Is a Higher Automobile Insurance Deductible Right for You?

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! Finally 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 insure that you can afford to cough up and extra $500 in a crisis which is one of the reasons it is essential to have a strong emergency fund in place. 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!

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Demand More Fuel Efficient Vehicles

American consumers need to demand better fuel mileage in lieu of more powerful vehicles. Every time I turn on the TV there is an ad for a “bigger, more powerful” version of last year’s model car, truck, or SUV. Even Honda, who proudly touts itself as the world’s most fuel efficient automaker, is in on the act with their new Accord commercials.

In these troubled times of global warming, high energy prices, and mounting debt, Americans’ still demand ever increasing power and automakers are more than happy to please.14 years ago when I was a senior in high school my 1984 Buick Skyhawk averaged just over 28mpg @ 90 horsepower with a 2.0 liter engine. Today I drive a similar sized car with a similar sized engine that cranks out 160 horsepower and averages only 26mpg.

I know that the performance wasn’t lacking in my older car, it would go WAY past the posted speed limits. A 275hp engine in an SUV has practically no benefit over one with a 175hp engine yet it loses over 4mpg. What is going on here?

Author Paul Roberts explains it best in his book “The End of Oil”. He refers to this phenomenon as the “efficiency dividend”. Automakers are always tweaking their technology to get the most energy out of a single gallon of gas. Every time they improve the efficiency of their engines they are faced with a decision. Should we keep the gas mileage the same and increase the cars power output, or should we keep the power output the same and increase the cars miles per gallon?

The answer is quite simple: The automakers will do whatever sells the most cars. We have the technology for better mileage; we just don’t have the heart.

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The Victoria Secret Credit Card: A New Meaning to the Term "Personal" Finance

70 Years ago people rarely financed new automobiles. Today, people can (and do) finance anything! Just yesterday, I visited two separate Victoria's Secret retail stores and was asked twice at each store if I was interested in applying for a Victoria's Secret Credit Card. I politely declined the offers and used my debit card to make the purchase. I could of saved $1.50 if I had taken advantage of their "valuable" offer of 15% off of my initial purchase.

Not only does the card offer outrageous interest rates, ridiculous late fees, and other charges, the last thing I need is the added responsibility of having to pay my "Underwear Bill" for the month!

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How to Pick the Best Mutual Fund for You!

OK, so you've finally convinced yourself to enroll in your company's 401k plan or maybe open up an Individual Retirement Account (see my article Roth IRA vs. Traditional IRA 2008). You've filled out the application and set up your automatic contributions. The problem is, you have no idea what to invest your money in now that it's in your account.

By no means am I an expert when it comes to picking individual stocks (read about my day trading stories here). But the free Mutual Fund Screener available at Morningstar.com can easily help you find mutual funds that have traditionally performed better than others, thus increasing your chances of making the most money. (Just remember that past performance is no guarantee of future results).

How Will I Know What to Look For?
You want to look at the 10 year track record of a mutual fund, and compare it with other funds of the same category. For instance, if you find one Mid Cap Blended Fund that has consistently outperformed other Mid Cap Blended Funds, and it has had the same manager the entire time, it may be a good fund to invest your money in. 1 and 3 year track records don't tell us much because even bad fund managers can have a "lucky" year or two!

Watch Out for the Fees!
There are many fees that go into running a mutual fund. Money is needed to pay the fund manager and staff, marketing fees, and legal and accounting fees, to name a few. Fortunately for the investor most funds publish what is known as an expense ratio that accounts for all of these expenses together. You can easily compare the fees from one fund to the next by looking at the expense ratio. When you are comparing the performance of two different mutual funds it is important to consider these ratios and here's why; suppose one fund has an expense ration of 2% with a 10 year performance average of 13%, it would be logical to pick it over a fund that averaged a return of 9% over the same period but only had an expense ration of 1%. In this case the performance of the costlier fund more than made up for the increased fee.

No-Load vs Loaded Funds
Some funds require investors to pay an upfront "load" when purchasing a particular fund (sometimes as high as 5% or more). To me, a "load" is nothing more than an initiation fee to play on the same course that everyone else is playing on for free (couldn't resist the golf analogy). Unless the fund has a considerably better performance record than it's "no-load" competitor I would not advise investing in a "loaded" fund.

The Morningstar.com Mutual Fund Screener is fairly straight forward. You can filter your results by 1, 3, 5, and 10 year returns, expense ratios and loads, tenure of current manager, minimum initial purpose amount (many funds can be bought into for $500), and Morningstar's Own Personal Rating (between 1 and 5 stars with 5 being the best). Simply adjust the variables you want to filter your mutual funds with and the screener will sort through thousands of available funds.

A rule of thumb that has always served me well is to put 25% of my money in each of the following mutual funds categories.

25% in an International Fund (My favorite is Fidelity Diversified International FDIVX)

25% in a good Small Cap Blended Fund

25% in a good Mid Cap Blended Fund

25% in a good Large Cap Blended Fund

I offer the above only as a suggestion and not the rule, there are more opinions on "allocation strategies" than there are mutual funds!

Feel free to contact me with any questions you may have, I'll try to answer them the best that I can or direct you to someone that can.

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How To Get the Best Price Selling Your Car Yourself

Don’t “trade-in” your car at a car dealership when you purchase your next vehicle! Instead, save a bunch of money and sell your current car yourself. Follow these tips below to help maximize the selling price of your old car and keep more money in your pocket!

Condition

Make That Baby Shine!
When you go to buy your next car, whether it is new or used, you’re going to expect it to be clean right? Well, the same will be true for the person who comes to look at your car. The cleaner you get your car, the more money you’re likely to get. If you're unable to properly clean your car (for whatever reason), it might be worth it to spend $100-150 to have your car professionally detailed by a local auto body shop (especially for cars worth over $8k). Check your local yellow pages for special coupons and discounts for these services. A properly conditioned car can sell for hundreds even thousands more than a dirty one.

Fix Any Minor Problems
Does your car have some vanity lights burned out? Do the headlight, brake, and signal lights all work? Does it have a cracked windshield or a wiper that is hanging on by a thread? Get these items fixed BEFORE you start showing your car. Most of these minor problems can be corrected for a few dollars at your local Walmart, or Autozone store.

Make a decision on Major Problems
If your car needs a new transmission, doesn’t run, or has major cosmetic damage, you need to make an honest estimate what the car would be worth after you've fixed it, and what it would be worth as is. If you’ve got a broken car that would be worth $3500 in good condition but is only worth $1000 as is, you’re better off not fixing it if the repairs will cost $2500 or more, especially when you consider the hassle involved. Just sell it!

Research

Price Your Vehicle
There are many great sources on the Internet to establish a fair price for your vehicle. Kelly Blue Book, and NADA both offer well respected used car pricing information. I always check the free online classified website Craigslist to get an estimate of what similar cars are selling for in my area. The longer you have to sell your car, the higher you can start your asking price. Get a feel for the market value of you car based on the above references and then set your price accordingly.

Market

Placement
One of the most effective methods of selling a used car yourself is to park it in a highly visible area with the "for sale" sign on it. If you live on a busy street you're in luck. If you don't, try one of these tactics:

Park the car in a busy shopping center along the front of the parking lot near the main entrance and keep the for sale signs in it.

Ask a friend in a higher traffic location if he'll let you advertise your car in his driveway.

Advertise
See my How to Sell Your Car on Craigslist article for a step by step guide to posting your vehicle for sale. It's easy, and best of all it's free. You can also place an ad in your local newspaper or other classified newspaper/magazines in your area. The trick is to give an accurate description of the vehicle. Be as honest as possible so people won't be disappointed when they come to look at it and end up wasting their time and yours. (Tip: Do not respond to out of state buyers who promise to give you more than your car is worth, or that they can sell your car for more than you are asking, it's a scam)

Another good advertisement is to print up flyer's and hang them on community bulletin boards around town. Many supermarkets, post offices, and department stores have community bulletin boards that allow you to place ads.

Seal the Deal

Protect Yourself
It's a good idea to meet prospective buyers in a public space. Not only is it safer, but it is generally easier to give directions to public places people are more familiar with.

Bill of Sale
You will need to create a "bill of sale" that meets the requirements of your state. This document is signed by both parties and typically includes the name of the buyer, the name of the seller, a description of the vehicle, the mileage of the vehicle, and the VIN#. Many states off free "bill of sale" forms on their websites. You can also download an inexpensive state specific "bill of sale" from US Legal Forms.

Payment
Never take a personal check when selling your car unless you accompany the buyer to the bank where the check is drawn and verify the funds are available. Be extremely cautious of Cashier's Checks. I got lucky when I accepted a check for my motorcycle from an individual that lived out of state. The check could very well of been counterfeit. See more about cashier's check scams and how to avoid them here. I personally won't accept anything other than cash, or a personal or certified check that is drawn on a local bank where I can personally verify the funds.

You may also enjoy these posts:

Leasing My Toyota 4Runner Was Dumb

All New Car's Are Luxury Vehicles

Bad Reasons to Buy a New Car.

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My Simple Excel Based Check Book Registry Spreadsheet

If you've got plenty of time, and need sophisticated tools to run advanced calculations of your finances, you can't beat Microsoft Money or Quicken.

On the other hand, if you just want a basic spreadsheet to keep track of your checking, savings, and credit card accounts (like I did), you might be interested in the simple checking account registry spreadsheet I created with Mircosoft Excel. It's easy to use, it's quick, it can be used on virtually any computer, and best of all it's FREE! You may also be interested in my article How to Pay Off Your Debt (The Debt Snowball), and How To Get Your REAL Free Credit Report.

To use, simply follow the directions below:

1) Click the "download" button above. A new window will open, you will see a file called "Checkbook Registry". Click "download" and save the file to your computer.

2) Once the file has downloaded, double click on the icon and it will open.

3) The program will automatically open to the "Checking Account" page you see in the picture above.

4) Enter your "Beginning Balance" in the Yellow Box, this will be your starting point.

5) From here it's simply just a matter of updating your registry with every transaction you make.

ID: This is where I enter the transaction type or check #. For example, if I made a purchase with my atm/debit card I would enter "atm" here. If I wrote a check I would write the check # here, if I made a deposit I would write "deposit", if I transferred funds to my savings account, I would write "transfer", you can use your own codes to suit your needs.

X: I write an "X" in this column when I see that the transaction has cleared at my bank either online or in the statements that are mailed to me. This is my form of reconciling.

Date: Enter the date of your transaction.

Description of Transaction: Write a quick blurb that best describes the transaction (Example: Ford Car Payment, Exxon Gas Station, Dinner @ Olive Garden, etc.)

- : If the transaction involves money coming out of your account enter the amount in the - column.

+: If the transaction involves money going into your account enter the amount in the + column.

Balance: Your new balance will be calculated automatically!

This simple spreadsheet has been extremely valuable to me over the years. I no longer have to worry about making mistakes when adding up long columns of numbers, the program saves me time, and it is extremely portable. You can even email a copy to yourself so you can always have access to it no matter where you are. If you do try it out, I hope you find it as helpful as I have. There are more sophisticated programs on the Internet, but this is all I ever needed a money management program to do.

Advanced Tips: If you look at the tabs in the lower lefthand corner of the screen you will see that I have included a page for you checking account, savings account, and credit card so that you can keep track of multiple accounts with this one program. If you want to add an additional account, right click on the tab you want to copy and select "move copy", then check the box that says "create a copy" and press "OK". To change the title of each page (example "Jane's Checking Account) simply click the title where it says "checking account" and type what you want the new title to be.

Have you read my Guide to Protecting Your Credit and Identity?

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Save $1.00 or More Per Gallon of Gas! How to Improve Your Vehicle's Fuel Efficiency

If you're tired with the outrageous price of gasoline, try these tips to help ease the pain at the pump!

Drive Slower
According to the US Environmental Protection Agency (EPA), the most efficient speed to operate a vehicle is between 55-60mph. Slowing down from 75mph to 55mph can increase your fuel efficiency by 20% or more. See the graph below from the EPA. At the current price of gas ($3.50) you can save up $.70 a gallon just by slowing down!
Remove Your Roof Racks
When I removed the bike rack from the roof of my car, my mileage improved from about 26.2mpg to 27.5mpg (that's a 5% improvement!).

Remove Excess Weight From Your Car
According to the EPA, for every 100 pounds of additional weight you carry in your car, you fuel mileage will go down 2%.

Avoid Idling Your Engine
Try to avoid letting your engine idle for extended periods of time. If it looks like your going to be sitting still for an extended period of time shut turn the car off.

Use Cruise Control
Cruise control will help increase your mileage by reducing the constant speeding up and slowing down that drivers often do without even realizing. Your car will run more efficiently at a constant speed.

Don't "Show boat" Around Town!
Rapid acceleration is a sure way to decrease your cars gas mileage, not to mention the increased wear and tear on your drive train. You can do "burnouts" if you want, but I don't want to hear you complaining about the high price of gas (or tires for that matter).

Keep Your Tires Properly Inflated
Properly inflated tires can increase you fuel efficiency between 2-4%. Keep your tires inflated at the maximum allowable pressure as recommended by the manufacturer. Consult your vehicles owner's manual for more information.

Change Your Car's Air Filter
Believe it or not, according to the EPA, changing a clogged air filter on your car will improve your fuel efficiency by up to 10%. That's another $.35 in savings per gallon!

Use the Recommended Grade of Oil
Using the correct grade of oil for your car can improve your mileage by 1-2%. Also, be sure to change your oil as recommended by your owners manual. The nastier your oil gets, the less efficient your car's engine will run.

For more great tips on saving gas, consult the US Department of Energy's Fuel Economy Guide 2008.

Read my Plea to New Car Buyers

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