Buying a car can be exhilarating. But before you get swept up in the negotiation process, consider your lifestyle and budget. Do you really need a car? Can you afford one? Are you sure? Do you know the various expenses associated with car ownership? To you have room in your budget for some unexpected expenses?

My daughter just turned 16 and is looking for a car. Several seasoned car salesmen have told me that buying a car between January and May isn’t a good idea. Why? Costs are inflated for one reason: tax rebate checks. Wait until May and most of my contacts have said that I’ll save as much as $1,500.

Here are some of the questions we’re considering as we talk about buying a car for my teenager:

Do You “Need” to Buy a Car?

To determine whether you really need to buy a car in the first place, consider:

• Necessity: If you don’t require a car for daily transportation, borrowing or renting a car only when you need one may be a more practical choice, especially if your budget is tight. As thrilling as it is to get a new car, it’s devastating to have to sell it because you can’t afford it. (been there done that)
• Safety: If you already have a car, but you sense – or your mechanic tells you – that your car is no longer safe to drive, it’s time to replace your car with one that runs reliably and includes up-to-date safety features.
• Savings: Sometimes it’s possible to save money by buying a car. For instance, if you spend a considerable amount of money on fuel, insurance, or repairs due to the condition of your current car, it may be more cost-effective to buy a newer pre-owned car.
• Budget: Car ownership entails costs beyond the mere purchase price of the car. If you’re not sure you can budget for all of the costs of car ownership, it’s best to put off buying a car until you can cover all of the expenses involved.

Can You Afford a Car?

The expenses involved in owning any type of car include ownership costs (what you pay to buy or lease the car) as well as operating costs (what you pay to maintain the car). Operating costs can be very high, depending on the model you choose. Check out Consumer Reports on any new or used car you consider.

Ownership Costs

• Purchase price: If you buy your car outright, you’ll likely spend at least $12,000 for a new car, or $4,000 for a well maintained pre-owned car.
• Loan payments: If you’re not paying the purchase price in full, you have to secure a loan and pay it off in monthly installments. Loan payments vary depending on your down payment – the sum of money you pay up front toward the purchase price. A typical monthly payment is at least several hundred dollars.
• Insurance: Most states require you to have car insurance that covers your potential liability in case you cause damage or personal injury. Costs vary depending on your car’s value, the types and levels of insurance you carry, your location, and your driving record.
• Licensing and registration fees: Before you can drive your car legally, you have to pay various fees to your state for license plates and registration (and personal property taxes in my state). Most states charge these fees annually based on the current market value of your car. Costs vary widely by state; expect to spend at least $50–100 for initial licensing and registration fees. You’ll pay slightly less each year as your car depreciates in value.
• Taxes: Most states charge sales tax and various other taxes when you purchase a car. These typically total at least 5% of the car’s purchase price.
• Depreciation: When you buy a new or pre-owned car, you’re spending thousands of dollars on something that will undoubtedly lose value – and lose it quickly. Depreciation, the loss of value that your car suffers over time, determines the resale value, or current market value, of your car. The value of a car depreciates most rapidly in its first year of use. It actually loses value the moment you drive it off the lot!

Operating Costs

• Fuel: Even the most fuel-efficient cars require that the average driver spend $50–100 per month on gasoline (assuming that gasoline is about $2.50 USD per gallon). If you plan to drive more than the average amount of 12,000 miles per year, or if your car is a gas guzzler (gets less than 20 miles per gallon), expect to spend even more on gasoline.
• Maintenance: Standard maintenance costs include replacing oil, oil filters, coolant, and other fluids; rotating and changing tires; washing; and regular tune-ups. Expect to spend $25–100 every 3,000–5,000 miles for small maintenance items and $400–1,500 every other year for larger maintenance costs, such as new tires, new timing belts, and other items.
• Repairs: All cars require occasional repairs beyond standard maintenance. Repairs can cost anywhere from $50–100 for minor work to several hundred or even thousands of dollars to replace major components, such as brakes or transmission.
• Roadside service: If your car breaks down on the road, you need to pay for a tow truck ($75–125). Many drivers buy membership in various auto clubs, but you can also get this service as part of most car insurance policies.
• Parking and storage: Unless you own or rent a home with a driveway or garage or live in a neighborhood with free parking space, you need to pay to park or store your car. Expect to pay at least $50–100 for monthly parking privileges, and considerably more if you live in a major city.

Photo by wishymom

We regularly read about the dangers of being in a rut. I’ve written about it myself (several times), but are there circumstances where being in a rut is a good thing? Does being “in a rut” get a bad rap?

It really depends. There are GOOD ruts – we call them ROUTINES.

Most of life is routine – dull and grubby, but routine is the momentum that keeps a man going. If you wait for inspiration you’ll be standing on the corner after the parade is a mile down the street. Ben Nicholas

I can make this one promise: show me your daily routine and I can come close to predicting your future because your future lies in those things that you do on a daily basis.

There’s an old saying that goes something like this: Guard your thoughts for they soon become your words. Guard your words for they soon become your actions. Guard your actions for they soon become your habits. Guard your habits for they soon become your character. Guard your character for it will soon become your destiny. It all starts with something simple – a thought.

Great lives are established by making wise choices in the little things, and making them consistently, day after day, week after week, month after month, year after year.

Have you ever watched an icicle form? Each little droplet of water contributes a tiny amount over a period of time until the icicle grows to be a foot long or even longer. Our character is formed in much the same way – each thought, each action, each feeling we cultivate contribute a small amount of influence. Over a period of time, those little influences produce something big.

The key is to develop a good routine in our lives that produces what we really want – so what do you want to produce?

You can produce financial independence by daily:

• Spending less than you earn by budgeting
• Saving and investing properly
• Avoiding high interest debt
• Mitigating risk through insurance

You can produce a great relationship with a friend or loved one by daily:

• Listening without judging
• Being grateful
• Spending time with your friend or loved one
• Becoming genuinely interested in their best interests

You can produce a great career by daily:

• Putting your company’s interests ahead of your own
• Finding a great mentor and using his or her experience
• Working to correct your mistakes
• Consistently working to make yourself more valuable at work

Use a routine (or a good rut!) to help create momentum in your life and accomplish what you really want. It isn’t always easy – establishing a good habit rarely is – but the rewards are long lasting and life changing.

Are you up for it?

Photo by khowaga1

Four years ago, I was bored with the Internet. It seemed like I read and visited the same sites over and over – mostly news and politics with a little weather and stock quotes sprinkled in. I did my taxes via the Internet. I check my bank balance. I bought a few things on eBay but I was very bored with what I was reading on a daily basis. Then I discovered blogs.

I quickly gobbled up these new sources of ideas and information and the Internet was new again. Then I discovered how to use an RSS Reader and suddenly I was really plugged in! New ideas, new posts, and new articles were at my disposal and I loved it … I still do. I quickly gave up the old “bookmarking” or “favorites” practice. A feed reader is much superior.

The great thing about being plugged in to so many people via The Wisdom Journal is discovering new information and new sites, so I’m asking you –

What blogs or sites should I add to my RSS Reader?

Feel free to recommend your own site or someone else’s by leaving a comment. I won’t guarantee that I’ll necessarily add it, but with over 3,000 people reading this site on a daily basis, I’m counting on finding something new, interesting, intriguing, and engaging. I’m looking for sites that update regularly and have well written, relevant content. My site holds a comment for moderation if it contains more than two links, so don’t be alarmed if your comment doesn’t show up right away.

What subjects am I interested in? Primarily those related to financial matters, but I’m also interested in time management, personal development, business and entrepreneurship.

Send ‘em on!

After you’ve written your will, you probably will want to have a say in how other wishes are carried out. These wishes are called planning directives, and without them, any decisions about your assets (while you’re still alive), or health care decisions (such as your admission in a nursing home), or authorization for medical procedures could be made by an someone you wouldn’t choose, possibly even by a court.

Planning Directives

Almost everyone who has a will should also have personalized estate planning directives. These documents, known as powers of attorney, letters of instruction, and living wills, provide guidance about your wishes for:

• Medical care.
• Financial management.
• Distribution of your personal property (any property that isn’t real estate).
• Other instructions not covered by your will.

Though not all states honor all directives, directives nonetheless provide valuable guidance for your executor and family members. Always have a lawyer prepare these documents for you. It usually costs about $100 to $300 per directive (powers of attorney, living will, and so forth) to have your lawyer draw up your planning directives.

Powers of attorney

A power of attorney allows you to name someone, called an agent, who can act for you in certain circumstances to carry out your planning directives. Powers of attorney are called durable powers, because they remain in effect until you revoke or cancel them. There are two primary types of durable powers of attorney:

• Durable general power of attorney: Names an agent who can make decisions for you as if he or she were you. The agent can sign your checks, sell your investments, access and change your accounts. General power of attorney typically comes into play only if you’re totally incapacitated.
• Durable limited power of attorney: Names an agent who can make decisions for you in specific situations. You might limit a power of attorney to allow someone to act on your behalf for financial transactions—for instance, allowing your spouse to sign your checks or sell your interest in a jointly owned property. My wife and I bought and sold houses this way! Durable medical power of attorney is a type of limited power of attorney that allows someone only to make medical decisions on your behalf if you’re incapacitated.

Living wills

A living will is a document that states in advance the type of care that you would like to receive if you become terminally ill and can no longer express your wishes, such as after a stroke or catastrophic accident. Unlike durable medical powers of attorney, a living will provides guidance to medical personnel for specific situations but does not authorize a particular person to make decisions for you.

Note that medical personnel are not required to follow the wishes outlined in your living will. To ensure that your medical care preferences are carried out, you need a durable medical power of attorney or a do not resuscitate order.

Do not resuscitate orders (DNRs)

A do not resuscitate order (DNR) is a request not to have cardiopulmonary resuscitation (CPR) or other heart-starting actions performed on you should your heart stop or you stop breathing. All states and medical personnel are required to honor these orders, though some refuse to on occasion, as DNRs inevitably result in death.

Letters of instruction

A letter of instruction is a document that specifies to whom you would like to give personal property that’s either not assigned to a beneficiary or not covered by your will. Letters of instruction typically do not cover every individual item you own. Instead, they apply to valuable objects not covered by wills, such as jewelry, coin collections, and so on.

How to set up planning directives

This isn’t a do it yourself project. To properly set up estate planning directives you really need to go through a lawyer who can help you avoid the pitfalls and potential legal challenges that could arise from an improperly established do it yourself job.

Photo by truemommy

How to write a will

There are two ways to write a will: by yourself or with the aid of a professional.

“Do it yourself” wills: Writing a will by yourself is less expensive than working with an attorney. Expect to spend between $30 and $100 for will writing software. If you have a relatively simple estate, going this route is probably acceptable for your personal situation, but if your situation is at all complicated, “do it yourself” tools (forms, software, and websites) simply can’t ensure 100% compliance with state and federal guidelines.

Work with a lawyer: An attorney specializing in estate planning not only can make sure the will you produce meets all governmental guidelines but also will be able to help you to create planning directives (a future post) and, if necessary, trusts( another future post!). Legal fees for producing a will usually range from $300 to $1,000 per person.

If you choose to work with a lawyer, always request and check references before beginning. The first step is to call your state’s Bar Association then look for a lawyer that will really listen to you, your concerns, and your wishes.

State considerations

Each state has specific estate planning laws and requirements. These include guidelines for spousal rights for married couples and community property statutes that decide who gets what when someone dies intestate (without a will). Other state guidelines may direct who can and cannot be an executor, how minor children are to be cared for, and how a will must be witnessed.

Choosing an executor

When you write a will, you have to choose an executor — the person or institution responsible for settling your estate after you die (the executor is sometimes called a personal representative). An executor “executes” your wishes as they are outlined in your will. Make sure you choose an executor you trust to fulfill this responsibility, and always get his or her consent before finalizing your decision. To choose an executor:

In addition, before selecting an executor:

• Make sure your executor will have access to liquid assets (cash) sufficient to cover the costs of probate, legal filings, and so forth. This amount should total at least $5,000 but could be as much as $25,000 or more if you have assets in multiple states, have complicated debts, or if the executor must travel extensively to settle your affairs.
• When choosing a family member or friend, always remember that being an executor requires a significant investment of time, money, and emotion. They’re going through a grieving process.

Executor’s copy of the will

Once your will is written, make sure the executor has a signed, witnessed copy before your death. Don’t keep your only copy in a safe-deposit box since these are usually sealed when you die (though your executor can eventually gain access). It’s best to provide a separate signed and witnessed copy to your executor before you die.

Your spouse’s rights in a will

You can usually leave all your personal assets (and your interest in joint assets) to your spouse without estate or income tax consequences, but only if you have a will that affirms your wishes. Other important considerations:

• You can’t “disinherit” your spouse unless you have a signed prenuptial agreement (pre-nup) authorizing you to do so.
• Property held jointly, such as a primary home, usually goes directly to the other owner(s) — most often to your spouse (if he or she is the other owner). Property held jointly may be classified as tenants-in-common, joint tenants with rights of survivorship (JTWROS), or tenancy by the entirety. Real estate owned as tenancy by the entirety applies solely to married couples. In this case, neither spouse may direct the property to anyone other than a spouse.
• Your share of any property held as joint tenants in common (JTIC) can usually be left to whomever you wish, including your spouse, as long as you comply with your state’s laws in preparing your will.

Community property states

Currently, nine states have laws that consider all property acquired during a marriage “community property” — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In these states, a husband and wife own jointly all assets purchased with money earned during the marriage. Estate planning in states with community property laws can be complex, so be sure to consult an attorney to help devise a plan to ensure that your wishes will be carried out if you die before your spouse. Spouses often wish to leave a portion of their jointly owned assets to people other than their spouses, such as children—a decision often best facilitated by a trust in addition to a will.

Choosing guardians

If you have minor children, you can use your will to identify a guardian who will be responsible for taking care of them should something happen to you. Get the consent of anyone you are considering as a guardian before selecting them. Also make sure that any guardian you select has sufficient financial resources to take care of your children.

Getting the will witnessed

In order for a will to be official, it must be signed in the presence of a notary by at least one, and usually two,witnesses. Anyone can serve as a witness to a will as long as he or she is not a spouse of the writer of the will. In most states (though not all), a witness may not be a beneficiary under the will.

If you work with a lawyer, he or she will make sure the will is witnessed correctly. After the will is witnessed, it may take several weeks for the legal documents to be completed.

Conclusion

Whether you use will writing software or decide to go the attorney route, writing a will is an important part of your financial life. It ensures that your assets go to the people you want, and it makes sure your wishes aren’t settled by a judge who probably never knew you.

Photo by Chris Tait

If you’re one of the thousands of people who have checked out YNAB through this site, I’m sure you’ve been as impressed as I am with this incredible budgeting software. If you’re one of the dozens who has taken the plunge and decided to follow up on your New Year’s Resolution by implementing YNAB’s budgeting philosophy in your financial life, you may be wondering what to do next. Well, after setting up your budget, you’ll quickly discover that you’re in one of four different categories:

• Your income and expenses are close.
• Your income exceeds your expenses.
• Your expenses exceed your income by a small amount.
• Your expenses exceed your income by a large amount.

If your income and expenses are close

Congratulations. You probably only need some small lifestyle changes to begin experiencing financial success, saving money, and eventually investing for your long term goals. Consider cutting back on dining out, clipping coupons, using NetQuote to help you get better insurance rates, or other small changes to decrease your ongoing expenses.

If your income exceeds your expenses

Big congratulations are in  order! It’s time to investigate which savings account to use and begin investing for your long term goals. Try reading How A Second Grader Beats Wall Street for some solid ideas on investing for the long term while decreasing your investment costs.

If your expenses exceed your income by a small amount

What is a small amount? In this case I’d say less than 5 percent. If this describes your situation, tighten up those budget categories and begin implementing as many changes as you feasibly can to save money. Cut your cell phone bill, do away with your land line, suspend your cable, clip those coupons, lower your thermostat (in the winter), carpool, raise your insurance deductibles, stop using any credit cards, and shop with a list.

If your expenses exceed your income by a large amount

Step back and take a deep breath. It’s time to decide what’s important to you and wipe your slate clean. It’s time to start over. Are you going to:

• Severely slash your expenses by using the above suggestions … and more?
• Learn ways to make extra money by utilizing your current skills and experience?
• Sell some of your possessions?
• Work on finishing your degree so you can get a better job and get paid what you’re worth?
• Cash in some investments? (first check with a financial or tax advisor)

Regardless of your personal situation, you do have choices. You can change your future by using your YNAB budget to correctly identify what categories you need to tweak, and where your expenses can be trimmed. You’ll find that you can identify where you’re wasting money and where you can manage to save for your future.

Congratulations to Kitty who left a comment on one of my posts about YNAB (You Need A Budget). Her comment didn’t win but her suggestion for a future topic DID! Kitty, I’ve sent you an email so as soon as you get it, respond back to me and I’ll get your $60 in FREE budgeting software on it’s way to you!

Her suggestion:

how to recover from stupid spending or stupidity in general, such as forgetting to pay your home owners until you have to be re-inspected or when you know you need a roof and don’t have the money for it.

Great idea, Kitty. There were a LOT of great ideas for future articles and I’m already sorting through them. Thank you to everyone who contributed.

I sincerely wish I could give everyone a copy of YNAB. It really is the best budgeting software you can use. Why?

The people who designed You Need A Budget really had their thinking caps on! If you head over to YNAB’s site, you’ll find several things that no other financial software company offers:  free tutorials, video tutorials, budget coaching, live online coaching, YNAB university, forums, a blog, as well as a free 7 day trial of their program. They don’t demand your passwords and logins from your bank (a super nice security feature). To top it all off, they don’t refer you to a FAQ page if you email their support staff – they actually respond to your individual email. Imagine that!

Everything YNAB revolves around their four tenants of budgeting:

1. Stop living paycheck to paycheck
2. Give every dollar a job
3. Prepare for rainy days
4. Roll with the punches

What sets YNAB apart in my mind is how they focus on helping you to establish a buffer – essentially you live on LAST month’s income by building a buffer with excess funds that your new budget helps you uncover.

From there, you learn to give each dollar a specific job. That job may be to pay your rent, feed your kids, save for retirement, or build your buffer.

YNAB helps you plan for those rainy days with a built in emergency fund for when your air conditioner dies, or your transmission needs repair, or your child gets sick and you have high deductible insurance.

Lastly, because you learn to live on LAST month’s income, a current hiccup in your budgeting plans doesn’t throw you off track. How many times have you started budgeting, had something come up, and you gave up? I know I have. YNAB’s built in flexibility keeps your budget in force even if life gets in the way.

So, if you didn’t win the software, you can still win by checking out YNAB’s free 7 day trial. Check it out and give it a try. I think you’ll see how intuitive and ridiculously easy it is to use.

Photo by jody.klopp

The difficult supervisor

When you’re working under a difficult supervisor or boss, it’s easy to develop a poor attitude. A bad attitude feels good for a while but demonizing your boss won’t make things better. A far more productive approach is to think of him or her as a person rather than an ogre or monster (or drill instructor). Chances are very good that he or she is dealing with many of the same pressures you are – from family needs and expectations to the expectations (realistic and unrealistic) of higher ups in the organization. He, like you, has to produce the desired results.

As far as it depends on you, the employee, try to make your boss’ life more pleasant. And let him know that is your goal! How? Do your job according to his or her specifications – not yours. I’ve told my boss that I never want him to be surprised and, if it’s within my power, I make sure he never is. I’ve told him repeatedly that he can depend on me to keep him in important loops, from office gossip to industry information. I’ve also told him that he can depend on me to help him look good because I’m depending on HIM to help make ME look good as well. “I scratch your back and you scratch mine” – but I make sure I take the first step.

Sometimes a boss makes decisions you don’t understand, but like it or not, your boss is in charge, and your personal work situation will improve if you maintain a good attitude and a good relationship (hint: your good attitude about your boss comes before a good relationship with your boss).

How to have a better relationship with your boss

Pay attention to how your boss works and adapt yourself to that style. Listen to what he or she says or doesn’t say. Don’t be a complete copycat, but if he or she wants no less than three options when you present something, give four.

If you have an issue, discuss it directly with him or her. If the problem persists, wait a few days and ask, “Have you had a chance to think about that issue we discussed?” If the problem still hangs on or is particularly serious, seek advice from your human resources department.

Never use phrases such as, “But that’s not my job.” It makes you seem whiny and uncooperative and that’s not the best way to have a good performance review or get paid what you’re worth.

Before you go to your boss with a new idea, extensively prepare background materials for support, but don’t neglect your current assignments! Going off the reservation on a personal quest doesn’t make you look like a team player either.

He or she has been placed in that position to get things done. Once a decision is made, respect it regardless of whether you agree or not.

If you have differences with your boss, don’t let the whole office know. Don’t just agree in public then complain in the break-room.

When your boss has done something particularly well, offer a compliment, but do this only for significant achievements or milestones. Otherwise you seem like an apple-polishing suck-up. No one likes insincere flattery.>

If you still have a problem, maybe your boss isn’t the problem. Maybe it’s you. It never hurts to take a long hard look in the mirror and ask your self, “Am I being unreasonable?” or “Should I have this response? Is it in my personal best interest?”

What’s really important? Being right or being employed? In today’s job market, that’s not a crazy question. If you’d rather be right, I’d suggest dusting off your resume.

Photo by The U.S. Army

Here we go again. Almost one year to the day after our last major ice storm, we’re faced with another. I’m a lot better prepared this time and I’m glad I’m with my family this time!

Take a peek at some great posts and articles from the past week:

Judicial Watch has a list of the 2009 Top Ten Most Corrupt Politicians. Don’t worry, it has Democrats and Republicans as well as some surprises. It’s in alphabetical order too, so no one can claim the top spot alone.

Lynnae over at Being Frugal has a fever, Square Foot Gardening Fever! Seriously, few things give me more joy than working with my hands in a garden, learning to patiently wait on a harvest, then enjoying the sweet rewards of that work and patience.

FCN at Five Cent Nickel is learning to live his life without something he’s had for most of his adult life … he’s having to learn to live without a MORTGAGE!

Jason from Frugal Dad is writing a great series called Saving With Purpose. The first article addressed short term goals and how we can plan for specific accomplishments.

Do you have a worst case scenario plan? Should you lose your job or go through some other financially traumatic event, having a plan in place will keep you from making the poor decisions that cause a situation to go from bad to worse.

Lazy Man is worried about saving for college. Saving for College – An Exercise in Depression reveals why I personally need to plan better for my kids college education.

David at My Two Dollars has a jewel of a post – It’s not what you earn, it’s what you spend. Understanding that one tiny fact is why people can retire wealthy while only making a modest income their entire lives.

In 10 Home Office Money Saving Ideas, Craig (a guest poster) helps you set up your home office the frugal way. Great ideas from Cash Money Life!

Brad from Enemy of Debt has No More Mondays. Yep he’s taken the plunge!

Dustin stirred things up a bit with an article on whether couples should have joint or separate bank accounts. Join in the fun!

Mandi from Organizing Your Way guest posted over at Simple Mom. Check out her great article that debunks seven common organizing myths.

I will hold the drawing for the best budgeting software you can get on Monday, February 1st, 2010. If you would like to get your name in the drawing for a free copy of You Need A Budget, this fantastic budgeting software, leave a comment – yeah, it really IS that simple to get $60 in free software freedom software. Living by a budget the YNAB way means freedom.

Only one entry per person but you can double your entries by leaving me an idea for a post in the future.

Make sure your email is valid – that’s how I’ll contact you if you’re the winner. I’ll assign numbers to each entry and use Random.org to generate a number for the winner.

Good Luck!