweaters near the entrance to a store.

Using a shopping cart frees your hands to touch items, which is when temptation is strongest. If possible, use a basket or at least the smallest size shopping cart. Human beings do not like empty space, so a smaller cart will feel better than a larger one. The risk with this is it looks empty, even when you have many items in there.

Conclusion

The best advice is to prepare a list before entering the shop and stick to it. Don’t be seduced by the sights and smells of the store! Be single-minded and you will save money by shopping smartly.

How about you all? What strategies have you seen that stores/retailers use to get customers to spend more? Have you ever encountered or fallen prey to any of the ones on this list above?


What tips do you have for other readers to avoid these schemes? 


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • @ Strategies behind store layout – Discussing the intricacies that go in to how a store is laid out is a source of un-ending interest for me!
    • Just off of the top of my head, the store layout strategy that I see most often is placing the milk at the very back corner of the store. This ensures that all customers (since just about everyone in a grocery store needs to buy milk) must first walk through all of the promotion “discount” items throughout the aisles on their way to retrieve their milky-treasure.
  • @ Strategies behind shelf placement – One strategy for product placement on shelves that I see quite often (in addition to placing higher-priced brand name items at eye level) is placing products within one side of the aisle where the highest priced items are on your left and the lower priced items are on your right.
    • My hypothesis is that they think that people are most likely to scan products on an aisle the same way they read a book (left to right). This ensures that people first see the higher priced items, increasing their sale.
    • Any one else seen this?!
  • @ Sensory strategies of cart size – I am definitely guilty of falling prey to this strategy!
    • Whenever I go on one of my big once-a-month food/household items shopping sprees at Wal-Mart, I generally continue to buy food until my shopping cart is full. And, if you’ve been to Wal-Mart recently, you probably know that the shopping carts are BIG!
    • I imagine that if the carts were smaller, I would spend significantly less. Wal-Mart sure has me figured out! 🙂
    • However, since I buy mostly all generic Great Value food/products and will use the food eventually, I consider these “smart” purchases and feel OK spending this money.

***Photo courtesy of http://www.flickr.com/photos/james_lumb/5587734031/lightbox/

A Simple Way to Banish Credit Card Interest

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post written by Colin Robertson from Credit Card Balance Transfer Offers, a blog focused on the money-saving and debt-destroying aspects of balance transfers. Enjoy!


A Simple Way to Banish Credit Card Interest


Back in my early 20’s, I racked up a decent amount of credit card debt.  It’s a pretty typical story – a young guy gets a job, starts going out to fancy dinners and expensive bars, buys pricey work clothes, trendy ties, and before you know it, spends beyond a paycheck he thought was much larger. Turns out taxes and insurance took a larger bite than expected.

It Starts Off Small


Not long after, finance charges were being applied to my credit card accounts each month.  At first, I thought, “It’s only $20-$30, no big deal. I get to keep spending and buy all the things I want, so it’s worth it.” But, after a while, I realized the money was really starting to add up, especially as my balances grew.  And, it appeared as if I was in a nasty downward spiral, where my balances kept growing and the fees got larger.

In hindsight, it makes perfect sense.  Credit card issuers charge you a certain APR, which when multiplied by your balance, gives you your annual interest charges. The bad news is most credit cards come with an astronomical APR – something in the high teens to 20% range to be sure, so it wasn’t long before I caught wind and decided to take action.

I Ignored the Offers


I had always seen balance transfer offers in those mailers the credit card companies send out, but I never gave much thought to them.  Usually, I just tore them up and cursed at the sight of them.


Finally, one day I decided to read the fine print, and found that these 0% balance transfer credit cards could actually save me some serious cash.  Still, I thought there must be a catch.  Why would they agree to take my credit card debt and move the interest rate from 20.99% to 0%? 


It just didn’t make sense.  Then, I realized these credit card companies had a plan as well.  They wanted me to transfer my balance so they could eventually charge me interest, essentially gambling (using their fancy algorithms) that I would eventually carry a balance with them, even after the promotional 0% APR period was up.


Then, I Beat the Credit Card Issuers


But I was wise to it, and made a payment plan to avoid that.  I wanted to beat them at their own game.  So, I took one of them up on their offer for one of their low interest credit cards and transferred $3,000 in credit card debt. 


My APR was set at 0% for 12 months, so I knew I had to move quickly to avoid finance charges.  Using simple math, I divided my balance by 12 and started making monthly payments of $250.  At the same time, I stopped spending excessively to make room in my budget.


And before long, I was out of credit card debt and no longer had to stress about those monthly finance charges.  It was a great feeling, and since then, I’ve never paid credit card interest. 


Why?  First, because I changed my spending habits as a result of learning about how credit card interest works.  And secondly, because I knew if my debt ever did get out of hand, there was another credit card issuer willing to give me promotional 0% APR for at least 12 months.


Nowadays, credit card issuers have become even more aggressive, offering 0% APR on balance transfers for up to 21 months, which would allow the most debt-riddled individual to get out of a serious jam.


So, if you’re paying credit card interest, take a look at your spending habits and balance transfers.  They’re not as complicated as they may appear, and they could save you some real money with very little time and effort.

How about you all? Have you ever used 0% balance transfer deals to reduce your credit card debt? If so, how did the process shake out? Were there any hidden fees?


If not, what has kept you away from using them? If you’ve never had credit card debt, would you use balance transfers?


Share your experiences by commenting below!


Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.


First off, great post Colin! I really enjoy these first-hand experience posts about debt reduction. It puts a very human feel to reading a blog, and I like that!

  • @ Spending excessively in your first job out of college – 
    • Colin brings up a very prevalent issue that I have seen all-too-often with highly educated early 20’s graduates with whom I was acquainted at my old job. 
    • It’s definitely understandable how it would happen: you go to college for 4 years busting your tail to get your engineering degree (or equivalent). You’re most likely strapped for cash and having to cut as many corners as you can on your apartment, meals, car, etc. 
    • Then, SHA-BAM!! You land an engineering job where right out of college you are earning $60,000 – $80,000 per year. You have no children and no family to take care of. You’re living the high life, and the money is plentiful! Sure, maybe you have accumulated some student debt in your undergraduate days, but the interest rate for that is low, and you have no trouble affording it!
    • Because of your new-found healthy cash-flow situation, it’s easy to be tempted to start taking out loans to buy furniture, cars, $10,000 wedding rings, or even a new house.
    • However, by simply attempting to maintain some of the same lifestyle you had in your college days, you can really save a lot of money and get ahead in life. 
    • In my first job out of college, I was able to save about 60% of the money I made. This really enabled me to get ahead, especially since the money was being invested during the recession of 2008-early 2009.
  • @ Key to reducing credit card debt = changing your habits –
    • I couldn’t agree more with Colin’s point about it being crucial that he not only 1) get the balance transfer to enable him to get ahead on his payments, but 2) that he also make sure to change the habits that landed him with credit card debt in the first place. 
    • Even with the most favorable 0% balance transfer terms, you’re not going to be able to pay off your debt if you keep on spending excessively.
  • @ Using balance transfers to get rid of credit card debt –
    • First, I want to add one word of caution for anyone thinking of using a balance transfer. Please make sure to watch for hidden fees. In other words, do what Colin did here and read the fine print! This will ensure that no surprises come your way as you commit to a balance transfer deal.
    • Second, I am still trying to decide if I would recommend using balance transfers or not when people are paying down credit card debt. Indeed, there seems to be a split in the advice of personal finance experts on this topic as well.
    • On one hand, I cannot argue that using a balance transfer will allow you to pay less interest in the short term. However, in the long run, after the 0% promo deal is up, what will the interest rate be? Will it revert to being 20%? 30%? Will the whole ordeal of finding a 0% balance transfer deal just take away the person’s focus of saving and paying off their debt?
    • Because of these reservations I have, in my Helping a Friend Get Out of Credit Card Debt Series, I currently just recommended that my friend focus on 1) calling their credit cards to lower their interest rates and then 2) creating their Debt Free Action Payoff Plan.

***Photo courtesy of http://www.flickr.com/photos/alancleaver/4105755730/lightbox/

Tour de Personal Finance, Stage 15, Round 4 – Posts 33-46

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Without further a due, let’s continue on with the 15th Stage (the second Stage of the 4th round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

There are only 6 blogs/posts remaining in the 2011 Tour, so the competition should be quite interesting from here on out! To view the most up-to-date brackets of the competition, click the following link –2011 Tour de PF Bracket

Going along with Tour de France cycling tradition, I’ve listed each competition within each stage as an “intermediate sprint” (one post versus another) along with the description provided by the blog author when the post was submitted.


Also, if applicable, I will give a brief description of the stage of the Tour de France that took place the same day as the competition.

How to Vote

You can vote for the one article (since there’s only one intermediate sprint today) you’d like to see proceed in the Tour by commenting in the comments section below and telling which are your favorites.

I’ve listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Sprint 1: Mutual; Sprint 2: 401k, etc.) Be sure to comment which one you like the best out of each set of two! Criteria for the best article is completely up to you, but you can use these factors as a guide: 1) post of your favorite blogger, 2) most interesting post, 3) most thought-provoking post, 4) most unique post, or 5) most actionable post.

Here is today’s competitions:

Voting will continue until July 22nd for this Stage!

Intermediate Sprint # 1
  • If I Had a Million Dollars, I’d Go Into Debt (Debt): What would I do if I won a million dollars? This post describes how I’d invest every last penny, scrutinizing tax benefits, risk, returns, real estate, and why I would go into debt — yes, I would go into debt — if I were a millionaire. And don’t just take my word for it: Einstein backs me up, and so does third-world poverty theory. Read this post to find out more.
VERSUS
  • What The Piano Tuner Taught Me (Piano): You can learn a lot from a person by their chosen profession even if that profession is not something you fully understand or are familiar with. Their passion, their spirit, their seemingly perfect fit with the intricate details involved – these things are clear when someone truly loves what they do. That and much more is what I learned from Howard the piano tuner. Read this article to learn more!  

Tour de France Daily Recap

While competition in the 2011 Tour de Personal Finance rages on here at My Personal Finance Journey, the riders of the 2011 Tour de France are enjoying a well-deserved rest day today. The race will continue tomorrow with a big show-down on the way in the Alps mountains! In these coming stages, we’ll be able to see if Contador has what it takes to be acclaimed as the best climber and stage race rider in the world currently! Should be exciting!

    ***Photo courtesy of http://www.flickr.com/photos/johnspooner/2410906296/sizes/l/in/photostream/

    Carnival of Wealth #47 – July 17 2011 Edition

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    Welcome to the 47th edition of the Carnival of Wealth! We at My Personal Finance Journey are very excited to be hosting the carnival again. The last time we hosted was the December 26th Fantabolous YouTube Christmas videos edition, and we very much enjoyed reading all of the articles.

    If you haven’t been by our site in a while, be sure to check out our big project for the month of July – The Tour de Personal Finance (a competition for personal finance blog articles). The event is currently in the 4th Round (Stage 14), and there are only 6 blogs/posts left. Be sure to stop by and cast your vote for your favorite article by clicking here.

    But, enough of that for now! Let’s get to the Carnival. Listed below are the top 3 editor’s picks for this week’s edition.

    Top 3 Editor’s Picks

    1. Glen Craig presents What is a Credit Card Number? It’s Far From Random posted at Free From Broke.

    2. Kathryn C presents What commitment phobes and investment phobes have in common posted at Kathryn’s Conversations, saying, “What do you think the similarities are between being paranoid about getting married and being paranoid about investing? I’ll tell you! So which one are you? or both?”

    3. Neal Frankle presents Bear Market Withdrawal Strategies For Retirees posted at Wealth Pilgrim, saying, “If you are retired and taking withdrawals from your investments, you’re likely very concerned when the market isn’t doing well.”

    Congrats to this week’s three winners! The rest of the submissions for this week are listed below.

    Credit and Debt

    Crystal presents Guide to Debt Prevention posted at Budgeting in the Fun Stuff.

    Philip presents How to Pay for College Without Loans posted at Deliver Away Debt.

    Jon the Saver presents Is Free Score Any Good? posted at Free Money Wisdom.

    Entrepreneurship

    Kyle Taylor presents 2012 Elections: How to Profit from Them posted at The Penny Hoarder.

    BWL presents 7 Habits of Successful Bloggers posted at Blogging Your Passion, saying, “If you want to be successful with your blogging these are a few of the common characteristics that most successful bloggers share…”

    Jason presents Making Extra Money: Niche Selection posted at Live Real Now.

    Family

    Before You Invest presents How to Teach Kids To Invest posted at Before You Invest, saying, “With so many young people graduating without knowing how to manage their money it is vital that we teach our children how to be smart with their personal finances.”

    Investing

    Control Your Cash presents This is Enough to Make Anyone a Red Sox Fan posted at Control Your Cash.

    Boomer presents Should You Sell The Family Home? posted at Boomer & Echo.

    Outlaw presents Can You Contribute to a Roth IRA and a 401K? posted at Outlaw Finance.

    Philip Taylor presents Pay Cash or Finance a Car? posted at PT Money Personal Finance.

    Maxim Kazawy presents Stocks that are Raising Dividends – July 2011 Edition posted at Best Dividend Stocks, saying, “Most retirees & Income investors know the value of stocks that are raising their dividends gradually over time. Dividend growth can make low yielding dividend stocks in to high yield dividend stocks over time because of the growth of dividends.”

    MM presents Volume Indicator Experiment posted at black swans & white crows.

    Lifestyle

    Eirini H. presents More money will only make you more of what you already are posted at Ask your Dreams for Ideas, saying, “Money is not the solution to any of our problems,financial or otherwise!
    Don’t pray for more money. Pray for more wisdom first”

    Kevin presents Savings=Freedom posted at Invest It Wisely.

    Money Cone presents Focus on Recurring Expenses to Improve Savings posted at Money Cone.

    Brian presents Money Saving Tips for Gamers posted at Wallet Watcher.

    Money Spending Mommy presents How Giving Up Expensive Habits Can Save You Lots of Money posted at Money Spending Mommy.

    Personal Finance

    Bob presents 5 Overseas Travel Credit Card Tips posted at Christian Personal Finance.

    The Family Wallet presents Five Ways to Deal with Financial Stress posted at The Family Wallet.

    Investor Junkie presents Just Starting Up: Loan or Investment posted at Investor Junkie.

    Sustainable PF presents My Take on the Emergency Fund posted at Sustainable Personal Finance.

    Matt presents What to Do When Your Income Drops posted at Living in Financial Excellence.

    Kelly presents Let the Dark Knight Guide Your Finances posted at Frugal Living.

    Miss T presents Christmas in July posted at Prairie Eco Thrifter.

    FMF presents Six Steps to Financial Independence posted at Free Money Finance.

    Melissa presents Ways to Find Free Gifts – A Lesson I Learned from My Son posted at Mom’s Plans.

    Money Beagle presents I’d Rather Be Safe Than Sorry posted at Money Beagle.

    Paula @ AffordAnything.org presents Property and the Pursuit of Happiness posted at AffordAnything.org.

    Dr. Dean presents Cable TV: Can The Cord Be Cut? posted at The Millionaire Nurse Blog.

    Tim Chen presents With a Good City Credit Card, It’s Okay to Eat Out posted at NerdWallet Blog – Credit Card Watch, saying, “There’s a thousand credit cards for suburbanites, but a true city credit card appreciates fine dining, entertainment and shopping, preferably all three.”

    Alex Young presents 5 Ways To Turn Ambition Into Results posted at Yell0BrickRd, saying, “Ambition isn’t really a valuable commodity at all. Have you stopped to ask yourself how you are different? Why will you be the one to achieve your ambitions rather than the person next to you? There are many people who have ideas on how to make a lot of money, but knowing how to turn ambition into results is the key. Here are 5 keys that can help”

    Moneyedup presents Building Wealth Instead of Clipping Coupons posted at MoneyedUP, saying, “One of the big fads right now is extreme couponing. While there is nothing wrong with extreme savings, and many people can save a great deal of money clipping coupons, there might be another way to use your time and get even better results.”

    Teacher Man presents Debt Consolidation posted at My University Money, saying, “A good way to beat that 18% interest rate on your credit card is to look into some debt consolidation.”

    Taxes

    Mike Piper presents What’s My Cost Basis for Inherited Property? posted at The Oblivious Investor, saying, “For inherited property, what cost basis should be used for the purpose of calculating capital gains/losses?”

    Other

    Jon Milligan presents How to Wake Yourself Up posted at Simple Life Habits, saying, “Not a morning person? Follow these tips to wake yourself up and be more productive”
    Michael Donelly presents Benefit from Moving to Another Country posted at Another Way, saying, “Why you should read this: It will provide you with ideas how to improve the quality of your life, start over and “open the door” to numerous opportunities. What you can gain: You will get another chance to build up your life from scratch, use your skills and knowledge to the fullest and fulfill your potential. The cost: some time for preparation of necessary documents (visas and passports) and transport and accommodation costs (the amount varies a lot depending on the country you’ve chosen)”
    Justin presents Variable vs Fixed Costs posted at Money is the Root.

    That concludes this edition. If your article was selected to appear in this week’s Carnival, please link back to this page within a week’s time. Hope you enjoyed the reading!

    You can submit your blog article to the next edition of Carnival of Wealth using the carnival submission form. Or if you (like me) are having trouble using Blog Carnival platform use this alternate form to submit. Past posts and future hosts can be found on the blog carnival index page.

      ***Photo courtesy of http://www.flickr.com/photos/joeshlabotnik/203777564/sizes/l/in/photostream/

      Tour de Personal Finance, Stage 14, Round 4 – Posts 1-32

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      Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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      Without further a due, let’s continue on with the 14th Stage (the first Stage of the 4th round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

      There are only 6 blogs/posts remaining in the 2011 Tour, so the competition should be quite interesting from here on out! To view the most up-to-date brackets of the competition, click the following link –2011 Tour de PF Bracket

      Going along with Tour de France cycling tradition, I’ve listed each competition within each stage as an “intermediate sprint” (one post versus another) along with the description provided by the blog author when the post was submitted.


      Also, if applicable, I will give a brief description of the stage of the Tour de France that took place the same day as the competition.

      How to Vote

      You can vote for the two articles (one from each intermediate sprint) you’d like to see proceed in the Tour by commenting in the comments section below and telling which are your favorites.

      I’ve listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Sprint 1: Mutual; Sprint 2: 401k, etc.) Be sure to comment which one you like the best out of each set of two! Criteria for the best article is completely up to you, but you can use these factors as a guide: 1) post of your favorite blogger, 2) most interesting post, 3) most thought-provoking post, 4) most unique post, or 5) most actionable post.

      Here is today’s competitions:

      Voting will continue until July 20th for this Stage!

      Intermediate Sprint # 1
      • Getting Started With Your Money Idea (Idea): Don’t know where to start or how to promote yourself? This article gives you the starting steps as well as a stack of ways to advertise and promote for free or very cheap. It is also an excerpt of my book 365 Ways To Make Money. 
      VERSUS
      • Bicycle In The City (Bicycle): This article was produced out of both frustration at city traffic congestion, and with optimism for real alternatives to the car. Cars are stressful, from financing the purchase to filling the tank. There must be a better way. Cities that integrate the bicycle and support carless lifestyles are the way forward.    

      Intermediate Sprint # 2
      • This isn’t your grandparents’ recession (Grandparents): 
        Ever since the recession began I think there’s WAY too much blaming of the victims. I’m good and sick of hearing pundits grumble about how lazy and soft Americans have become, and how we ought to take a few lessons from the Great Depression. Here’s the thing: The world was a different place back then. Heaven knows I’m no apologist for slackers, credit-card spendthrifts or people who won’t take anything but the “right” job, but a lot of the advice our elders offered/modeled isn’t relevant today. Plenty of folks are in big trouble not because they’re lazy, but because of complex personal, local, national and global economic issues.


      VERSUS
      • THE Top 10 Bad Financial Lists (Lists): I grow weary and tired of bloggers putting out Top 5, 10, and 20 lists of various financial things that would make our lives better. So, I have devised a most nefarious, ugly, and downright useless list of financial lists (there is the twist) that could ever be published and still be labeled as SFW (Suitable for Work). Careful reading this, you may find yourself suddenly wanting to write a similar list mocking other bloggers. 

      Tour de France Daily Recap

      It’s been almost 3 days since the last Tour de France race recap during the Stage 13 posting on Thursday, so let’s get caught up on all of the action!
      Today was Stage 15 in the 2011 Tour de France, with the riders traveling 187 km from Limoux to Montpellier. It was a flat stage, and Mark Cavendish ended up winning the final sprint ahead of Tyler Farrar to win the Stage.

      Against all odds, Thomas Voeckler is still in the yellow jersey after the first big showdown in the Pyrenees Mountains. However, the overall standings should get sorted out for good this coming week when the race goes through the Alps. One of the showpiece stages is a mountain top finish on Alpe D’Huez (I was actually lucky enough to be able to climb this mountain on a bike in 2008, and let me tell you – it is HARD!). 

        ***Photo courtesy of http://www.flickr.com/photos/puliarfanita/3311290609/

        July Blogging Goals Update

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        Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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        In January of this year, I wrote a post detailing some of my blogging goals, targets, and dreams for the year of 2011. When I did this, I also added a reminder on my Outlook calendar to track our progress pertaining to these goals each month. 

        I have been sort of bad in that while I have been tracking these goals offline, I have not published an update on my blog since April (only so many hours in the day, right?!). 

        My goal for today’s post is to rectify this!

        By tracking blogging goals, I am hoping that it provides us with more accountability and visibility to what we are doing and where we want to go with this community/blog.

        So, here goes! The blog goals for 2011 are as follows, with progress updates given in bold type, current as of July 2011.

        1. Obtain Alexa ranking of 200k or less. Dream goal = 100k. Currently, we are at 91,000. We were cruising along pretty steadily at 110,000. However, we have since dropped due to some good visits as a result of our Lost Decade guest post at Yakezie.com as well starting up the Tour de Personal Finance.
        2. Read and interact with (comment) 5 partner blogs per day. Currently below this average, but hope to improve. However, we have been doing well these past few months at reading through every post submitted to the blog carnivals that we’ve hosted..
        3. Continue active participation as a proud Yakezie Personal Finance Blog Network member. On track. Have posted a total of 1437 comments on the Yakezie Forums advising, learning, and interacting with others. Also, I have now coordinated ~8 advertising campaigns, bringing in a total of >$5000 revenue (and counting!) to partner blogs and have hosted the 4th Yakezie Blog Swap. I also helped to screen part of the ~1049 essays submitted to the 2nd Yakezie Writing Contest.
        4. Publish 3-5 blog posts per week. On target for this average currently. I’m very proud that I’ve kept up the consistency! I think I’ve found my “comfort zone” in posting frequency with posting one post per day Mon-Fri (with the exception of holidays). Having a break from posting on the weekends really gives me a chance to sit down with some quiet time and write good content!
        5. Obtain 200 unique visitors per day average by end of 2011. Currently averaging 203 per day. I was up to 307 average per day back in March before I had to focus more time in to my graduate program’s classes. I’ve heard from some of my blogging friends that traffic levels are very seasonal, with big drops happening in the summer. So, it will be interesting to see if traffic picks up in the fall/winter months when people are more often around their computers!
        6. Host all personal finance blog carnivals (Festival of Frugality, Best of Money, Tax Carnival, Carnival of Personal Finance, etc). Have hosted all blog carnivals that have allowed me! If any one out there needs a host in the future, just send me an email!
        7. Grow Carnival of Passive Investing to point where someone would be proud to host it. Have now had 7 editions of the carnival. Three were hosted by me, and the last four were hosted by Canadian Finance Blog, A Rich Life, Free Money Wisdom, and The College Investor. The top articles in the last two editions (May and June) were selected by two passive investing book authors – Larry Swedroe and Rick Ferri. We were very honored to have their help! The July carnival will be hosted by Wealth Informatics. Submit your passive investing posts by clicking here.
          1. My next moves for the Carnival are to a) continue getting passive investing authors involved and b) start reaching out to financial journalists (maybe from Kiplinger’s or Money Magazine, etc) and/or financial reports on TV. We’ll see how it goes!
        8. Continue to spread word about benefits of passive investing over active investing. Get involved in BogleHeads forums as well. Need to do this more. I have done a good job organizing the Carnival of Passive Investing, but have neglected visiting the BogleHeads forums. However, I just placed an automatic weekly recurring reminder on my Outlook calendar to try to increase my participation.
        9. Write and publish 1 guest post for another blog per month. On target with this goal. Have guest posted once this year on Free Money Finance, twice on InvestorJunkie.com (a review of Sharebuilder and a review of Vanguard), once on Yakezie.com, once on Budgeting in the Fun Stuff, and guest posted a total of five times during the 2nd-6th Yakezie Blog Swaps.
        10. Create an eBook on one of the following topics – a) Ways to be Frugal b) Investing Strategy c) Steps to Buying a Home. Ongoing, but have not yet started.
        11. Possibly transfer blog to WordPress hosting???? This is still a maybe. I am leaning more towards not going to WordPress. I know that it limits me from doing some things, but with weekly manual backups, I feel safe using Blogger for now.
        12. Create newsletter – “X Number of Weeks to a Frugal Lifestyle”. Ongoing, but have not yet started.
        13. Two free giveaways / contests during 2011. Have hosted 4 giveaways so far this year – a $25 Amazon gift card to the best cheapskate story, a $25 Wal-Mart gift card for the best passive investing article from the March 31st Carnival of Passive Investing, an H&R Block At Home giveaway of 5 tax software codes, and 3 sets of 500 free business cards from Allbusinesscards.com.
        14. Put together material to present to groups and or classes on personal finance. Ongoing, have not done yet.
        15. Attend blogging, marketing, finance, or real estate classes at local community college or nearby conference locations. Need to search for seminars. Found classes offered at local community college in blogging and marketing. Have not made any progress on this yet.
        16. (New as of July, 2011) Submit blog posts to 5 blog carnivals each week to expose my blog to new audiences and build links. Have been doing well at this for the past 3 months or so. Hope to continue!
        17. (New as of July, 2011) Successfully execute Tour de Personal Finance in July this year and each July in the future. For 2012, plan further ahead of time to gather more entries (max = 64) and get some sponsors involved. If get sponsors, donate 50% of the earnings of the event to a charity chosen by the yellow jersey winner of the event. 1st round of Tour de Personal Finance going on right now!

        How about you all? What goals did you set for 2011? How are you progressing in achieving them?

        Share your experiences by commenting below!

          ***Photo courtesy of http://farm3.static.flickr.com/2622/4207563765_954cd50863.jpg

          Tour de Personal Finance, Stage 13, Round 3 – Posts 1-8 & 33-40

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          Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
          ————————————————————————————————————————

          Without further a due, let’s continue on with the 13th Stage (the fourth and final Stage of the 3rd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

          To view the most up-to-date brackets of the competition, click the following link –2011 Tour de PF Bracket

          Going along with Tour de France cycling tradition, I’ve listed each competition within each stage as an “intermediate sprint” (one post versus another) along with the description provided by the blog author when the post was submitted.


          Also, if applicable, I will give a brief description of the stage of the Tour de France that took place the same day as the competition.

          How to Vote

          You can vote for the two articles (one from each intermediate sprint) you’d like to see proceed in the Tour by commenting in the comments section below and telling which are your favorites.

          I’ve listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Sprint 1: Mutual; Sprint 2: 401k, etc.) Be sure to comment which one you like the best out of each set of two! Criteria for the best article is completely up to you, but you can use these factors as a guide: 1) post of your favorite blogger, 2) most interesting post, 3) most thought-provoking post, 4) most unique post, or 5) most actionable post.

          Here is today’s competitions:

          Voting will continue until July 17th for this Stage!

          Intermediate Sprint # 1
          • How to feed a family of 6 on roughly $200 per week (Family):  Groceries account for one of the highest household expenses. However, it is also a variable cost that we can all budget for. Nikki Holloway, a Canadian mother from Arrowwood, AB, who feeds 6 on roughly $200/week, has provided her top 11 tips to putting the money back in your bank account and not on your plate.
          VERSUS
          • Getting Stated With Your Money Idea (Idea): Don’t know where to start or how to promote yourself? This article gives you the starting steps as well as a stack of ways to advertise and promote for free or very cheap. It is also an excerpt of my book 365 Ways To Make Money. 

          Intermediate Sprint # 2
          • If I Had a Million Dollars, I’d Go Into Debt (Debt): What would I do if I won a million dollars? This post describes how I’d invest every last penny, scrutinizing tax benefits, risk, returns, real estate, and why I would go into debt — yes, I would go into debt — if I were a millionaire. And don’t just take my word for it: Einstein backs me up, and so does third-world poverty theory. Read this post to find out more.

          VERSUS
          • I Refused To Pay Someone What I Was Charged (Refused): What do you do when the value of a service or product doesn’t match the price you were charged?  In this personal finance story, you’ll find out how my situation played out (it may not be what you think) and what you can do if you find yourself in a similar situation.

          Tour de France Daily Recap

          Today was Stage 12 of the 2011 Tour de France. It was the first real mountains Stage in this year’s race, with the riders leaving from Cugnaux and finishing on the mountaintop of Luz-Ardiden (209 km away!).
          The Basque rider, Samuel Sanchez, finished first on the Stage to claim his first ever victory in a Tour de France.
          The finish today had a fairly significant impact on the general classification among the Tour contenders. Unexpectedly, Thomas Voeckler held on to his yellow jersey, despite his historically less-than-stellar climbing record in the mountains.

          The big loser today was Alberto Contador. He lost time to Frank Schleck, Cadel Evans, and Ivan Basso on the last climb. While he didn’t lose a TON of time, it most likely did serve a psychological blow. However, he is a strong rider, and you don’t win the Tour de France 3 times on just luck. So, he still has time to recoup his loses on today’s Stage.   



          ***Photo courtesy of http://www.flickr.com/photos/petitbrun/5809291874/sizes/z/in/photostream/

          How Strategic Currency Conversion Can Prevent Losing Money in Translation

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          Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
          ————————————————————————————————————————

          The following is a guest post from the editorial team at Card Hub, a leading credit card comparison website.

          How Strategic Currency Conversion Can Prevent Losing Money in Translation

          Wasting money – It’s what we all strive to avoid and why many of us read a blog like My Personal Finance Journey. While there are endless ways people waste their hard-earned funds, one of the most frustrating is currency exchange while on a vacation to another country, which can add up to 15% on the cost of a trip.

          There’s something about overpaying for a supposedly equivalent amount of money that just doesn’t sit right with me, and I’m sure many of you feel the same. So, what’s the best way to approach currency exchange, and how can we avoid losing cash in translation? Let’s find out.

          Current State Analysis of Foreign Currency Exchange

          The name of the foreign currency exchange (FXCM) game is minimizing fees and finding the lowest possible exchange rate, which means shopping around. Luckily, you’ll have a bit of a head start in this endeavor as we at Card Hub recently conducted a study of the exchange rates offered by the market’s major players: 15 of the largest consumer banking institutions in the U.S.; Visa and MasterCard, the most widely accepted credit networks in the world, and Travelex, the world’s biggest airport forex operator. Overall, this study provided three major insights into consumer currency exchange that will help guide your shopping:

          1. Credit cards save you the most money on currency exchange.
          2. You should never convert currency at the airport, if you can help it.
          3. Bank exchange rate offers vary widely, so shop around.

          More specifically, no international fee credit cards on the Visa and MasterCard networks can save you 14.7% on currency exchange relative to Travelex and 7.9% as compared to your average bank. Therefore, getting such a card is the first step in minimizing the cost of overseas travel.

          That’s not the end of the story, however, because you’re going to need cash when traveling abroad and Credit Card 101 says that a credit card cash advance is a terrible idea given the high fees and interest rates. You should therefore use a low-foreign-fee ATM card when you land.

          Final Thoughts

          There are a few additional details to keep in mind in order to bring your currency exchange savings plan to fruition.

          • First, it’s important that you open a no international fee credit card before booking any flights or hotels because the foreign fees that 90.2% of credit cards charge apply to any transactions processed outside the U.S. 
          • Second, make sure to notify your bank of your travel plans in order to avoid suspicion of fraud and resulting account difficulties. Last but not least, though it might be tempting, decline any merchant’s offer to covert your bill into U.S. dollars or you’ll be left paying an exchange rate that would make an airport currency exchange service’s offer look attractive. Other than that, all that’s left is to enjoy your travels.

          How about you all? Did you know that credit cards have the most favorable foreign currency exchange rates? What strategies do you and your family employ to save money on converting currency? 


          Share your experiences by commenting below!

          Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article

          • Great article here! Since my family and I like to travel to foreign countries for vacations, currency exchange is an important topic for my personal finances. It is also one to which I’ve given a bit of thought before.
          • Typically, in order to save money on foreign currency exchange fees during vacations, my family does the following:
            • Withdraw the majority of the cash we need for the trip before we travel at our home bank branch. This saves money on foreign ATM fees. Then, when we get to our destination, we split up the money among the four of us, with each of us carrying a bit of the cash in our money-belts for security.
            • Because all of our credit cards carry the typical 3% foreign currency purchase fee, we try to only purchase “big-ticket” items using our credit card.
            • If we need to exchange our US Dollars for the local currency, we generally always try to do so at a bank (because we’ve found banks have better rates than currency exchange booths).
            • @ Results of currency exchange study – Very interesting study! I would definitely like to see the complete methodology and results of the study for further reference. My thoughts on the results are listed below:
              • I completely agree that 1) bank exchange rates vary (so shopping around is very good!) and 2) that exchanging money at the airport will cost you more.
              • I definitely didn’t know that credit cards provide the most favorable foreign currency exchange rates. I would have thought that one would pay a premium for the convenience of having the credit card do the conversion without you having to take any action. I’d like to see the complete details of the study for this part especially!
            • @ No-International Fee Credit Cards – I have heard of these credit cards before, but I have resisted applying for one because I really only travel about 1-2 times per year outside of the US. Because of this, I don’t think I would use the card enough to make it worth its while. In addition, I would suspect that since no-international fee cards have this added no-fee perk, certain other features such as cash-back rewards, APR, etc, would be less favorable than normal credit cards.
              • However, if I were to get a no-international fee credit card, I would make sure to get one that 1) has no annual fee and 2) has a rewards program.
              • A list of cards that fit these criteria can be found here.
              • Examining this list, there are 8 credit cards that fit the two criteria described above. Of these 8 cards, none offer cash-back bonus levels as high as my current favorite credit card for domestic spending – The Chase Visa Freedom Card.

              ***Photo courtesy of http://www.flickr.com/photos/epsos/5902557577/sizes/l/in/photostream/

              Tour de Personal Finance, Stage 12, Round 3 – Posts 9-16 & 41-48

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              Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
              ————————————————————————————————————————

              Without further a due, let’s continue on with the 12th Stage (the third Stage of the 3rd round of competition) of the 2011 My Personal Finance Journey Tour de Personal Finance (to follow all of the action, click on the Tour de Personal Finance category link and scroll down to read all the posts involved in this subject).

              To view the most up-to-date brackets of the competition, click the following link –2011 Tour de PF Bracket

              Going along with Tour de France cycling tradition, I’ve listed each competition within each stage as an “intermediate sprint” (one post versus another) along with the description provided by the blog author when the post was submitted.


              Also, if applicable, I will give a brief description of the stage of the Tour de France that took place the same day as the competition.

              How to Vote

              You can vote for the two articles (one from each intermediate sprint) you’d like to see proceed in the Tour by commenting in the comments section below and telling which are your favorites.

              I’ve listed a keyword after each post title to make it easy to vote (as a made-up example, you can just comment: Sprint 1: Mutual; Sprint 2: 401k, etc.) Be sure to comment which one you like the best out of each set of two! Criteria for the best article is completely up to you, but you can use these factors as a guide: 1) post of your favorite blogger, 2) most interesting post, 3) most thought-provoking post, 4) most unique post, or 5) most actionable post.

              Here is today’s competition:

              Voting will continue until July 16th for this Stage!

              Intermediate Sprint # 1
              • Bicycle In The City (Bicycle): This article was produced out of both frustration at city traffic congestion, and with optimism for real alternatives to the car. Cars are stressful, from financing the purchase to filling the tank. There must be a better way. Cities that integrate the bicycle and support carless lifestyles are the way forward.   
              VERSUS
              • An Argument for Privatizing Social Security (Argument):  Just as our country’s finances reach a critical point, Social Security is set to start failing. Social Security makes up 1/5 of our federal budget and is facing a huge deficit if changes aren’t made quickly.  This article argues that privatizing Social Security could be a permanent and sustainable solution.   

              Intermediate Sprint # 2
              • What The Piano Tuner Taught Me (Piano): You can learn a lot from a person by their chosen profession even if that profession is not something you fully understand or are familiar with. Their passion, their spirit, their seemingly perfect fit with the intricate details involved – these things are clear when someone truly loves what they do. That and much more is what I learned from Howard the piano tuner. Read this article to learn more! 

              VERSUS
              • How I Went From 30K To 100K in 5 Years (100K) I went from an admin clerk making 30K to a financial professional making over 100K in only 5 years. That’s the equivalent of getting annualized raises of 27% per year. How did I go from 30k to a 6 figure income in 5 years? Here’s my story!

              Tour de France Daily Recap
              Today was Stage 11 of the 2011 Tour de France. The riders traveled 168 km from Blaye-les-Mines to Lavaur.
              It was another flat stage and the race stayed together going in to the finish town. The Manx Missile, Mark Cavendish, won the sprint to claim his third Stage win of this year’s Tour. Congrats Mark! 

                ***Photo courtesy of http://www.flickr.com/photos/teamtraveller/3921094904/

                What Would You Do If You Needed to Buy a Car? – Part 2 – Secure Your Car Buying Financial Details

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                Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
                ————————————————————————————————————————

                Back in April of this year, one of my graduate school friends asked for some advice with buying a new car. Unfortunately, since I’ve never had to go through the car-buying process myself yet in life, I wasn’t able to provide him with as much insight as I would if he asked about investing for retirement.

                However, in an attempt to learn some more about car-buying in order to offer help to future inquirers, I’ve decided to roll-out a post series speaking to this important topic. In Part 1, I discussed the various considerations and steps I would take to sell my car. You can view the complete post at the link below:

                What Would You Do If You Needed to Buy a Car? – Part 1 – Sell Your Current Car

                Having sold my car using the steps discussed (and hopefully freed up some cash from the proceeds), it would then be time to nail down the financial picture that will be involved in purchasing my new car. Similar to buying a house, you must first determine how much car your finances can afford before you even think about setting foot on a new/used car lot.

                So, let’s get started with how I would nail down the financial specifics needed to buy a car.

                Step 1 – Determine What Type of Car Buyer You Are

                Just like we saw in Part 1, the first step (in my opinion) to determining the financial specifics of your car purchase is to do some inner-self reflecting to determine what is important to you in a car.

                The ultimate goal of this exercise should be to determine whether or not you are a used car buyer or a new car buyer. Listed below are some guidelines to help you determine which category of buyer you belong in:

                New Car Buyer

                • People that fall in to the new car buyer category are very similar to the “Category 1” sellers described in the first Part of this posting series. 
                • New car buyers are those individuals to whom price is really not the main issue when buying a car. These people are well-off enough to be able to afford a car comfortably, with the biggest concern being that their normal life is not interrupted by the car purchase process.
                • These buyers want to purchase a car quickly and can be assured that no wear has already been placed on the vehicle that would result in anything more than the car needing a routine oil change.
                • Examples of people who fall in to this category are doctors, lawyers, professional workers, etc. that have enough money in their bank accounts to pay for a new car (or can easily obtain the financing required). 
                • I would propose that these individuals typically receive high enough pay that the extra 10 hours of time that would be required to become a semi-expert in car value in their local area would not be worth it financially. After all, if you are a lawyer or contractor charging $300-$500 per hour, that extra 10 hours could be costing you THOUSANDS of Dollars.
                • However, you could also fall in to this category if you simply do not have the will, desire, or capacity to learn about the in’s and out’s of car buying and car value. While this is perfectly acceptable, I would definitely encourage everyone to read about the used car buyer category below before deciding to which you belong.

                Used Car Buyers

                • While everyone (at least to some extent) probably aspires to be in the New Car Buyer category, for a large amount of the population, buying a new (unused) car is either 1) not economically justified (because the car decreases in value 30-50% by simply driving it off the lot) or 2) not financially feasible.
                • For the people that fit either one of these two descriptors, we have to rely on being able to buy used (pre-owned) cars.
                • Used cars cost much less up-front, but will most likely require more up-keep, maintenance, and on-going costs in general in order to stay on the road. All of this must be factored in to your decision about which car to buy.
                • Furthermore, within the used car buyer category, I believe there exists two subcategories – extreme frugalists and value shoppers.
                  • Extreme Frugalists – This first category is for those rare special souls (like a college instructor I had) that take frugal living to the extreme! These people buy the cheapest of the cheap cars (think $1000-$2000), don’t carry collision coverage (only liability coverage), and don’t care one bit about the appearance of the car as long as it gets them to where they need to go. They are OK with it breaking down because they only drive it around town and can be picked up if needed.
                  • Value Shoppers – The second category is probably where most used car buyers will be. These folks need a dependable car they can take on an occasional long trip, drive to work each day, run errands, and live life in general. The car needs to be dependable enough to not break down with this normal use.  

                So, take a moment and look at which category you think you fall in to before we move on. Personally, I probably fall in to the Value Shoppers used car buyer category. Being in graduate school, I don’t yet have enough money to be able to buy a new car the way I’d like to (more on this later in the post!).

                Step 2 – Determine How Much Money You Have Currently to Purchase a Car

                Once you’ve decided what type of car buyer you are, it’s now time to think about how you will pay for your new vehicle. To get started with this exercise, you need to take stock of all of the money you have available at the present time to go towards a car payment.

                Listed below are some common places to look:

                • Cash obtained from selling your car (Part 1).
                • Money saved in savings accounts or taxable investing accounts (not retirement accounts).
                  • Important note: Your emergency fund should NOT be used to buy a car. If you got in to a wreck with your current car and needed some money to pay for medical or car insurance deductibles, that would be an acceptable use of an emergency fund. However, if you’re buying a new car, you should theoretically be able to plan far enough ahead so that you don’t have to touch your emergency cash reserves. 
                  • You should also not tap in to savings that you have earmarked for other purposes, such as achieving your life values or dreams, to buy a car. This may be tempting, but it really should be avoided! After all, you want to actually achieve your life dreams/values at some point correct?!
                • Cash from parents or relatives that might be able to help you buy a car.


                Step 3 –  Determine Your Time Frame for When You Need to Buy a Car and Automate Savings Accordingly

                So, in an ideal world, all of the money a person needed for buying a car would be obtained from one of the cash sources above. However, the truth of the matter is that selling your current car may not generate all that much cash, you may not have well-off parents, and your savings may be non-existent.

                In the real world, we have to take a more active approach and plan/save for our upcoming vehicle purchase. Listed below are the steps I would recommend taking:

                • Determine how many months from the present time you’d like to purchase a car.
                • From tracking your spending and determining your monthly cash allocation needs, figure out how much extra money per month you can comfortably save for purchasing a car. In other words, make saving for your car purchase more of a priority for any extra money you have after your other monthly cash needs.
                • Once you determine the amount, set up an automatic transfer for this quantity to a high yield online savings account to occur at the beginning of each pay period.
                  • Please note that it’s important for the transfer to take place at the beginning of the pay period so that you don’t have a chance to spend the money.


                Step 4 – Determine How Much Car You Can Afford Before Looking Around + Financing Options

                After you’ve gone through Steps 2-3 above, it’s time to sum up the total amount of money you will have that will be available for buying a car both from existing funds and future savings according to your automated transfer plan. Take a minute to calculate this for your situation.

                Once you have added the values up, I can imagine one of two scenarios happening:

                • Scenario 1 – The number you calculated is, in your opinion, sufficient to buy a decent car for your needs.
                • Scenario 2 – The number you calculated is too low, in your opinion, to get a dependable car (even a cheap used one). 

                If your calculations result in Scenario 1, then great! You’ve successfully secured the money you need to buy a car, and you’re ready to begin the car shopping process. This topic will be covered in Part 3 of this series (on the way soon!).

                If it’s looking like you are experiencing Scenario 2, don’t feel bad! There’s still hope; you just have a little more work to do.

                Step 4b. – Car Financing

                Personally, I am not a big fan of taking out loans on depreciating assets (such as a vehicle that depreciates in value with each year it’s on the road). Because of this, I would try with all of my power to avoid taking out a car loan for my car purchase.

                However, I also strive to be a practical person (even if I am a head-in-the-sky engineer! haha). And, the reality in today’s society is that unless you live in a big city with lots of public transit options, you need a car. And, more exactly, you need a sufficiently dependable car.


                Because of the strict need for a car in today’s society and fairly favorable financing options (because it’s a secured debt), taking out a car loan isn’t as bad in my book as racking up thousands of Dollars of 25% daily-accruing credit card debt or taking out a 50% interest payday loan.

                So, as I’ve mentioned, car loans aren’t all that bad. However, you do need to take some precautions in order to maximize your success with the car financing/purchasing process.

                First, let’s take a look at the different possible sources you can turn to for where to get a loan for a car.

                • Family/Friends
                  • The first option available to you for obtaining a loan for a car is your friends and/or family. 
                  • Personally, I would advise against obtaining this type of financing, as loans to friends/family are rarely ever paid back and often cause stress on relationships.
                  • If getting a loan from family/friends is absolutely your only option, it’s important to draw up an explicit loan agreement to protect both parties’ financial and legal interests.
                • In-House Financing from Dealership
                  • Pretty much any dealership that you visit will offer some variety of in-house financing/loan options. Why is this? Because dealerships make most of their money off of 1) these loans and 2) reselling used cars. Fairly little money is made on selling new cars.
                  • An example of in-house dealership financing is Honda Financial Services. 
                  • One of the benefits of in-house financing is that promotional loan packages are often offered (you’ve probably seen them on TV or heard them on the radio!) to entice consumers to get to the dealership and buy a car. In fact, currently, on the Honda website above, they are offering a loan special for Accords for 1.9% interest financing for 24-36 months.
                  • Personally, I am not the biggest fan of in-house financing because I feel like they are trying to almost trick me in to buying a car. I also do not like how they try to get you paying for too expensive of a car by offering low monthly payments, but spread them out over MANY years! Why would you want to be paying off a car loan for 15 years?! This is not a house!! 
                  • However, if there was a SUPER low interest financing deal on a car I wanted, I would consider in-house financing, but would make sure to examine the loan details very closely. Some red flag tricks to look for are hidden loan fees, balloon payments, and/or jumps in interest rate after a certain introductory time period is up.
                • Auto Loan from a Bank
                  • My preferred method of obtaining financing for a car purchase would be from a reliable bank. At banks, I feel like you are more likely to get unbiased loan assistance as compared to a dealer who is also selling you the car.
                  • If you go to the website of almost any bank in your area, you’ll most likely be able to pull up their options for auto loans. Listed below are several current loan packages I found for used car purchases from a dealer:

                No matter what route you choose for obtaining an auto loan, the most important thing is that you define what you’d like your approximate monthly payments and loan payoff period to be before looking at cars. These two specifics should be defined by looking at how much cash you have on hand for a down-payment and how much free income you have each month to put towards a car payment.

                To assist you in determining these specifics, I created a car loan payoff/amortization schedule spreadsheet at the link below. I’ve shared it as “view-only,” so just download it as an Excel spreadsheet so that you can adjust it to fit your specific situation.

                Car Loan Amortization Schedule – Google Docs Spreadsheet

                The spreadsheet can be used to determine the approximate “amount of car” you can afford by performing the following steps:

                • Enter the following information in Column A – 
                  • Amount of cash you currently have on hand.
                  • Interest rate on the bank/dealership loan you are considering (or use the default value of 2.99%.
                  • Tentative loan term that you’d like to have (or use the default value of 36 months). Please note that if you increase the loan term, you’ll need to simply add more rows at the bottom of the calculation table.
                • Next, using the Solver function in Excel, set the cell in the last row of Column G to a “value of 0” by changing your Target Car Purchase Price in cell A14. Then, click “OK.”
                • The Solver function should generate the appropriate car purchase price that you can afford based on your cash savings and monthly payment specified.

                Once you’ve used this spreadsheet to determine how much car you can realistically afford, you can start thinking about shopping around for your car. And, you will not lured in to buying a car that you cannot afford simply because the dealership tries to talk you in to a promotional loan package.

                Conclusions


                So far in this post series, I’ve talked about the first two big steps I would take in buying a new car. In Part 1, I discussed how I would sell my car london. After freeing up some money from the sale, I would first nail down the financial specifics of how I would pay for my new vehicle before going shopping.

                In determining these details, it’s important to consider 1) what type of buyer you are, 2) how much cash you have on hand for the purchase, 3) how long you want/can wait until buying a car, and 4) how much car you can comfortably afford, either solely from money you have or supplemented by an auto loan. By arming yourself with this information, you can make your car-buying process a more satisfying and less painful process.

                How about you all? How did you go about figuring out the finances for buying your last car? Did you take out a loan? If so, did you get the loan from the dealership or a bank? 


                Share your experiences by commenting below!

                  ***Photo courtesy of http://www.flickr.com/photos/rjs1322/1009831723/sizes/l/in/photostream/

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