Cars

Latte, Schmatte?

By now, we’ve all been inundated with David Bach’s “Latte Factor.” Some are proponents of it, others think it’s hogwash. By some accounts, if your “latte factor” is actually, well, latte’s, depending on how often you swing by your local Starbucks or what not, you may end up giving them over $1,800 of your hard-earned money a year. That, invested over the course of thirty years would have made you a hefty sum well into the six figures (different expert’s calculations yield different results).

But is focusing on the proverbial “latte factor” the most effective way for you to cut expenses and grow your retirement fund? Even though I discussed the merits of tracking your latte factors here, especially if you are just learning the basics of money management, I’m not entirely sure that it is. That being said, I do think that it’s a good idea to keep an eye on your latte factors. I know that if I’m not careful, my “latte factors” can get expensive. Even though I do track all my expenses and use budgeting software, I can sometimes lose a bit of self-control, especially when I’m stressed, tired and it’s the end of a long work day.

Depending on what you’re spending, you can potentially save a nice chunk of change every year. About ten years ago, I was in a really bad spot financially. So, yes having a ton of small expenses was no good when I didn’t even have $500 in the bank for emergencies. But is that change enough to actually change your life? Don’t get me wrong, $1800 a year is nothing to sneeze at, but you may gain more traction cutting back larger expenses.

The irony is that larger expenses are often the toughest to cut back on quickly. Reducing housing and car expenses can yield big bucks, but it takes time to make the arrangements to do that. So what did I do?  Caveat: Though I’ve done some things right, I’ve also made some poor financial decisions in the past and apparently I’m still making them.

Thing that I did right: A few years ago, I found cheaper housing. I could have really cut back on housing expenses, but I absolutely love the town I live in. I’m currently in contract with my current lease, but plan to move to even cheaper digs when my lease ends.

Thing that I did wrong: I went and leased my car since I didn’t have enough saved to purchase one when my old car finally died. Bad, bad move. I discussed a bit of my foolishness here.

Other really bad thing that I did, I got into debt (half of it being consumer debt). This IS the biggest money drain out there. For those who are in debt, getting out of debt is the best way to begin super-charging your savings. Once I’m out of debt, I can use the money that was going towards my debt payments, along with the money saved by having cheaper housing and car costs, to really supercharge my countdown to freedom. I believe that once that money is available, a little indulgence in the “latte factors” won’t matter.

Do you think that “latte factors” are a significant inhibitor to saving money?

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Zoom, Zoom, Zoom!

Cars as we know it are a true American creation. Cars allowed Americans to really be able to traverse our nation and gain some freedom from their neighborhood. Like most things, cars have become a status symbol and the instrument in which to proclaim to the world what kind of person you are.

Some people could care less about what car they drive, but for many, it’s an important aspect of their life and the focus of many aspirations. Where I’m from cars are BIG deal. People notice cars, they ask what kind of car do you drive or better yet, what kind of car do you want to drive.

Me? I’ve never really cared that much about what kind of car I drove. In fact, I drove my last car into the ground. It was twenty years old when I finally retired it- and I still miss that car. The undercarriage was so rusted that my mechanic said it was time to just let her go. So, what do I do when it’s time for me to replace my old trusty car? I get a lease. That’s right, you heard me. I leased my next car. Big. Mistake.

As I’ve stated, the purpose of this blog is to hold me accountable for all of my foolishness. I’m telling you folks, I’ve made some really bad financial decisions in the past. Leasing my current car is one of them. Why did I lease the car? Easy, I had zero dollars to purchase a car outright and zero dollars for a down payment on a used car. How did I get away with walking off of the lot with a brand new car and zero dollars? Contrary to my past financial mistakes, my credit score is pretty decent (it wasn’t always, trust me, but that’s another blog for another day).

So, I walk into the dealership and say, “Hey! I need a car but I don’t have anything for a down payment. This is what I can afford per month.” The car salesman runs my credit, and walks back smiling slyly. He says, “No problem. With your credit, you don’t need a down payment. Sign here and you can drive off the lot.” So that’s what I did.

Fast forward and now I’m really regretting not saving money every month for the last few years to buy a used car outright. First, I’ve spent all of my car-driving life without a monthly payment. Second, my car insurance was minimal due to the age of my previous vehicle. Not only do I have a $230 car payment, but my insurance went up too. Wow, I’m really kicking myself. And to top it all off, I have to watch my mileage like a hawk.

Well, to say the least, I’m now putting money in my online savings account specifically for when I turn this car in. I won’t be in the position where I have zero extra money (all due to my lack of discipline by the way) for my next car.

As much as I feel like a complete fool for not planning for my inevitable car expenses, I know that I’m not alone. I talk to people every day who are driving cars they really can’t afford. For many in my neck of the woods, these are their dream cars and they don’t care what the total cost incurred is. Some people are paying $500 or more a month for their car! I mean, in many locales in the Midwest, $500 is sum that can go a long way towards life’s other necessities.

Needless to say, I understand that America is the birthplace to cars as we know it, but many Americans have let their need of having a vehicle overshadow sound judgement.

What kind of car do you drive? Any car buying mistakes in your past?