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Month: June 2008

Goodbye little Nissan

Goodbye little Nissan

Guy came and bought my car last night.  Goodbye little Nissan Altima.  In the end, here are some of the stats:

Years owned: 10.2 (15 total years old)
Mileage I put on it:  138,000 miles (197000 total miles)
# tanks of gas: 424 (approx)
# gallons of gas: 5520
Cost of that gas ($2 avg): $11,040
Price of vehicle/years owned: $945/year
Cost of driving/owning per year (vehicle+gas cost): $2049/year
Insurance+repairs would have been about:  $1200/year

Cost of driving per year = $3249

So when your teen comes wanting a car, put this figure in front of him/her and see if they want to put that kind of money down per year.

Ramsey observations over time

Ramsey observations over time

Dave Ramsey does a radio show where people who are having financial issues call in for advice and help. His attitude is that everybody should be successful with their money – no matter what they make – and that you are ultimately the decisionmaker and responsible when it comes to your situation.  He’s also a big fan of not living beyond your means and paying off huge debt instead of filing bankruptcy. His personal experience with having filed bankruptcy several times showed him that until you change the behavior (i.e. living within your means and paying off debt) you will just continue the cycle of going bankrupt every few years and ruining your life/marriage/etc .

My personal reason to listen to the show: I really like listening to the amazing and varied things people have gotten themselves into, or have happened to them in financial matters.

A few of my own observations from the show:

1. You are only one debilitating accident/illness away from bankruptcy/complete ruin. This is shocking but amazing and consistent. This was pointed out by this guy (12 things I learned by 42 that I wish I knew at 22) as well as numerous people that call into the show. But it came home for me when a very successful $200k+/year software engineer called in and after a car accident – and in just over 1 year from the accident had lost all his contracts, lost his home, and was likely going to file bankrupcy over nearly a $100k+ in medical bills.  His injuries caused him 6 mo of recovery in which he lost all his contracts (and got sued by a few of them he couldn’t meet) and now could now barely work 4-6 hours a day due to his disabilities.  He was only in his late 30’s. That shocked me – if that guy got clobbered by one accident – so could anybody.

Probably one of the most common call-ins I have heard is ‘We were doing ok, then my wife/husband had X medical thing happen’. X being: back injury, cancer, car accident, accident on job, some kind of illness that sporadically popped up made keeping a regular/shift job that requires 9-5 5 days a week difficult. You absolutely must have health insurance and long-term disability – or you’re playing with so much fire you can’t even begin to imagine. One major illness can get you to $100k in medical bills in no time. This goes for car insurance too.

But it also showed me how many mid-income families run with minimal or no coverage – and one bad thing comes along and it completely ruins them. It does tell me something needs to be done in this department, but exactly what has been debated for years now. I’m not a fan of completely socialized medical coverage, but there are far too many people falling into these black holes and there is little or no way out.  If you declare bankruptcy, you’ll just keep running up more debt if the condition is a long-term debilitating condition.

2. People get ripped off by partners in business more than I imagined. Seems like there are lots of call-in stories of folks that start getting shafted by friends/family/partners in business. Things start off cordially enough – even when both parties want things to work. But people don’t adequately set up financial accounts, expectations, and protections early in the business dealings – then get left holding big bags of debt the other partner’s decisions left on them. Common ones:

  • Partner gets divorced and partners share of business becomes part of settlement – crippling your companies financing/day to day operations.
  • Business goes bad and now you’re about to lose your own home/car/etc because you didn’t isolate exposure.
  • Partner starts stealing from company and when they get arrested (or you can’t turn them in without having all your clients sue you too) – you get left holding the debt they ran up living the high life or going to jail/being sued with them.
  • Business idea just didn’t fly and the other guy and you get into huge lawsuits over the debt/assets
  • You see the business permanently going south and want to close up shop to cut loses – but the partner doesn’t and now you can’t get out of the mounting debt that can’t be paid off or stopped while the partner continues the downward trend.
Google – are you losing it?

Google – are you losing it?

I use Google to search for everything. But you know what? In the last year, I’ve had to go to Yahoo search to find things that Google doesn’t seem to be able to find. A few interviews reveals that Google tweaks its engine regularly (450 times in 2007 alone), but I was looking up some author bios and papers for work, and Google stubbornly refused to find anything useful on them. Yet Yahoo search popped up what I was looking for right in the first ten hits. On top of that, I’ve noticed Google maps (my favorite) has also been somewhat glitchier and slower lately – especially when searching for local businesses (looking up ‘Chinese’ or ‘bike shop’ or the like). I still have Google as my default search, but things feel a little less solid than before.

Anyone else notice this?

Dave Ramsey quotes/ideals

Dave Ramsey quotes/ideals

I’m a big fan of this guy. Not so big a fan of his mutual fund approach (that’s after all where he makes his money), or his absolute no credit card rule (but I know why he makes it) but his advice to those getting started in their financial affairs is solid. I listen to his nightly radio show when I can. Here’s a few of his core tennats or opinions I really like:

1. There is NO reason for you not to retire rich in this country – no matter what you make now. You have a responsibility to be saving for your retirement and future medical needs. This can be done by people making $35k/year – but it requires you budget, take responsibility for yourself, and not live outside your means (which few people do). Our country provides miriads of ways to save money tax free (401k’s, Roth IRA’s, etc) that many other countries do not – and people retire there too. You’re now going to ask that they pay for you after retirement when you piddled away what you should have been saving? You are not owed a comfortable retirement by anyone. It’s your responsibility to plan for and live within your means.

2. Never buy a house in which you are paying more than 45% of your take-home pay on a 15-year mortgage. Yep – you’ll be living in 1/2 the house other folks are buying, but you’ll have it paid off in the time it’ll take them to finish their car payments. And then you can upgrade. The 45% rule keeps you having a real life and covers needing new roofs and other maintenence.

3. Home ownership in the current climate likely costs more than renting. When housing prices aren’t rising faster than inflation, pound for pound, if your living modestly you can get by renting for cheaper (because of home ownership costs of repair, taxes, etc). Long-term, however, it’s better to get into a house as an investment – but wait until conditions favor you.

4. If you’re waiting for the government to fix your life – you’ll be waiting a LONG time. Seriously, you’re actually expecting the government to fix your life? I mean really. These guys can’t even get their own lives in order. Additionally, if you buy into this, you’re buying into socialism – and you should look long and hard how governments/countries as large as ours that adopted the philosophy turned out. Socialism CAN work on smaller scales by dedicated individuals (I know, I lived at a monastery for 4 years). Idealistically, it should work on a country scale – but in reality people aren’t ideal and don’t always think of the other’s good as equal to their own. In fact, it required a lot of effort and constant vigilance even at the monastery. It starts getting really rocky the larger it gets.

5. Who’s in the White House has very little to do with your personal situation. Your attitude has far more influence over the state of your life/finances than any government official or whether a democrat or republican is in office. If you’re in trouble, odds are very good the problem lies largely with your decisions. Examine those first. Do your homework and learn about what you need to be doing. Failing to plan is a plan for failure.

6. You don’t have a right to other people’s money. You have a responsibility to yourself and making sure you are on track. If you can’t make a living doing what you’re doing – then it’s telling you that you’re not offering a service or value to your community that anyone wants. Demanding that others support you is selfish and destructive to a working society; because you are providing (or not providing) something of no value to the world. Regardless of what you think you’re doing. If everyone did that, then society would be in grave danger of collapse as critical services might not get done.

7. Never buy a new car – unless you pay cash and all your other goals are met. New cars are a luxury that depreciates faster than you can say ‘fiduciary irresponsibility’. But maybe once in your life, if it fits easily in your long-term plans, you may want to splurge and go for it. A reward for a life well lived. Other than that, buy a used one. Never lease (he calls them ‘fleece’ cars)

8. It has been shown that conservative people donate more of their time, money, blood, etc than moderates or liberals– Living in Portland, you can’t throw a rock without hitting a non-profit organization. And talking to some of the folks living from working at them is enlightening. Does anyone actually stop and ask the question where the hundreds of thousands of dollars these things take to run each year come from? Hint: it’s not the government for most of them. It’s large funds set up by Carnige, Gates foundation, and donations by folks who can give 100’s of thousands of dollars. Yet, some of my friends that work at them are constantly decrying Gates and his ilk.

Prof Aurthur Brooks, himself a registered Democrat, released his results on the most extensive analysis of public data on giving patterns of liberals, moderates and conservatives. The results? Even to his surprise (he says he himself hated writing what he wrote), he found conservatives give more money, donate more time, give more blood, and in short, out-give their liberal counterparts by wide margins. He also documents that because of this, conservatives reap extra health benefits from the secondary effects of feeling wellbeing. All this is backed up by extensive peer-reviewed data. Read the articles for more info – they’re based on public databases you can get yourself.

The last car you’ll ever own…

The last car you’ll ever own…

Having just recently bought a new car and made a few observations while driving to/from work:

I’ve never been so glad I capped my search at $15k.
Buying an expensive car is the dumbest thing you can do – even if you can afford it. I looked into some Lexus/BMW’s but left them on the table – and don’t regret it one bit. In fact, part of me wishes I went even cheaper (but part not because I’m really happy with the car I got). Why? Because this may be the last gas car I ever buy. No, seriously. If gas prices don’t go down (they aren’t projected to), then alternative fuel vehicles now enter the realm of not only feasible, but cheaper. Technologies that would have been not cost justifiable before now becomes viable technology at $50/tank or $100/tank when gas hits $8/gallon. People are desperate for alternatives, and there’s soon to be a swarm of smart people who will decend on this problem. When gas hits $8/gallon, you can start adopting some pretty expensive technologies. So, with my cheaper car, it can be paid of soon and I won’t cry a river when I go to sell it in 7 years and find it has no value. You’re an idiot to spend more than $20k on a car until this all gets sorted out and gas either goes down, or the viable alternative appears.

I got a call from a car dealer wanting to buy my car:
I just bought it, and they wanted to buy my car for trade-in. I told them I just got it 3 months ago – and he still wanted to deal. It was a cold-call by a big local dealership too. They’re getting desperate. They were even offering lifetime powertrain warranties on their new cars. Yes, lifetime. Heck, I even got 2 years bumper-to-bumper included in my used car.

Traffic congestion is down:
It’s getting eerie. I drive in to work and home again some days and can markedly tell a difference in the amount of road traffic. It’s quite noticeable. The mornings that I turn on the radio and hear about gridlock are fewer and fewer. I used to take 40-50 min to get home if I drove and traffic was bad, and now its usually 30 min or less. I rarely stop in traffic anymore and haven’t had to take my ‘back route’ to avoid freeway gridlock in weeks. I got up one weekend and the freeways around Portland were so empty that I honestly turned on the radio to hear if some world catastrophe had happened (or maybe Dancing with the Stars was on).

If this is permanent – then society is shifting – and it’ll be dramatic:
If you can’t drive anywhere anymore, or gas is $8/gallon – what do people do? You’d likely start staying in or going to fewer, but maybe bigger shows/larger events. We’ll get more choosy about going out and doing it less often. More people will stay at home entertaining with TV, movies/dvd’s, video games, or other home diversions. They’ll eat out less. We might even <gasp> interact with neighbors more. People in suburbia will get hit harder after having built for sprawl. Instead, people will probably want to concentrate more – and outlying areas of urban areas will decline in value as they require a lot more money to get to/from services and work. Some of this is already happening.

Business in general will continue to slow:
As gas prices stay high, transportation will cost more, and people will again buy less. Food/goods/etc will all go up in price. This will drag on the economy and you shouldn’t expect things to improve much. Some have even said the ‘D’ word might be coming (Depression). I’m personally working on saving up as much reserve cash as I can – and putting it into something that will hold its value. Mutual funds are one option as long as they stay above inflation – but foreign currency is actually starting to look as a viable alternative if the dollar keeps dropping…

Europe will weather better:
If we’re moving into a new reality of fewer and fewer cars – we will now reap the pain of our urban sprawl and 8 lane highways right through city centers. They’ll be empty. Cities and communities will need to shrink back down and compact services. European cities were built this way, and suffered in recent decades because of cramped quarters. Now, we go back again to foot/public transport. Something their ped-friendly cities will weather far better than our layouts that require a 3 mile drive to groceries, a 2 mile drive to hardware, etc.

We’ll likely start loosing weight:
Walking more ain’t a bad thing – especially if you’re using public transport.

Public transportation isn’t just for liberal arts majors and homeless anymore
Simple enough. There are folks in Portland with chartered work buses from Portland/Salem now.

(moderately off-topic) Buy into the crash, sell into a boom
I’m also very very glad I didn’t buy a house these last 2 years. I felt like I had been missing the meteoric gains in housing that people had been seeing during the boom times and I was stupid for sitting on the sidelines. Now, I’m watching people lose 10’s of 1000’s of dollars in value. standing in my window at home, I can count 5 different forsale signs (and one is now edging up on being for sale 2 years now) in a neighborhood when people just 3 years ago didn’t even bother putting up forsale signs as they could start a bidding war just putting up a RLMS listing. It reminded me again what ‘buy low and sell high’ really looks like. Never buy when a boom is going on, save your money for when things are going down.

Recent car sales numbers.

Recent car sales numbers.

Reports on car sales are out – and the results aren’t surprising, but the numbers are not pretty. Overall sales are down about 14% compared to last year, truck and SUV sales are down about 30%, with only small car sales being up (way up). Luxury cars are also down. Some numbers (these are all the year-to-year ADJUSTED averages – some articles quote the unadjusted numbers):

Honda (+11% overall):
Honda Fit +73.8%

Nissan (+1.6%)
Altima +28.1% (test drove one – great car for money, great reliability, but a little cheap with interior plastics/finish)
Versa +26.4%
Sentra +25.5%
Titan -54.9%

Toyota (-3.3% overall):
Camry -2.6% (no surprise to me – these have been way overpriced for some time – and reliability has slipped)
Corolla -7.3% (also overpriced for features)
Prius +53.8%

Ford (-18.5% overall):
F-Series -21.0%
Explorer -38.5%
Expedition -35.5%
Focus +43.5%

Chrystler (-29.4% overall)

GM (-12.2% overall)