Can you save money by raising your decuctible? With an emergency fund in place you may be able too, here’s how:

A few years back I became incensed after receiving a statement from my car insurance company. I had just moved from Maine to Quincy, MA and had registered my car in my new town. You can imagine my surprise when my bill went from $700 a year to over $2300.

Little did I know at the time, but Massachusetts utilizes an insurance premium distribution program. Essentially, drivers from the outlying suburbs and towns are forced to pay part of the insurance premiums of the “riskier” drivers who drive primarily in the congested urban areas. Massachusetts does this to “ease the premium burden” of city drivers. I reasoned that I couldn’t do much about state law so I looked into other avenues of reducing my bill.

Then it donned on me: “why not call that lizard guy I see on TV?” He claims he can save me a bunch of money on my car insurance. So, I call Geico and SUPRISE, they don’t even offer car insurance in Massachusetts because “the system is too messed up”. I can’t blame them for that!

Then I call my agent with USAA and ask them if there is anything that I can do to lower my premiums? He asked me if I wanted to raise my deductible from $500 to $1000 and if I did I would save nearly $300 a year in premiums. To answer his question I had to step back and ask my self what this policy change would actually mean.

If I had an at fault accident I currently would only have to front $500 of my own money to cover any liabilities to myself or others. If I changed my policy I would have to cough up $1000 in the above scenario but I would save $300 for every year that I didn’t have an accident.

In other words if I could go for 1.67 years (20 months) I would break even, and every year I went after that would be additional savings! It really does pay to be a safe driver!

One caveat is to make sure that you can cough up and extra $500 in the event you have an accident (hence the emergency fund). Each individual case will be different but it doesn’t hurt to call your insurance company and ask them what the difference would be in your case.

Simply divide the difference in deductible by the difference in annual savings and this will give you the number of years you need to drive without being in accident. Then you simply need to ask yourself: “can I go this long without an accident or other claim?” Unless you’re an incredibly insecure driver the answer will always be YES!

Related Articles:
Deceptive Car Insurance Advertising
Unlimited Mileage Car Rentals
Identity Theft Prevention Tips

While leasing my Toyota 4Runner was probably the worst financial decision I’ve ever made (so far…), my purchase of a brand new Honda CBR 600F4i motorcycle back in 2003 was the straw that broke my financial back.

I never considered myself the “motorcycle type”, but as more and more of my friends began purchasing and riding their bikes around, I thought it would be a cool thing to do.

The first hurdle in my quest for my motorcycle was to get my motorcycle permit. In Maine, all that is required to obtain a motorcycle learner’s permit is an 8-hour course. Ironically, the course is held in a class room and no time is spent actually riding motorcycles. The class was easy and I think I scored a 100% on the written test (multiple choice).

The next hurdle was acquiring a motorcycle. For me the choice was easy, three of my friends already had similar Honda CBR600 motorcycles and I was 99% sure I was going to purchase that same model as well.

Based on my experience of buying new vehicles, I wanted to do the smart thing and buy a used motorcycle.  Unfortunately, after calling several banks, I was unable to find anyone who would approve me for the amount I needed.

“We’re sorry sir, but your debt to income ration is too high” they kept saying.

In hindsight they were right…between rent, my 4runner lease, another car payment, student loans, a wedding loan, and credit cards, my debt to income (DTI) ratio was approaching 40%! The warning signs were right in front of me, but I needed that bike and I was determined to make it happen.

After a few more days of frustration, a buddy tells me that Honda Financial Services (Honda’s in-house financing company) is very lenient with their financing standards. The only problem was that I would have to purchase a brand new bike if I wanted to finance with them.

That’s right…the traditional banks found me financially incapable for a $5000 used motorcycle loan, but Honda was willing to finance me for a brand new one at $8600.

I should have known better but there is not a rational thought that goes through a man mind when he’s staring at a shiny new toy!

I filled out my application and was approved on the spot, I couldn’t believe it.

Not only was my decision to buy an expensive motorcycle unwise given my current financial situation, it was also unwise because I had never ridden a motorcycle in my life.

Essentially, I was purchasing a top of the line performance bike (and paying for it with money I didn’t have) without ever having ridden one in my life.

As the warm summer season turned to fall, I cold temperature forced me to put my bike into storage.  Unfortunately, that motorcycle bill kept coming in and I found myself putting more and more things on the credit card.  It wasn’t just the purchase of a new motorcycle that eventually brought me to my financial knees, but it was the last purchase that I ever made on credit.  Since that fateful day in the summer of 2003, my family and I have paid off over $90,000 in consumer debt and are debt free with the exception of our mortgage. 

In retrospect, I’m glad that I fulfilled the urge to buy a motorcycle. Had I not done it I’m sure I would still be carrying that urge today. Another important note was that I eventually did pay the bike off and then sold it to get my debt snowball rolling in my eventual path to debt freedom.

Who knows; had I never bought that bike I may have never actually gotten to the financial bottom where I decided that what I was doing was not working and that I needed to change.

Related Articles:
I Finally Bought a Car the Right Way
How to Clean Up Your Credit Reports
How to Use the Debt Snowball to Pay Off Your Debt
My Tips to Prevent Identity Theft
36 Ways to Reduce Your Home’s Energy

I “pre-bought” my home heating oil for the 2009/2010 winter season and this is why:

One year ago today I wrote about the different heating oil payment options available by oil delivery companies across the country.   At that time, heating oil was approaching $5.00 a gallon and many people were worried oil prices would continue to rise. 

I explained the difference between “pre-buying“, “budget plans“, and “spot delivery prices” and what I thought was the best option given the current economic situation.   Many people were pre-buying their heating oil at this point to lock in heating oil at the cheapest prices possible but I warned about the consequences:

“In my opinion, its just not worth the risk of being locked in if oil prices subside even a little bit. I like having the price protection that the “Budget Plan” provides”.
-Easing the Pain of Home Heating Costs, June 27th, 2008

I argued that the flexibility offered by a “budget plan” was a much better option for consumers especially given the historically high price of oil.

Before I go any further, here’s an explanation of the three basic payment options available by my local oil delivery company.  Your company should have something similar:

Spot Delivery Plan: This plan means that you pay whatever the current cash price is for heating oil for the day it was delivered. This plan is excellent is you know for sure the price of oil will remain unchanged or even drop over the course of the heating season. Unfortunately, the price of oil has been so volatile over the last few years that making this prediction with any level of confidence is nearly impossible.

Budget Plan: This plan has been my favorite over the last few years. You sign a contract for the delivery company to deliver oil to your home for the entire heating season. The best part about most budget plans is they offer a “cap” or “price ceiling” on the price you pay per gallon, but unlike “pre-buying” contracts, if the price of a gallon of oil goes below the price per gallon you budget for you get the advantage of paying the lower price. As an added advantage, your payments are spread out evenly over a 10-12 month period so that you are not faced with gigantic heating bills during the coldest months of January and February.

Pre-Buy Plan: When you pre-buy your oil, you pay for your home’s total estimated oil usage for the entire winter season upfront. The price you pay is usually competitive with the current spot delivery prices on the day you sign your contract. Pre-buy plans are excellent if you have the funds available, and expect the price of oil to rise over the winter season.

Last week I received a letter from my local oil delivery company with the payment plans available for the 2009/2010 heating season. After successfully picking the most advantageous plan last year I was pretty sure that I was going to go with the budget option again but then I had second thoughts.

These were my options:

Spot Price:  The spot price for oil delivery was currently $2.39/gal.  If  I agreed to this plan there would be no contract, but I wouldn’t have any protection if the price of oil were to suddenly (or gradually) rise.

Budget Price: The 10 payment budget plan was $2.64/gal if I wanted protection from the spot price of oil rising higher than $2.64/gal.

Pre-Buy Plan: Finally I had the option of pre-buying my oil for $2.29/gal if I paid with cash or check (credit card payments were slightly higher due to ridiculous credit card interchange fees).

Alternatively I could pay $2.59/gal if I wanted insurance from the price of oil dropping below $2.29/gal (essentially you are paying an extra 30 cents per gallon for “downside price protection”).  In other words, the price of oil would actually need to drop below $1.99/gal before I would see any benefit of paying the extrac 30 cents per gallon for the price protection.

In the end I decided that the price of oil was unlikely to dip below $1.99 per gallon for the 2009/2010 heating season so I opted to pre-buy my oil for $2.29/gal.

I cannot guarantee this is the best option for you, but I am comfortable with the decision we have made for our home.  With oil price rising back above $70 per gallon, the sooner you act, the better pricing options you will have!

Related Articles:
Do It Yourself (DIY) Home Energy Audit Guide
36 Ways to Reduce Your Home’s Heating Costs
An Explanation of Geothermal Energy Heat Pumps
Reduce Energy Costs with Insulated Concrete Form (ICF) Construction

Catalytic converters are expensive, their benefit to the environment and our general health is controversial, and many are disappearing from automobiles around the country. An expensive trip to a state vehicle inspection station taught me more than I ever dreamed possible about these prodigious little devices.

In my recent article Do You Really Need a Newer Vehicle, I argued that it was almost always cheaper to repair an older car than to buy a newer one:

“If you don’t believe me, just look at all of the vehicles on the road older than yours, then ask yourself this question: If it is cheaper to drive a new car, then why aren’t all of those owners trading in their older cars too?”

This position was recently challenged when we brought our car to a Volvo mechanic for its annual state inspection. My wife and I were stunned when we learned that the car needed a new catalytic converter, and rear shocks to the tune of $1400, the vast majority of which was the catalytic converter.

Since the car is barely worth what it would cost to repair it, my first thought was to just sell the car and get another one! After settling myself down, I realized that this was not be the best course of action.

I am ashamed to admit it, but the second thought that crossed my mind was to seek out a more favorable mechanic in the area that may not “notice” that my car’s catalytic converter was rusted through. After all what do catalytic converters really do anyway?

After doing a little research and speaking to a couple of engineering friends, I learned about the importance of these expensive emissions control devices and how they truly have become a necessary evil to the modern day automobile owner.

What is a Catalytic Converter:
Unburned engine waste from your car is a principle source of air pollution which results in respiratory disease, smog, and acid rain. To remedy this situation the auto industry invented catalytic converters as a primary source of emissions control for their vehicles. Since the late 1970’s catalytic converters have become standard equipment on almost every car, truck, and piece of heavy equipment in use today.

The unit itself is located in the exhaust piping of your automobile somewhere between the engine and the muffler. Looking under your vehicle, follow along the exhaust line until you see a football sized bump(that’s it!).

Inside this expanded “football” is a massive “honeycomb” of ceramic material. This honeycomb has been coated with expensive metals (usually palladium or platinum) and other material that react with the exhaust from your engine to eliminate certain harmful emissions like nitrogen, carbon monoxide, and unburned carbon particles.

Catalytic Converters and Global Warming:
Catalytic converters do an excellent job of reducing the quantity of toxic pollutants emitted from your vehicle’s engine, but the process of incinerating unburned engine waste using such devices, creates another equally serious problem… Global Warming!

The byproducts of a catalytic converter’s “cleaning” of your engines exhaust are carbon dioxide (CO2) and nitrous oxide (N2O), which are the two principal elements of global warming.

Are Catalytic Converters the Answer:
So which is better, less smog, acid rain, and respiratory disease, or less global warming? Unfortunately, all states require that your car meets certain emissions standards through the use of catalytic converters which gives many of us no choice. They are the law!

On the other hand some states do not require state inspections which open the door for some individuals to put a straight pipe in their exhausts or remove the catalytic converter and exhaust pipes completely.

Because of the expensive metals used in the manufacture of most catalytic converters, and the unit’s accessibility on the outside of the vehicle, many thieves have begun stealing the units and selling them on the scrap metal market for up to $100 each.

The good news is that as a result of record setting oil prices, people finally started to care again about smaller, more fuel efficient vehicles which invariably will result in less pollution in the atmosphere.

I can only hope that the recent slide in the price of oil does not lessen our determination for more environmentally responsible vehicles.

If you’ve been reading Trees Full of Money for a while, you are probably aware of how passionate I am about the use of geothermal energy to heat and cool your home. Using energy stored in your own back yard, Geothermal Heat Pumps can save consumers 70% or more on their yearly heating and cooling bills, and best of all ground source heat pumps have a minimal impact on the environment.

Unfortunately, the cost of a professionally installed geothermal system is prohibitive to most homeowners including myself. Until such time that geothermal systems become less expensive (or I get a significant windfall of cash) I would like to share my tips on an alternative way to harvest geothermal energy to “partially” cool your home during those sweltering summer days.

This method has been utilized by many homeowners in the northern states for years without them ever realizing that they were tapping into a source of renewable energy. I have simply perfected the process to get the most efficient use out of the cool air that is stored inside your home’s basement.

If your home doesn’t have a basement or suitable crawl space beneath it, you will not be able to utilize this technique but you may be interested in reading about it anyway.

What You Will Need:

1) A “below ground” basement or crawl space with direct access from inside your home, it also helps if your basement or crawl space has a small window that can be opened to add air flow.
How it Works

2) A small portable fan.

3) Optional: A portable dehumidifier

During hot summer days and cold winter nights, basements in our homes stay relatively mild when compared with the outside temperatures and the temperatures in the main part of your house. This is a classic example of how geothermal energy works.

The temperature of your basements exterior walls are regulated by the relatively constant temperature of the radiant heat trapped only a few feet down beneath the ground adjacent to your home’s foundation walls. These temperatures radiated through your basements walls and cool (or heats) the air volume inside your basement. The trick is getting this usually damp and musty cool air distributed throughout the rest of your home.

After some experimenting, I have finally come up with the most efficient method for achieving this goal.

I place a small dehumidifier in my basement the night before to bring the relative humidity down from over 80% to less 60% by the following morning. I also ensure that all of the window shades are drawn on the “sunny side” of my house to minimize the effect of the suns “solar” heating. If your has a relatively low humidity then the use of a dehumidifier may not be necessary.

If the outside temperature gets below 75deg during the night I will leave most of the upstairs windows open in my house with fans sucking in the “cool” air until the outside temperature gets above this level.

As the sun comes up and the inside temperature of the house begins to rise I wait until the inside temperature of the house gets above 77deg. At this point I “turn on” my geothermal system by doing the following:

I crack open one of the small windows in my basement just enough to let a little bit of airflow through. Then (with all of the other windows closed in the house) I crack open another window in one of my homes upstairs bedrooms with all doors open between the two windows so that air can flow through (tip: opening the highest window you have in your home will vent out the most hot air in your home [heat rises!]). You can also close of other areas of the house that you do not wish to cool to maximize the cooling effect in the areas of the house you frequent during the day.

I then place a small window fan in an upstairs window with the flow of air pointing out the window. This technique effectively suck air up from the basement through the house and then out the window.

The trick is to monitor the temperature of the air on the suction side of your fan as it is being pushed outside. Close the windows (and the basement door) and shut the fan down when the drop in the rooms temperature begins leveling off.

It usually takes between 30 minutes to an hour for all of the cool air to be circulated through depending on your fan’s power and how large your home is. If all has gone to plan, the temperature inside your home should have dropped a more tolerable 4-5 degrees. This may buy you a couple of hours time that you don’t need to run your air conditioner.

Caution: If you run the fan too long, all of the cool air that was trapped in your basement will be displaced by the warmer outside which will then be sucked up into the rest of your home negating the whole process. You generally only get one shot at this cool air during the day since it will take at least 6 hours for your cool basement walls to regulate the temperature of the new mass of warm air that has been displaced into your basement.

It may seem like a lot of work but you really get the hang of it after a weekend of testing and if nothing else this DIY geothermal energy project is a fun experiment to share with your family! Thanks for reading and be sure to check out some of my other articles on personal finance, and alternative energy! I am also curious to hear how this technique works for you, be sure to comment below with any successes, failures, or criticisms of this method!

A word of caution before you “Max-Out” your 401K contributions. If you don’t plan carefully you may be leaving money on the table.

Ask most financial gurus and they will all tell you the same thing: “Max out your 401K!” Named (creatively I must say) after section 401 (k) in the United State’s Tax Code, the 401K has become the preferred investment vehicle for many Americans saving for retirement. Benefits include allowing you to defer taxes on your income like Traditional IRAs (Individual Retirement Accounts), and as an added incentive employers often will match your contributions up to a predetermined amount. A typical example would be a company matching your contributions dollar for dollar up to 3-6% of your annual salary. With this money you are then free to invest in various mutual funds, bonds, and money market accounts that your employer has pre-selected.

Before arbitrarily setting your payroll deduction percentage to the maximum you may want to consider the following. Current law allows individuals under the age of 50 to contribute up to $15,500 in their 401K plans (2008 Tax Year). Once your account reaches this limit your company will discontinue your contributions until the beginning of the next tax year. Unfortunately, they will also discontinue their matching portion as well since you are no longer contributing. Albeit a technicality, very few employers have created fixes for this. Protect yourself from “leaving money in the trees”. If you feel you may be close to reaching the IRS limits you can do a simple calculation. Multiply your current payroll deduction percentage by your projected annual salary. Be sure to consider any associated overtime or scheduled pay raises in your projection as well. If your calculation exceeds $15,500 you may want to consider reducing your payroll deductions so that you meet your IRS limit on your last paycheck of the year.

Last summer I explained how credit and debit card interchange fees are soaking American consumers:

Most people don’t realize that in addition to charging interest and penalty fees on individuals who carry a balance, credit card companies charge the merchant an additional “interchange fee” (transaction fee) between 2 to 3%.

Although they are not as high, debit card transactions are subject to a similar interchange fee.

Interchange Fees Affect Cash Buyers Too:

Even if you prefer to use cash, merchants are generally unwilling to offer a discount due to restrictive user agreements with the credit card companies.

Merchants have little choice but to honor credit card companies’ requests for a “one price for all” pricing structure in fear that their ability to process credit card transactions will be revoked by VISA, MasterCard,
Discover, or AMEX networks.

As a result, Americans spend over $40 Billion Dollars a year for the privilege of using their credit cards (whether they carry a balance or not). Billions more are paid by cash buyers who are forced to pay the same price as those who pay with credit or debit cards.

How to Fight Interchange Fees:

There is hope for consumers. A sweeping credit card reform bill has been introduced in Congress with the hope that Americans might see some relief from these ridiculous fees.

Unfortunately, law makers in both the Senate and the House are hesitant to take issue with “interchange fees” directing their “precious time” on the issues of universal default, high interest rates, and excessive late fees.

The first thing you can do is contact your State Representative and Congressperson and tell them you want to restore your right to purchase goods not have to subsidize the credit card industries profit margins.

Secondly, you can always ask your local merchant for a discount. This is exactly what I did when I took my car in for repairs at the local Volvo Dealership, and it paid off!

Under a new Federal Law, consumers have the right to receive one free copy of their credit report every 12 months from the 3 leading credit bureaus Transunion, Experian, and Equifax. You have the option of checking one, two, or all three. Checking them all at once will force you to wait a whole year before your next free report. By spreading out your reports you have a better chance of catching fraudulent our inaccurate information throughout the year.

To get your real FREE credit report simply log on to:

http://www.annualcreditreport.com/

1) Select your state and click “Request Report”

2) Then fill in the fields required in the registration. Don’t forget to type in the numbers in the green/blue box to the left of where I have circled (this is a security feature). Click Continue.

3) Next check which one of your three credit bureau’s you want to pull (You can pick all three if you want). Then Click “Next”.

4) Just Click “Next” on the next page since we are only looking at one bureau’s report for this example.

5) You are now redirected to the credit bureau’s website and are asked to verify your information. After double checking your info push “Continue”.

6) You are now asked a couple of security questions about one of your accounts to help verify that you are actually who you say you are. After answering click “Continue”.

7) The next step is sneaky, the bureau asks if you want to buy your credit score as well. Don’t worry about this right now and just click where I have circled for your free credit report.

The bureau tries one more time to get you with additional products and services. Make sure that the “NO” boxes are checked and click “Submit”.

9)Your almost done! Now just click where it says view your credit report! Notice the total cost FREE!

10) Congratulations! Here is your Free Report! Now you can use the blue bar at the left of the screen to check all of the accounts that you have on your file! Including Negative Information, Personal Informatin, and How to Dispute items on your file!

 

 

With the economy in a funk, many young urban professionals (affectionately known as yuppies) are finding it harder and harder to project an image of success by driving an exotic late model car.

If you are one of these vain individuals who “are what you drive” but the economy has placed the most pretentious vehicles out of your reach, don’t worry, this article is written just for you!

Roll up the collar of your Lacoste polo shirt, grab yourself an ice cold bottle of Perrier sparkling water, and follow along as we review the best values in budget minded yuppie transportation each priced below $10,000.

BMW 3 Series 1999-2001: What hasn’t already been said about the ultimate driving machine? If you’re down on your luck, and desire to present yourself as god’s gift to the neighborhood, check the local classified listings for a nice black BMW 3 series.

Prices for a well conditioned BMW 3 series will vary but you can expect to find a 325i in decent condition with average mileage for around $8000. If you really want to impress your friends, you can order decals off EBay to make your BMW 3 Series look like a BMW M3 super car!

Toyota Echo 1999-2005: Anthropologists are becoming increasingly aware of the close association between “yuppies” and an emerging class known as the “eco-snobs”. It is for this reason that I must recommend the Toyota Echo as another top pick for the financially burdened yet environmentally conscious yuppie.

What sets the Echo apart from the other cars on my list is the opportunity to purchase the vehicle for less than $3000 while still allowing you to feel “better” than anyone else because the car gets more than 40 mpg.

Don’t be bitter because you can’t afford a $60,000 Cadillac Escalade; roll in “eco-style” and judge everyone along the way as you cruise down the highway in your gas sippin’ eco-machine!

Saab 9-3 Series 1999-2003: I would be amiss if I didn’t suggest a 1999-2004 Saab 9(3) as another great inexpensive yuppie car. You will score even more points with your friends if you can find a 9(3) Viggen edition! With 230hp and 258 ft/lbs of torque, your friends will have no choice but to admire you as you race down the boulevard to the Whole Foods Market to pick up that $9.00 jug of organic orange juice!

Purists argue that General Motors destroyed the prestige once associated with Saab when they bought 51 percent of the company around 1990. Fortunately for our yuppie friends, the engineering master minds responsible for the Hummer H2 and Pontiac Aztek, didn’t start messing too badly with the Saab models until after the first generation 9-3 models replaced the Saab “900” series in 1999.

Audi A4 2001-2005: Another frugal choice for financially challenged yuppies is the Audi A4 sport sedan. Although the car’s design is almost 10 years old, it still has a refined understated elegance. Used Audi A4s have dipped below $10,000, making them an honest alternative to today’s high-falutin’ foreign imports.

If your neighbors are still not impressed with your purchase of a used Audi A4 make up an elaborate story about being in a horrific car crash back in 2001 coming back from a party at your buddies beach front home in the Hamptons. Drive your message home by stating that if you were in any other automobile other than your buddies 2001 A4 you wouldn’t be here today!

Infinity G35 2003-2004: At the very top of our $10,000 budget here is the Infinity G35. The recent decline in used car values has finally brought this car within the reach of those desperately trying to establish themselves in the competitive world of yuppies.

Some people might prefer the Infinity G35 in black, but I recommend silver so you don’t have to spend quite as much money washing and waxing the car every single day to hide dust, pollen, scratches, and water spots. Anyone who has ever owned a black vehicle knows what I’m talking about.

$10-15 car washes a few times a week will quickly destroy the budget of a yuppie who has fallen on tough times! Save this money and instead by a bottle of Schramsberg Reserve sparkling wine as a hostess gift; you will need it for the inevitable social soirée you and your significant other will be attending now that you have “arrived” on the scene in your new G35!

Volvo 240 Wagon: Perhaps one of the newest “classic” automobiles. The Volvo 240 wagon (and to a lesser degree the 240 sedan) has reached near iconic status among aspiring yuppies over the last few years.

Although Volvo discontinued the 240 series in 1993, its reputation as a safe and reliable mode of transportation to and from countless varieties of extra-curricular activies has earned it a special place in the garage of some of the wealthiest families in New England and beyond. It is not uncommon to see one owner 240’s with over 300K miles passed down from one generation to the next.  These vehicles have literally become family heirlooms.

You read it hear first, interest in the 240 station wagon is on the rise and I feel the 240 wagon will become a desired “collector car” within the next 10 years!

To add even more pizzazz to your Volvo 240, place a few stickers from the local yacht club, country club, or the closest exclusive private university in the rear window and watch the neighbors turn green with envy.

I hope you enjoyed my choices for inexpensive yuppie vehicles! Please let me know if you have any yuppie vehicles to add by including it in your comments below!