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4 Ways to Save on Gas that Really Work
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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 guest post comes to us from Jessica Bosari. Jessica writes for CarInsuranceQuotesComparison.com. The site helps consumers compare car insurance companies with tips, information, and advice.
As gas prices continue to rise, it seems that almost every website has new tips and tricks for how to save gasoline. However, not all of those tips are really accurate or useful. The following suggestions come directly from fueleconomy.gov, a trusted federal website designed to help consumers improve their gas mileage. These tips have been tested through government research, so you can feel confident that they will work.
1. Avoid Idling for Long Periods of Time
Idling in your car can use up more gasoline than actually driving on the road. If you idle for more than 10 seconds, you will use more gas than it takes to restart the car. When you idle with the air conditioner running, you burn fuel even faster.
Remember to shut your car off if it will be in one place for more than a few seconds. Restarting the vehicle several times can cause wear and tear on your starter, but it will save you money on gasoline. If you must idle, turn off the air conditioning until the car is in motion once more.
2. Keep Your Tires Properly Inflated
Driving with tires that do not have the right pressure can cost you up to 3% more in gasoline consumption. Manufacturers place a sticker on the inside of the driver’s door that tells you how much pressure your tires should hold under normal operating conditions. The proper inflation number should also be printed on the side of each tire.
If the air hose that you are using does not have a built in tire gauge, you can pick one up for a couple of dollars at any discount or automotive store. Keeping your tires properly inflated will save you money on gasoline and make your car safer to drive.
3. Find Alternatives for Your Daily Commute
Driving to and from work is how many people use the most gasoline. You can save money on your gas costs if you find an alternative to driving your own car even one day a week. Carpool with other employees who work in your building and live in your part of town. You can alternate drivers so that each of you only drives once or twice a week.
Look into your public transportation options to see if it would be feasible for you to take the bus or the train into work sometimes. If you live closer to work, you might be able to ride a bike or walk on nicer days. Driving less can also earn you a low-mileage discount.
4. Buy a More Fuel Efficient Vehicle
Auto manufacturers have realized that the driving public needs cars with better fuel mileage. Newer cars get much better gas mileage than cars that were produced just a few years ago. Choosing a car that gets better gas mileage will save you money on gas in just a few short weeks. If you find a car that gets 10mpg better than the car you are driving today, you could save almost $1,000 in the first year of driving the new car. The website fueleconomy.gov provides detailed mileage information for cars that were produced between 1984 and 2012.
How about you all? What strategies do you use to save on fuel? So far, have the higher fuel prices changed your driving behavior at all? If not, what price would gas need to be before you REALLY made serious changes to your driving patterns?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Avoiding idling to save gas – I didn’t know about this one. However, it does make sense that it would be this way.
- Another reason to avoid idling is because frequent idling can be hard on your car’s motor (as well as burning gas quickly!).
- @ Keeping your tires properly inflated – I have to admit that I am guilty of not airing up my tires as often as I should. Ideally, I would like to check my tire air pressure before each drive I take that is longer than 2 hours. However, I often forget.
- Not only can having low air pressure in your tires cost you more in gas, but it can also cause the tires to overheat and blow out if you go fast enough. Best to avoid this situation!
- @ Alternatives to daily commute – Although it would be nice if everyone were able to either bike or walk to work like people do in Europe, for most areas of the United States (maybe with the exception of big cities), this simply is not possible.
- Why is this you might ask? Simple. In the US, the economy and city structure (for better or worse) is built upon the idea that everyone has a car.
- Additionally, two trends are becoming “the norm” in the US. First, in a family, it is most common to find the situation where both parents work. Since both parents work, it is tough to position the family geographically close to both persons’ jobs. Second, it is becoming more and more prevalent for an individual to change jobs upwards of 5-10 times during a career. Because of all of this change, it is nearly impossible to be able to move your family each time, often increasing the length of one’s commute.
- @ Buying a more fuel efficient car – I definitely agree that newer cars are much more fuel efficient than older ones. However, there are two important things to consider before jumping in to buying a new car..
- First, new cars can depreciate up to 30% in value by the mere act of driving the car off of the new car lot. As I discovered in my analysis last year in the post, Buying a New Car vs. a Used Car, new cars typically lose about 20% of their value in the first year of ownership and about 65% of their value in 5 years. Because of this steep depreciation curve that occurs with new cars, the amount of money saved by having a newer, more fuel-efficient car may not be financially justified overall vs. a used one. Always remember to do your homework and check this math out before buying!
- Second, it is tempting in this day and age to want to buy a “green” hybrid car (such as a Prius, etc) due to the savings in gas you will achieve and the lower environmental footprint. However, as we saw in the post, Does Being Green Make Economic Sense – Green and Hybrid Vehicles, these hybrid “green” cars come at a very high premium, and it can take up to 7 years to break even on your initial purchase from the fuel savings you experience.
***Photo courtesy of http://www.flickr.com/photos/schill/2570639630/sizes/l/in/photostream/
Online Shopping – The Risks, Benefits, and How to Stay Safe
The following is a guest post. Enjoy!
Online Shopping Statistics
Online shopping has been the retailing revolution of the 21st century and is still increasing in popularity. Statistics produced by Forrester Research Inc. suggest that 60% of consumers shop online at least quarterly.
By 2015, over 200 million consumers will shop online, according to eMarketer. The increase is due to the many benefits of online shopping, although according to statistics from the Lieberman Research Group, 51% of users are concerned about internet security.
How to Stay Safe While Shopping Online
There are many ways to reduce the risks of shopping online and staying safe in the process. There are many advantages to purchasing online, including convenience, speed, pricing and access to the best financial products available.
For instance, there are numerous sites that will give honest reviews on a range of consumer products.
Gone are the days when consumers had to fit in a trip to the shops or carry home heavy shopping. With a click of the mouse, you can have any product delivered from anywhere in the world. And, a lot of the time, the products purchased online will be cheaper than those in local stores!
Types of Scams to Watch Out For
This quick and easy process has also unfortunately encouraged fraudsters to use the internet for their criminal activities. Many different types of scams are used by these individuals.
A frequent scam is to set up a web store offering designer goods at seemingly bargain prices. The consumer, hoping for a good price, may be tempted to purchase from here. By purchasing from this store, the consumer will, in essence, hand his or her financial information to the criminals behind it. Within moments, the consumer’s bank account will be cleared of funds by the criminals.
How to Evade These Scams
There are many ways to avoid falling victim to this trap. Firstly, only purchase from stores that appear reputable. Check online to see if any comments have been made about the store to verify its authenticity. Always keep updated with the latest version of your browser as it may contain an Extended Validation SSL Certificate. This technology will turn the address bar green to show you are visiting a secure site. Then, look at the URL address bar when you begin your purchase. A secure site will begin with the letters HTTPS, rather than just HTTP and may also show a locked padlock icon.
Always pay with a credit card rather than a debit card, so that if information is obtained by criminals, they will only be able to spend the credit card limit. Whereas with a debit card, criminals can access your bank account too and cause greater damage. Both banks and credit card providers are constantly alert for signs of fraud.
Due to monitoring accounts to check for suspicious activity, do not be surprised if you are asked for the three or four card digit on the back of your card. The reasoning is that criminals may possess your name and the card number but they are unlikely to have the card in front of them, so will not be able to answer this question.
Always create difficult-to-guess passwords, so do not include family names or dates of birth. Use a different password for each site you visit and combine letters and numbers to make it harder to crack.
Finally, trust your instincts. If something does not feel right, shut the site down immediately. Purchasing online is easy and convenient, and with these hints, you can be safe too.
How about you all? How do you protect your security online?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Statistic showing 60% of shoppers shop online each quarter – I’m surprised this isn’t more! I probably shop online (especially Amazon – which is the most buyer friendler out of the Amazon/eBay pair) more than shopping at a brick-and-mortar mall.
- @ Secure sites beginning with HTTPS:// – I actually didn’t know this was what https stood for! You learn something new every day. I’ll know to watch out for this going forward.
- How I Stay Safe Shopping Online – This is a great article over a topic which I think is relevant to us all. The main way that I stay safe online is to always use either 1) PayPal or 2) my credit card for online purchases (not my debit card, bank account direct transfer, or Western Union). Both PayPal and your credit card enable you to dispute any fraudulent charges and get your money back if you feel you’ve been scammed. By doing this, I feel pretty comfortable purchasing things online!
***Photo courtesy of http://s0.geograph.org.uk/photos/22/99/229953_59d4b5e6.jpg
Top 10 Money Saving Tips
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The following is a guest post from Joe Lewis. Enjoy!
1. Cut the price of your fuel bills
It’s no secret that fuel prices are getting more and more expensive. But that doesn’t mean you have to pay ridiculously high energy bills. That’s why it’s so important for you to keep an eye out for cheaper energy suppliers and compare gas and electricity prices – meaning you pay less!
2. Home DIY
Before spending sky-high prices on home extensions and builder’s fees, turn your creative hand to DIY tasks and save yourself a small fortune!
3. Consider generic goods
Buying supermarket brand-name food can become very expensive, so why not turn your attention to economy foods and cut your weekly shopping budget down to size.
4. Compost your waste
If you’re a keen gardener, you’ll know all too well about the high cost of soil additives. To save money on soil additives, go green and collect all your garden and food waste in a biodegradable box outside your home. Wait a few months and let Mother Nature take its course. You’ll have nutrient rich matter you can use in your garden or vegetable beds for free!
5. Replace your bulbs with CFLs –
It’s no secret that many eco-friendly experts are suggesting that you should change conventional bulbs for CFLs to save on both energy and cost. What you waiting for?
6. Use ceiling fans in the winter
Believe it or not, ceiling fans can be used not only in the summer but also when you have the heat on. Simply, set the fans to move clockwise and turn them on at a low setting. Hot air rises, so the fans help to push down and circulate that air you paid to have heated.
7. Get cheaper broadband deals
Keep your eyes peeled for the cheapest broadband deals available. There are some great deals available, so make sure you don’t miss out on the latest offers. It really does pay to shop around and secure that fantastic broadband package!
8. Consider renting equipment instead of buying
Renting equipment is a great way of saving money! If you can’t afford something then why not rent it and save yourself a small fortune?
9. Late shopping
Get down to your local supermarket and purchase food with “sell by” dates for that day. The reductions are labelled in yellow and you can pick up food for nearly three quarters of the original price!
10. Farmer’s markets
Nothing tastes nicer than scrumptious local produce. With this in mind, buy fresh organic fruit and vegetables at your local farmer’s market that are a lot cheaper than those found in your large corporate supermarket chains and save some serious money.
How about you all? What are the main ways you use money? Have you successfully been able to incorporate any of the tactics mentioned above in to your personal finances?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Keeping an eye out for cheaper energy suppliers – This is a good idea, but for most people, I don’t believe it’s possible. This is due to the fact that most of the time, when you move in to a place, the energy supplier is fixed. So, you simply cannot just change. Prices are regulated by the government to prevent price gauging stemming from the “necessary monopoly” the energy companies have.
- @ Home DIY – Also a very good idea! However, it’s important to know when to draw the line when it comes to your expertise (or lack of in my case) around the house.
- For little things though like fixing a light or recaulking something in the bathroom, it can save money to do it yourself.
- However, if you were to fix something and find out that you did it wrong and that it will cost $10000 to repair, most likely, it would have been cheaper to pay a professional for the job.
- @ Generic goods – This is one of my favorite ways to save money! I am a big Wal-Mart shopping fan, and I have probably saved thousands of Dollars over the years by buying Great Value brand items. The quality has gotten surprisingly good over the past few years! You should also give them a try!
- @ Replacing bulbs with CFL’s – Great idea here, and also something that I need to work on.
- Currently, about half of the bulbs in my house are CFL’s. They work perfectly well and never burn out it seems!
- The ones that are the “old type” I’m just waiting to burn out so that they can be replaced.
- @ Cheaper broadband Internet deals – This is also a good idea, in theory. However, in most of the areas I’ve lived, a specific neighborhood (especially apartment complexes) will have a deal set up for one company to be the sole supplier of Internet and TV/cable. But, it can’t hurt to compare prices to be able to bargain for a better deal with your current supplier!
- @ Late shopping – I’ve scored some killer deals on bread this way. It works well for me since I buy a lot of bread at once and freeze it for an extended period of time before using it to make sandwiches for lunch at work. It’s not rare to find the prices marked down 50%!
***Photo courtesy of http://www.flickr.com/photos/acrider/4337122047/sizes/l/in/photostream/
Was The “Lost Decade” Really Lost For Investors? – Guest Post at Yakezie.com Today!
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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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Good day all! Just a quick post today to recommend stopping by Yakezie.com whenever you have a chance to read my guest post that went live this morning (at the link below).
Was The “Lost Decade” Really Lost For Investors – Yakezie.com
In this post, I take a look at the performance of the stock market over the past 10 years, a time period often labeled as “The Lost Decade” for investors because the market basically ended up in 2011 at the level at which it started in 2001.
What I found was that by using dollar cost averaging, the returns delivered by the market over the past 10 years weren’t quite as bad as the financial media would have us believe!
How about you all? How did your investments fair the past 10 years? Was it actually a “lost decade” for you?
Share your experiences by commenting below!
***Photo courtesy of http://cdn.yakezie.com/badges/300-yakezie-01.png
Yakezie Carnival – Tour de France Financial Factoids – June 26th, 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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Click here to enter my free giveaway for 3 sets of 500 business cards from AllBusinessCards.com.
Welcome everyone to the June 26th, 2011 edition of the Yakezie Carnival!
For those of you unfamiliar with the Yakezie Personal Finance Blog Network, it is the web’s largest, most involved, and most organized group of personal finance and lifestyle bloggers. Participants in the network collaborate multiple times throughout each day on the Yakezie forums and through other mediums. You can view all of the details at the “About Yakezie” page by clicking here.
Each week, the members and challengers of the Yakezie Network submit their best articles to be featured in the Yakezie Carnival. And, today, it is My Personal Finance Journey’s honor to be the host!
The theme for today’s carnival is random Tour de France (the biggest cycling race in the world) financial facts. With this carnival being only 4 days away from the start of July and the Tour de France cycling race, I figured this would be a fitting theme!
In addition, it fits in nicely with the spirit of my site starting the Tour de Personal Finance this year. Each July from 2011 onward, I’ll be running/hosting the Tour de Personal Finance (sort of a Tour de France for PF blogging competition) on MyPersonalFinanceJourney.com. You can view all of the details and guidelines at the announcement below.
- Name and URL of blog.
- URL and title of your best article from last 12 months.
- A concise 2-5 sentence description of the post (this will be posted on each stage’s announcement, so really SELL why post should win!).
- The month and year in which you started blogging (will be used to determine White Jersey winner).
OK, enough with the introduction! I’m getting carried away. Let’s get to this week’s Yakezie Carnival articles.
The best thing about hosting a Yakezie Carnival is that the posts are all top notch, and not from spam sites talking about online dating of Ukranian brides! (haha – I’m not even joking. I have received carnival submissions like that in the past).
Top 3 Editor’s Picks
1. Frugal Confessions brings us We Were Scammed on Craigslist: How to Protect Yourself from Fraud, saying, “After snagging an interested buyer, Mary Hudson, for our $500 item we listed on Craigslist, we became increasingly alarmed at the strange requests and secondhand-English email correspondence. See how this scam played itself out.”
It really ticks me off how sophisticated of schemes the scam artists are coming up with these days. Just take a look at the one Amanda shares in this article!
When I got screwed over by a fake eBay supplier, the payment was also requested to be issued via Western Union. Maybe Western Union should change it’s slogan to, “Preferred by fraud artists worldwide!”
2. KNS Financial brings us Need To See A Doctor? Go Rob A Bank!, saying, “James Richard Verone robbed a bank in order to get medical care. Find out the details behind this strange story, and then weigh-in with your opinion!”
In this article, a man goes to some extreme measures to get medical care! Or, were they extreme…..
3. The Amateur Financier brings us What I Want to Pass on to My Children.
Passing along your life lessons to your children is what every parents wants. Personally, I think the biggest gift that my parents passed on to me is the gift of wanting – wanting to succeed, wanting to do my best, and wanting to learn more. What do you hope to pass on to your children?
And, listed below are the rest of this week’s submissions!
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Tour de France Financial Factoid # 1 (brought to us by Wikipedia.org)
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Outlaw Finance brings us The Difference Between a Roth IRA and Traditional IRA, saying, “This article looks at the Roth and the traditional IRA individually and then compares the two. ”
Squirrelers brings us Memorable Examples of Witnessing Generosity.
The Ultimate Juggle
brings us Happy Hour Isn’t for Drinks, saying, “Happy hour is known for its price break on drinks, but it’s also a great way to save money on food – especially if you have to eat out early anyways with a toddler!”
Money Reasons brings us The Benefits of a High Credit Score, saying, “I describe how to take advantage of a high credit score if you have one. Also I explain why having a high score is beneficial.”
Money Health Central brings us Did The Debit Card Revolution Kill The Balanced Checkbook?, saying, “We use debit cards for convenience. In return, the transactions fly fast and furious. Balancing your checkbook is nearly impossible, which can lead to other problems.”
In fall 2006, Lance Armstrong and several other institutional investors were considering buying the Tour de France in an effort to reform cycling for the better. It was estimated that it would have cost about $1.5 billion at the time to buy the Tour. Quite a hefty price tag! I don’t believe it ever went through though. The current family that owns the Tour didn’t want to sell.
My Multiple Incomes brings us
What To Consider Before Starting a Website, saying, “A few key points to know before you take the plunge of starting a website!”
***Photo courtesy of http://www.flickr.com/photos/dripps/2304151835/sizes/l/in/photostream/
Carnival of Value Investing # 9 – June 25th, 2011 Edition
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Welcome to the June 25th edition of The Carnival of Value Investing!
For those of you unfamiliar with The Carnival of Value Investing, the purpose is to showcase the best posts throughout the personal finance blogosphere each month related to undervalued stocks and value investing strategies in general.
Investopedia.com defines “value investing” in the following way:
The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company’s long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.
Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.
I think that all of us can benefit from knowing more about value investing. Even for a passive investor like myself, I incorporate small-cap and large-cap value index mutual funds in to my investing strategy.
As such, let’s get to this month’s value investing posts! There were quite a few posts submitted to the carnival this month. However, only the 3 selected below were specifically related to value investing.
Echo presents How To Add Gold To Your Portfolio posted at Boomer & Echo.
In this post, Boomer and Echo discuss different ways that gold can be added to an investor’s portfolio. However, they advise that caution should be taken before buying, given that gold is currently priced above it’s 52-week high. Personally, I have also been contemplating whether or not to add gold to my investing portfolio. However, as a passive investor, I haven’t yet decided the best way to go about this, or that it is even totally necessary. This post will serve as a good resource whenever the time comes for me to take action.
No Debt MBA presents Buy stocks that leave the S&P 500 posted at No Debt MBA.
No Debt MBA shares their thoughts about an interesting value investing strategy in this post. Given the fact that so many mutual funds track/buy shares of stocks that are in the S&P 500 index, they broach the question of whether an investor could make a good deal of money by investing in stocks that have recently left the index (and are intrinsically undervalued as a result).
My guess to this would be that the market would self-correct to account for this. However, I am by no means an expert when it comes to individual stock selection. What’s everyone else’s take on this? Will this strategy work?
Investor Junkie presents What I’m Investing In Now posted at Investor Junkie.
In this post, Investor Junkie shares his thoughts about the strength, value, and direction of the current stock market and also the recent performance of his actively managed investments. Overall, he feels that the market is overpriced by historical standards. I would tend to agree with this assessment. One good practice that he does is to carry 15% of his asset allocation in cash. He uses the cash to invest in the market when corrections (significant dips) occur, buying undervalued shares. Nice idea!
Thanks to everyone for participating and for reading! Hope you enjoyed the posts.
You can submit your posts for the 10th (July) edition of the Carnival of Value Investing using the submission form either at Blog Carnival or at the Canadian Finance Blog Carnival Workaround.
***Photo courtesy of http://www.flickr.com/photos/thewalkingirony/3051500551/sizes/z/in/photostream/
Introducing The Tour de Personal Finance Competition – Submit Your Best Posts Today!
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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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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
I simply love the Tour de France.
There is truly something magical about watching this particular 3 week cycling race unfold in July each summer. In the race, the riders cover nearly 2,000 miles, including stages through the majestic Alpine Mountain range and the sunflower and vineyard fields of Southern France. As an avid cycling fan and past Category 2 road cycling racer (I raced once-upon-a-time from 2001-2005), July is a truly a glorious time of year.
And, now that I’ve been blogging for a little over a year and a half, I’ve decided that I want to bring the spirit of healthy (minus the occasional doping scandal) competition embodied by the Tour de France to the personal finance blogosphere in the form of the Tour de Personal Finance!
What is the Goal of the Tour de Personal Finance?
How The Tour de Personal Finance Will Work
- Personal finance bloggers will submit their best, highest quality post from the past year (only one post) to me via email (see below for details of how to submit a post) before July 1st.
- The posts will then be paired off using a random number generator.
- The paired posts will “compete” against each other each day in a stage (what they call each day of racing in the Tour de France), which will be posted on My Personal Finance Journey.
- Readers will comment on the post to vote for which post they think is better. The post with the most votes each day will be declared the STAGE WINNER.
- The stage winners will move on to the next round, where they will square off against other stage winners. Again, the best post each day will be voted for by the readers.
- The blog author will be allowed to vote for him/herself. Others will most likely do it, so you should too! But, no gaming of the system will be allowed. Entrants will, however, be allowed to ask their friends to vote for them, promote the contest on their site, etc.
- At the end of the month, the final winner of the competition will be crowned the Maillot Jaune (or the yellow jersey, which is given to the overall winner of the Tour de France each year). Ties will be broken by me.
Winners’ Jerseys
- Yellow Jersey – Winner of overall competition. Article voted “best” by readers.
- White Jersey – Goes to highest placing, new blog (judged by how far they get in the competition and how long they have been blogging).
- Green Jersey – Goes to the blog whose article wins a single stage “the fastest.” In other words, the Green Jersey goes to the blog who wins a single stage by the biggest margin against their competitor.
- Polka-Dot Jersey – Goes to the best blog article entered which details information on “climbing” out of the debt “mountain”.
How To Enter
- Name and URL of blog.
- URL and title of your best article from last 12 months.
- A concise 2-5 sentence description of the post (this will be posted on each stage’s announcement, so really SELL why post should win!).
- The month and year in which you started blogging (will be used to determine White Jersey winner).
Please let me know if you have any questions! Let the cycling (and blogging) begin!!!
***Photo courtesy of http://www.flickr.com/photos/joeshlabotnik/350582000/
How To Save Your Family $1000 On Your Next Vacation – Pay For The Rental Car With Your Credit Card
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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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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
Recently, I took a trip down to Raleigh, North Carolina to celebrate my grandfather’s 90th birthday.
After arriving at the party location, our gathered family began to eat dinner and share interesting and funny stories about my grandfather over the past half century or so.
During the dinner, a fairly fierce wind started to blow outside. However, our family didn’t think much of it because little to no rain was coming down.
Needless to say, we were very shocked when we strolled outside after dinner to find the tree in the picture below laying on top of my Dad’s Enterprise rental car. Apparently, the tree had been loosened by a semi-tornado that came through Raleigh a week or so before, and the wind was all that it needed to fall down nearly 30 feet on to my Dad’s car. Yikes!!!
After having a little laugh about how strange the situation was (what are the odds of having a tree fall on your car in a parking lot after all?!), I began to think about how the situation would be handled from a financial/insurance perspective because I know that my Dad is smart and never gets the rental car insurance coverage.
What Happens If Your Car Gets Damaged And You Did Not Buy The Rental Car Insurance Coverage?
Rental car companies almost annoyingly push the sale of insurance policies covering any damage incurred to rental cars while under your care. In fact, they try to push the sale of the coverage so hard that they make you feel almost reckless if you decline the coverage. Talk about tricky!
However, is this coverage really necessary?
The question to this is a resounding, “NO,” (with one exception) for two primary reasons.
Reason # 1 Why Rental Car Insurance Is Not Needed – Your Existing Car Insurance Already Covers You
That’s right folks, if you already have a comprehensive car insurance plan for your normal car, you are most likely already covered under that policy for any damage that gets inflicted to the car while under your watch-full care.
However, it is important to remember that you will still be responsible for paying your deductible on your car insurance before your full policy takes effect. This is just another important reason why you should have an adequate emergency fund.
Reason # 2 Why Rental Car Insurance Is Not Needed – Your Credit Card Covers You (if you paid for your rental car with the credit card)
A very powerful, useful, but somewhat unknown perk of many credit cards is either providing primary or secondary insurance for rental cars rented using the credit card.
If the card has primary coverage, it will pay the full cost of repair or replacement of the car, without even having to access your regular car insurance policy. If the credit card offers secondary coverage, it will pay your deductible and any replacement or repair costs not covered by your normal car insurance, but will require you to file a claim with your main car insurance.
Regardless of whether your credit card carries primary or secondary rental car insurance coverage, this is a very cool perk that is offered, and definitely one that I would recommend you follow up on.
In my Dad’s case, he called up his credit card company and found out that he has primary coverage. Because he had used his credit card to pay for the rental car, he avoided having to spend $1000 to pay for his deductible on his regular car insurance policy.
Follow up Action Item – I would recommend calling your different credit card companies and finding out which one(s) offer rental car coverage. After you find out, you can make sure to bring that card(s) with you on your next trip and pay for the rental car with it. Just make sure you smile for me when you decline the rental car insurance coverage!
The One Exception For When Rental Car Insurance Is Recommended
How about you all? Do you buy the rental car insurance coverage offered by many companies? Why or why not? Do you think it’s worth the money? Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/jefield/37133848/lightbox/
My Current Asset Allocation and Net Worth Growth – May-June, 2011
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Overall, the 1st half of 2011 went very well.
I was able (surprisingly) to successfully complete the required classes in my chemical engineering PhD program, and this summer, I have been getting a nice start to my research in preventing the protein aggregation that is believed to be a cause of Alzheimer’s disease.
As far as the stock market goes, this was a nice upwards trend during the first 5 months of the year, and investors were enjoying ~6% gains in their portfolios. However, recently, the market has dropped off, and we are back to only about a 2% overall gain in 2011. Not bad, but still, not the best returns in the world. Let’s hope that things improve as we get in to the Fall.
With all of the up and down that has occurred, let’s take a look and see how it affected my net worth progress…shall we?
Net Worth Growth (not including condo)
From
29-April-2011 (when the last portfolio update was published – see link below for more information) to 18-June-2011, the S&P 500 index went down 6.54%. Yikes! Pretty nasty little run for a month and a half, eh?! Let’s hope it doesn’t stay this way!My Personal Finance Journey – April, 2011 Portfolio and Net Worth
During that time period, my net worth (excluding condo ownership) decreased by 0.60%.
Condo Equity Growth
Currently, I have 11.4% home ownership in my condo (up from 9% at the end of December, 2010), with this accounting for 27% of my real net worth (so net worth subtracting the condo loan – this is different from the net worth above).
I have now achieved the following financial goals in 2011. I have done quite well I think – thanks to everyone’s help for keeping me motivated and accountable!
- Have contributed the maximum allowed by law for 2011 to my Vanguard Roth IRA ($5000). I am very proud to have achieved this!
- Am maintaining slightly over my target of 6-9 months of expenses in a cash reserve fund in my Dollar Savings Direct high yield online savings account. This is due to being paid my entire summer salary (through August) at the end of May. However, this should correct itself as we get towards the end of the summer.
- Have rebalanced my mutual fund portfolio to meet my asset allocation target %’s (75% equity, 25% fixed income overall)
- Have donated $1,300 to Multiple Sclerosis Foundation in 2011 (5% of income) and passed my target fundraising amount of $5000 for my MS 150 ride that took place June 11-12, 2011. I will most likely be shooting for raising $7500 for 2012. Rock n’ Roll!
For a detailed list of my short term, mid term, and long term financial goals, click on the link below:
My Personal Finance Journey – Financial Goals
Review of Current Asset Allocation (excludes condo)
- Overall Fixed Income / Equity Allocation
- Currently, 29% of my net worth is invested in fixed income instruments (cash or bond funds), and 71% is invested in equity.
- This is 4% off from my targets for these categories of 25% (fixed income) and 75% (equity), but still within my +/- 5% allowable band limits.
- Equity Allocation
- In the equity portion of my portfolio, 73% is invested in US Domestic Equities with the remaining 27% being held in international equities.
- This is almost perfectly aligned with my equity breakdown targets of 71% and 29%, respectively, for US Domestic and international holdings.
While the overall percentages for these categories looks fairly good, a detailed look (table below) at the allocation breakdown reveals the real story and provides for better analysis of the current state.
Remember: a red flag goes off if your current % allocation in a category is greater than +/- 5% off of the target allocation. This is my trigger that I need to rebalance that aspect of my portfolio.
% Cash (money market target 5%) 10%
% non-inflat Bond Funds (target 15%) 15%
% TIPS Bonds (target 5%) 3%
% International Equity (Target 11%) 10%
% International Emerging Markets (Target 11%) 10%
% Domestic Large Cap (Target 8%) 7%
% Domestic Small Cap (Target 8%) 9%
% Domestic Small Cap Value (Target 14%) 14%
% Domestic Large Cap Value (Target 13%) 13%
% REIT (target 10%) 9%
Analyzing my current asset allocation percentages, it appears that my current asset allocation is aligned with my target levels with the exception of the cash portion of my portfolio. This is once again due to the fact that I have more cash than normal on hand in my money market portfolio from being paid in advance for the entire summer period at the end of May.
Because of this, no action needs to be taken at this time, as this will correct itself as we move forward in the summer and I naturally spend more money.
My next moves for the June-July, 2011 time frame will be to do the following:
- Now that I have fully funded my Roth IRA, any extra money I have will most likely go towards paying off my condo loan and obtaining even more equity in that investment. The only other option I would have is to invest in my individual mutual fund (taxable) account. But, I feel that it would be a more efficient use of my time to build up more equity in my condo. What do you all think?
- Continue investing $41.67 each month in microloans to help the working poor in Peru and/or Nicaragua This is part of my 2011 goal of having $500 in microloans. I am currently more than half way there!
- Save 30% of any income from blogging for 2011 tax payments next year at tax time.
Wish List
- At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund. This gives better, broader diversification to the US stock market.
- Install a stacked washer/dryer combination unit in to my condominium. This one will be a long shot, but it just may be possible! More than likely, this will be something that I will do in 2012-2013.
How about you all? How did you progress with your net worth in May-June 2011? What are your thoughts about the strength of the market right now? Do you think it will rebound?
Share your experiences by commenting below!
***Photo courtesy of http://farm4.static.flickr.com/3154/2625861427_0a6b6f48c2.jpg
Dollar Cost Averaging vs. Dollar Value Averaging – Which Is Better?
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This post was selected as the No. 2 pick in the 109th Best of Money Carnival over at Couple Money and the No. 1 pick in the 9th Carnival of Passive Investing at Wealth Informatics. Stop by the Carnival pages and read all of the great posts!
Recently, I received a comment on the post, Valuation-Informed Indexing vs. Passive Investing – Which Is Better?, asking whether I had used dollar cost averaging or dollar value averaging in my analysis.
In that case, the answer was “neither” because the analysis merely looked at the performance/growth of a $10,000 initial investment using both Valuation-Informed Indexing and passive investing in an attempt to determine which strategy was more effective.
However, the question definitely got me thinking about my own personal finances, whether dollar cost or dollar value averaging is better, and which I should recommend that people utilize.
To begin addressing these questions, we first need to have an understanding of what each method involves.
Dollar Cost Averaging
In Dollar Cost Averaging, the idea is that a constant amount of money is invested each month in to your account. Therefore, you will naturally buy MORE shares when the market is down and LESS shares when the market is up. Sounds like a good, simple method, right?
Dollar Value Averaging
In Dollar Value Averaging, the idea is to meet portfolio value goals that you pre-define at regular intervals throughout the year.
For example, say you bought the S&P 500 index mutual fund with Vanguard in your Roth IRA for $3000 in 2010. In 2011, you plan to contribute $200 per month to the fund for all 12 months. Therefore, you would then lay out value targets throughout the year as follows.
End of Month Portfolio Values
Jan $3200
Feb $3400
Mar $3600
Apr $3800
May $4000
etc
At the end of the month, you assess the current value of the portfolio and compare it to the targets above. For example, if at the end of January, the fund is worth $2900, you would then contribute $300 instead of $200 in order to force yourself to buy more shares when the market goes down. Then, at the end of Feb, the market has gone up a lot and we find that the value of fund is currently $3500. Since it is over our target, we would then invest nothing in the stock fund, and instead place the investment money in a cash or fixed income security. Make sense?
Why Do Most People Use Dollar Cost Averaging?
In my reading over the years, most experts seem to agree that dollar value averaging is more effective in the long term than dollar cost averaging.
However, dollar cost averaging seems to be more aligned with how most investors save money/contribute money to their retirement plans. It is also a simpler approach/strategy to roll out.
So, why do most people use dollar cost averaging, despite the consensus among experts about the superiority of dollar value averaging? Well, the majority of investors (me included) invest money for retirement in one of three ways, as described below.
- They specify to contribute a set percentage (dollar cost) of their monthly income to their 401k retirement account.
- They specify a percentage (dollar cost) of their monthly income to contribute to their Roth or Traditional IRA.
- They spend money throughout the month according to their routine. Then, at the end of the month, they invest the money they have left over in their Roth or Traditional IRA.
Potential Problems with Dollar Value Averaging
However, due to the importance the decision of using dollar cost vs. dollar value averaging can potentially have on long-term returns, I wanted to perform a fairly in-depth analysis to determine what trends result.
Analysis – Dollar Cost Averaging vs. Dollar Value Averaging – Which Is Better?
In order to determine whether dollar cost or dollar value averaging demonstrated out-performance over a long-term period, I examined the portfolio value growth of two hypothetical portfolios over the past 10 years (June, 2001 to June, 2011) employing dollar cost and dollar value averaging.
Both portfolios assume a monthly target contribution of $500. The only difference is that for the dollar cost averaging strategy, this is the exact amount invested on a monthly basis, while for dollar value averaging, we will be targeting to increase the portfolio’s value by $500 each month.
Portfolio 1 – Assumes that the portfolio is made up of a single equity mutual fund. In the analysis, I used the Vanguard Total Stock Market Index Fund.
Portfolio 2 – Assumes that the portfolio is made up of the same equity and fixed income index mutual fund mix that I currently employ (see table below for detailed allocation splits). Overall, this portfolio has 25% of the assets in fixed income securities, 75% in equities, and employs monthly rebalancing.
Analysis Results
The complete results of my analysis can be found at the Google Docs Spreadsheet link below.
Google Docs Spreadsheet – Dollar Cost vs. Dollar Value Averaging – Which is Better?
Because of 1) the results found in my analysis and 2) the previous books I have read agreeing that dollar value averaging is the “way to go,” I think it’s time that I begin thinking about implementing this strategy to new money I invest in my finances.
However, to do this, it will not be 100% easy. Therefore, I will need a solid plan to ensure that the implementation goes successfully!
Implementation Plan for Changing from Dollar Cost to Dollar Value Averaging
If you look at the pink highlighted Column P of the “Multiple MF Portfolio” tab on the shared spreadsheet, you’ll see what I mean when I said that dollar value averaging is not the easiest thing to do!
Why is this you might be asking? It stems from the fact that with dollar value averaging, the amount you need to invest VARIES greatly in order to keep your portfolio value steadily increasing.
For example, in February 2009, dollar value averaging dictates that I needed to invest $4,833 that month. However, from March, 2009 to present, the system dictates investing $0. While investing $4,833 in one month sounds like a wildly large amount of money, overall, dollar value averaging only causes you to invest more accumulated money than dollar cost averaging 26% of the time (so, not that often).
Even though dollar value averaging recommended keeping money out of the fixed income and/or equity market from March 2009 to the present, I definitely would not want to miss out on contributing money each year to my tax-privileged 401k or Roth IRA accounts.
Because of this concern and the fact that I have already contributed the maximum allowed to my Roth IRA for 2011 (so I am too late to do it this year), the way I plan to implement dollar value averaging in 2012 is shown below:
- Using the spreadsheet above as a template, I will create a spreadsheet with the goal of increasing my overall portfolio (excluding condo ownership) by $420 each month.
- The $420 per month increase is calculated by dividing the maximum allowable 2012 Roth IRA contribution of $5000 by 12.
- On the 1st or 2nd of each month, I will automatically transfer $420 to my Roth IRA Vanguard account and direct it to be invested in the Vanguard money market mutual fund. We’ll call this my “money parking lot.”
- Also, at this time, I will examine my current portfolio’s asset allocation percentages and determine if I need to move around any money within the tax-deferred accounts (but will not touch money in the “parking lot.”
- On the last day of each month, I will compare my total portfolio value to the target value (old value + $420).
- If the current value is less than the target, I’ll take the money that is in my “money parking lot” and invest it in such a way that maintains my asset allocation targets.
- If the current value is more than the target, I won’t touch the money in the parking lot.
- It will be important for me to include the parking lot cash/funds in my overall net worth calculations, but to exclude them when looking at my portfolio asset allocation percentages. This is due to the fact that the added cash could skew the “invested” asset allocation levels.
- This process will then be repeated each month.
Conclusions
For quite some time now, I have read about the benefits of using dollar value averaging. However, for one reason or another, I always talked myself out of implementing the strategy for my investments.
But, after seeing the 13% out-performance of dollar value averaging over dollar cost averaging over the past 10 years in this analysis, I am now convinced enough to try it. I am hopeful that it will be an effective strategy, and also one that becomes easier to execute each month as I become accustomed to doing it. Wish me luck!
How about you all? Do you currently use dollar cost or dollar value averaging for your investing? Which do you think is superior/provides superior returns?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/calistan/3610859184/sizes/l/in/photostream/