Buy Another Car or Fix the Old one AGAIN

Since my daughter is turning 14 this weekend, she is eager to put in applications around town. In our area, grocery stores begin hiring at age 14 and she has been counting down the months until she was old enough to apply.

The problem? My car is not running properly. I parked the car while I worked on paying off our credit card debt. Since my kid takes the bus to school and I work from home, the 2nd car wasn't a necessity.

But, she wants to work and I don't want to do anything that interferes with her desire to start making her own way in the world. Additionally, I want her to have a clear understanding of how much work is required to make the money needed to purchase wants like cell phones, high-end clothing, and cars and insurance.

But the delimma of whether to sink more money into a car that I've had in the shop 3 times for the same problem is not an easy one to resolve. If it was a simple issue of so-and-so needs replaced, and it costs $xxx to replace it, I would happily put it in the shop and have it fixed.

With this car the issue isn't that simple. It's what I get for buying a Pontiac Grand Prix, I guess. I've had 3 different mechanics try to fix the car, and although they've all replaced something, that something was not the problem. So, I continue to have the same problem after shelling out hundreds of dollars.

After reading several articles online, I'm thinking I'm going to put old Duchess in the shop again. It still works out far cheaper to keep trying to fix this car than to go in debt to buy another one. Here are the best of the articles I read, tell me what you think.

Keep Your Old Clunker or Buy a New One MSN Money
Fix Old Car or Buy New One - Dave Ramsey's Advice

Time to Increase 401(k) for Retirement

It's time. I've been thinking about increasing my 401(k) contributions, but I've been putting it off.

I have other goals - goals that I want to accomplish as quickly as possible - so it's been easy to ignore retirement savings since we are decades from retiring.

Everyone wants to think about the "now" not the "later". It's human nature, and I'm no different than anyone else when it comes to that.

But, when I think of the lost opportunity of NOT taking advantage of saving Pre-Tax dollars, my frugal heart skips a beat. That's a lot of money we are letting slip through our fingers, folks.

For example, let's say you make $20,000 a year before taxes. *That puts you in the 15% tax bracket. You want to save 10% of your income for retirement. In pre-tax dollars you will save $2000 each year.

But, if you don't put that money in a tax deferred account like a 401(k), you will only save $1700.

You've just lost $300 - plus all the interest it would have generated.

It's gone forever.

It belongs to the government now.

Are you happy with that? Three hundred dollars is a lot of money to just give away, don't you think? Especially when it's going to the government. They already have enough of our money.

So, I am going to just bite the bullet and increase my 401(k) deductions. In take home pay, it will only decrease our income by a few dollars a week.

How about you? Are you ready to stop letting the government take such a big mouthful, and keep more of your own hard-earned money?


*These tax calculations have been simplified. For a more detailed explanation of your tax bracket, I recommend Moneychimp

Home Ownership - is it Really Less Expensive

There is so much to do and so little money to do it with. Yes, I'm whining. Yesterday, I saw that my Home Repair savings has risen by $100, so I took out my "To-Do" list to see if there was enough money to make one of the most pressing repairs.

There still isn't enough to do a major overhaul on the porch (the most pressing repair), but that's not why I'm whining. I'm whining because that "To-Do" list is never ending.

After doing some calculations, I realized that by the time I save enough money to make the most pressing repairs, regular maintenance for everything else will be due.

This got me to thinking about how expensive it really is to own your home. Conventional Wisdom says that you will save money and build wealth by owning a home and building equity, not by renting and giving someone else your money.

But, I'm beginning to doubt so-called conventional wisdom.

Now, certainly, renting is giving your money to someone else in exchange for housing, with no end in sight. And it is logical to assume that owning your home - not having housing payments - during your retirement years puts you in a much better financial situation. But, does it really?

Well, I guess that depends on the maintenance costs of your home, and on how high your property tax might rise during your retirement years.

And - here is the kicker for me - how will you be able pay someone else to do that maintenance once you're old and not making money any longer? Are you assuming that you will still be able to do your own maintenance even into your 60s and 70s?

I'm assuming that you are somewhat like me ( meaning you aren't going to have a million dollars to spend during your retirement). So, how are you going to pay for the roof that needs to be replaced, the new hot water heater, porch repair/replacement, vinyl floor repair, carpet replacement, resurfacing grungy cabinets, leaking/rusting faucets, new elements for the stove?

And, how are you going to keep up with yard maintenance?

Some of us may be able and willing to push that mower around when we are 60-70 years old, but I'd say that it would be a real toll on most of us.

Pat Veretto, at Frugal Living found that she could do much better by selling her home, investing that money, and using it to pay rent. She not only came out ahead financially, she no longer had to worry about making home repairs, keeping up with maintenance, or dealing with the cost and physical toll of lawncare.

It makes you think. Are we really in a better position financially when we take on the cost of ownership of a house and yard? Is the cost of property taxes, appliance maintenance and repair, home maintenance and repair, and landscaping really less expensive than renting?

Unexpected Expenses - Are they Really Unexpected?

You know how it seems that as soon as you get close to accomplishing a goal something always comes along to set you back? That happens often in my life, especially with my financial goals.

It seems like every time I free up money - by paying off a debt, getting a raise, or a money gift - something comes along to eat up that money. And, that "something" always shows up AFTER I've made plans to spend the extra money or have actually already spent it.

So, I've paid off my credit card debt and freed up $185 a month. I planned to put that money toward paying down the mortgage, saving to buy a house in the country, and adding a little extra to my food budget.

And that "something" showed up. That "something" is Major car repair. OK, it wasn't really unexpected. I knew it was coming, eventually. Both of our cars are OLD, and my car has been sitting in the driveway - not working - for several months now.

I've had my car in the shop 3 times in the last year to fix the same problem. It seems there is not one mechanic in this town that can figure out what is wrong with it, so I just keep paying to fix something else "that might be the problem," but isn't.

So, we just parked the car and decided we could get by with just one car. We've been told that the transmission in this car is on it's way out. The "brilliant" mechanics in our area told us that the transmission could last another 6 months or another 6 years. That was 3 years ago. So, I guess it's close now.

The car still works, but it's something that we just can't keep ignoring. There are little sounds and symptoms that warn us of imminent doom. So, why haven't we been saving and preparing for this major expense?

When you've lived poor as long as I have you learn to just push the specter of major expenses out of your mind, because you know you don't have the means to really prepare for them.

But, that has to change now. I have money freed up that can be saved for this expense.

So, I've re-written my goals again, including the car repair.

New Goal #1: Pay Off Credit Card Debt

SHORT-TERM GOAL: 3 more months till all credit card debt is paid.ACCOMPLISHED

LONG-TERM GOAL: Stop using credit cards unless total can be paid each month ACCOMPLISHED

New Goal #2: Save for Transmission Repair/rebuild

New Goal #3: Save just for Home Improvements needed to Sell the House

New Goal #4: Save for Down Payment and Closing Costs on a Home in the Country.


They say that Life is what Happens When You've Made Other Plans. I guess they were right.

Let Your Kids Trade Clothes with Their Friends

Do your kids give their clothes away? My teenage daughter does. This drove me crazy until I realized that new-to-her clothes were appearing in the laundry.

Now, trading clothes with friends might seem like an odd way to get clothing on the cheap, but hey, if my picky, fashion-conscious teenager thinks it's cool, then I'm all for it.

When she first started giving her clothing away I decided it was time to have a talk. I explained to her that I was not in a financial position to buy new clothes to replace the ones she was giving away.

Her argument in favor of the practice was that she didn't like the clothes anymore and she wasn't wearing them anyway, but her friend did like them. So, she wanted to pass them on.

How could I argue with that? If the clothing was just hanging in her closet, it was much better to give them to someone who would get some use out of them.

Completing the trade may not occur with the same friend. But, it usually evens out, because there is always another friend who doesn't like some of her clothes. So, periodically I find new-to-her clothes in the laundry.

Trading is not limited to clothing. My daughter has traded purses, backbacks, shoes, and even jewelry. These things are often traded back again, though, so maybe it's more like borrowing. (Who can follow a teenager's thought processes, anyway?)

I can't say that I am always happy with the trade. If I've spent more than $30 for an item and she gives it away, I feel a frugal pinch in my pocketbook. (When you are Living Poor, spending $30 for one item is a chunk of cash, and it doesn't happen often.) But, as long as my kid has enough clothing to last the season, and she is happy with what she has, I'm not going to complain.

So, I recommend the practice. Let them trade, or borrow clothes from each other. It's a viable way to get new-to-them clothing - on the cheap. And, truth to tell, you probably couldn't stop it if you tried.

Replace a Dryer Element

Have you ever tried to replace the heating element in a Dryer? If you haven't, I wouldn't recommend it.

When our clothes dryer stopped heating, I did research to find out whether it was something we could repair ourselves. It looked easy online, but it was a tough one in real life.

After ordering the element for our dryer, taking the dryer apart (not an easy task), and carefully re-stringing the darn thing, it worked for one day and started blowing cold air again.

The clerk that worked at the dryer-part store where we bought the element warned us not to pull the heating element too hard because it could break. So, it was strung very carefully.

There were no visible breaks when we finished, but it still didn't work. Evidently we did something wrong. We ended up having to buy a new dryer.

If you encounter this problem, I would recommed that you either let a professional replace the element, or just bite the bullet and buy another dryer. It's too delicate to be one of those DIY jobs, in my opinion.

Easy Cash Budget - Envelope System

Some people simply do not like to budget (go figure). It's understandable, though. Budgeting can take quite a bit of time in the beginning, especially if you create a spreadsheet yourself, from scratch.

There is a simpler alternative to saving all of your receipts and keeping track of every dollar spent. It's the Envelope system. With this method of budgeting, everything is done with cash.

Here is how it works. Cash your paycheck and divide it up for each spending category you have. Put the amount needed for each category in an envelope and write the category names on the envelopes. Put all the envelopes in a safe place until money is needed for an expense.

Let's try an example. You get your paycheck for the week and cash it. You know you will need money for rent, gas for the car, groceries, the electric bill, the phone bill, the bill for cable TV, some money towards Jr's school clothes in the summer (school starts in 6 months), money towards insurance for the car (due in 6 months), and something for entertainment.

OK, that's 9 envelopes. Label each envelope and write the amount needed for the month on them. Divide the amount needed for the month by how many paychecks you get that month. For example, if you get paid weekly you will divide the monthly bills by 4.

• Rent - $350/4 = $87.50
  
• Gas - $50/4 = $12.50
  
• Groceries - $250/4 = $62.50
  
• Electric - $100/4 = $25
  
• Phone - $35/4 = $8.75
  
• Cable - $50/4 = $12.50
  
• School Clothes (needed in 6 months)- $100/6 (months) = $16.67 (a month)/4 = $4.17
  
• Auto Insurance (due in 6 months) - $350/6 (months) = $58.34 (a month)/4 = $14.59
  
• Entertainment - $20/4 = $5
  

Technically, there are an average of 4.3 weeks per month, but I always use 4 because most months have 4 weeks. This adds in an automatic cushion that should carry over each month.

This cushion should be put into an envelope labeled "Unexpected Expenses." It will be used when the car needs a new tire, or everyone gets sick and you need to buy a zillion dollars worth of vitamin C and cold medicine.

Place the calculated weekly amount into each labeled envelope and put all of the envelopes in a safe place. When you are ready to go food shopping or a bill is due, take the money from that envelope and pay that expense.

Once the envelope is empty, there is no money left for that category of spending. If you find that you run out of money before your needs are met in certain categories, you will need to re-work your budget, or find a way to cut back spending in that category.

The Envelope system works fine for a family with basic budgeting needs, as long as they have the needed discipline to stay out of the other envelopes when one is empty. This method of budgeting removes the need for listing each dollar spent, and offers the ability to see how much money is left in each category by simply opening the envelope.

Just remember, Do not spend the cushion money (Unexpected Expenses) unless a real emergency occurs. (Eating out is NOT an emergency)

Budget for Entertainment - Give Yourself a Break

It's really important to have an Entertainment category in your budget. Even if you can allocate only $5 a week for entertainment, set aside that $5 to spend for fun. This creates a positive feeling about your budget, and gives you a break from working on all the debt you are trying to pay down.

If you are Living Poor, like me, you will have to make your entertainment dollars stretch, but that isn't too hard to do. Here are a few Ideas that we use to entertain ourselves on a slim budget.

• rent movies - some movie rental stores have deals like 5-for-5 where you can rent 5 (not new release) movies for 5 nights for $5. There are some great movies out there that you probably haven't seen yet.


• save until you have enough for a board game - my family enjoys playing Trouble, Monopoly, Trivial Pursuit, and Yahtzee. Our next game will be Scrabble.
  


• go to the library for movies, and spend the money on popcorn and candy as though you were at the theatre.


• buy an extra $5 gas and go for a ride in the country, to a park, or just to some place in your neighborhood you haven't been before.


• buy ingredients to make a big batch of cookies and bring your entire family in to help make them.


• save until you have enough to take the family out for breakfast. You needn't go to a fancy restaurant. You can have fun going to Shoneys or even to McDonald's if you make an event.
  

However you decide to allocate your Entertainment money, have some fun with it. With all the hard work you are doing to get your spending under control and pay off debt, you should have some easy jobs like blowing a little pocket change.

Need Food for Christmas - Ask at Church

Most churches do much to help the poor throughout the year, but during Christmas they really work hard to provide a good Christmas dinner for needy people in their community.

I know of at least 2 churches in my community that give away boxes of food to families every month (I'm sure there are more, but I personally know of these two). These boxes contain cans of vegetables, boxes of pasta, canned fruit, dried fruit, frozen dinners, desserts, dried milk, beans, and sometimes personal hygiene products like toothpaste, mouthwash, feminine products, and soap.

During November and December these food boxes are supplemented with special purchases like frozen hams, cakes, pies, stuffing mix, frozen cooked chickens, canned concentrated juice, and condiments.

Supporting the community is one of the missions of most churches. So, if you need a little help during the holidays don't hesitate to ask for help at a church. And, if you don't need any help, consider donating to a local church, especially during the holidays.