A breakthrough: We're staying in our townhouse

The past three years haven’t been easy for M and I when it’s come to discussing our housing situation. We’ve struggled with whether we should stay in our 3-bedroom townhouse or move up to a larger house. Finally, last weekend, we had a breakthrough: We’re staying in the townhouse.

That might seem odd, given all the reports that housing prices are on the decline. But I think it’s the right decision, and most importantly, both M and I do. For the first time, we are on the same page regarding a topic that has been a steady source of conflict. And really, the credit belongs to M, for whom letting go the idea of a bigger house—at least for the time being—was emotional and difficult.

Still a big stretch
The decision is hard for me, too, but for different reasons. It is a good time to buy, or at least better than it was a few years ago. M’s regular monitoring of websites like Realtor.com indicates that single-family home prices in the Burlington County, New Jersey, area have fallen anywhere from 10% to 15% from their highs in 2006.

However, they still ain’t cheap. While we have a fair amount of equity in our townhouse, it would be a financial stretch to buy the kind of home we really want—a contemporary four-bedroom house that we envision living in for the next 20 years or longer.

We toyed with the idea of killing ourselves with extra jobs and belt-tightening over the next 12 months to save for a bigger down payment. But with M juggling full-time mommy duties for a toddler, an infant, and a teenage daughter, and my daily two-hour work commute, our schedules are already tight. And our $500 per month grocery budget is considered “thrifty” by many standards.

A focus on other goals
So instead, we’re going to concentrate on modestly improving our townhouse more to our liking, and saving for our kids’ college. For instance, our 3-year-old son’s basement play area is half-finished (our friends half-kiddingly call it “the dungeon”) and too close to sharp tools and old paint cans for comfort. Plus, my stepdaughter graduates high school in 2012, and we are far short of having the money we’ve agreed to provide for her college (the actual amount requires some explanation; I’ll get into that in another post sometime).

Without the specter of a new house looming in the back of our minds, we can focus on achieving those goals.

Can’t do it all
I asked M what the turning point was for her in deciding it was best to stay where we are. Her personal sacrifice is enormous, on multiple levels: As a young girl, she always envisioned marriage and family life with having a house and a yard in a neighborhood—a far cry from our multi-unit, parking lot-covered townhouse complex. She also knows we could afford that house if she returned to full-time teaching, a job she loves, is good at and well-paid for, and finds much more appealing than cooking and cleaning.

I imagine many women today, balancing work and family, can relate to her response (which I’ve paraphrased).

“It was a combination of things,” she said. “The kids being sick so much this winter. Trying to keep up with doctor and orthodontist appointments and cheerleading practice, while also tutoring just a few hours a week on the side. It’s overwhelming.

“I think God has been showing me that I can’t do it all, that I have to decide what’s really important. And I want to be there for my kids when they need me. I don’t want someone else raising them. If that means waiting to have the bigger house, so be it.”

Peace in exchange for a bedroom
I’m confident we will someday have the house of our desires, probably in about five or six years, when M does return to work. And we are still passively “in the market” if an opportunity arises. We’ll take any miracles God wishes to send our way.

But we’re not counting on a miracle to make us happy. We are hopefully putting to rest our discontent with the blessings He’s already provided, removing it as a flashpoint in our marriage. I’ll trade an extra bedroom for marital peace any day.

When should I get rid of my high-mileage car?

I’m approaching 193,000 miles on my 1998 Nissan Sentra GXE, and I’m in a quandary. When should I buy another car with lower mileage?

My Sentra, unlike the one shown here, is in fair condition. It runs a little more sluggishly and loudly than it used to. A small dent from backing into a friend’s car is noticeable, but not terribly so. The interior is clean and tear-free, with a few minor upholstery stains that I could scrub out.

My wife and stepdaughter see my Sentra as a “junker.” I see it as a wise choice for my driving needs. I’ve logged 100,000 miles in about four-and-a-half years traveling 105 roundtrip miles daily to work and the car has required just one non-maintenance repair of over $500. It’s 30 miles-per-gallon has been nice in this era of $2.50-plus per gallon gas prices. And I could conceivably sell it for about $2,800, according to Kelly Blue Book—an amount that’s held fairly steady even as the miles have piled higher.

Sell the car now or later?
With 200,000 miles approaching, I’m actually a little excited. Just how many miles can I get? But I also know I’m living on borrowed time. If the car does die, it will be worth nothing.

I’ve been watching the market for used Nissans, Toyotas, and Hondas on phillycars.com, a local car-buying site. I could get something similar to my Sentra with less than 100,000 miles for $4,000 to $7,000. M and I have some cash saved to get another car for me, but we also dip into that reserve when our monthly cash flow gets tight. A part of me wants to use that money for the car sooner rather than later, before we drain it completely.

Going to keep driving—for now
Still, I’m tempted to keep wringing as many miles as I can out of my trusty Sentra. There’s a good chance that it will die a slow death, with steadily increasing repair bills, rather than suffer a sudden automotive cardiac arrest. Then I could keep it running until I find a car and a deal I like, which is better than being forced to take whatever cars and deals are available at the time because I need a car to drive.

What would you do?

The truth about budgeting

Research has shown that about 40% of all households maintain a monthly spending plan, or budget. While they make up less than half of us, do budget-users know something non-budgeters don’t? Have they discovered a secret to make budgeting less of a chore?

Unfortunately, no. Here are three truths that I've learned about using a spending plan, and that other users would likely agree with:

Planning ahead is hard. Unexpected expenses come up every month and prices on most things (not just gas) continue to rise. Sometimes spending predictions are off—even way off.

Tracking spending is a pain. A purse or wallet stuffed with receipts is annoying. And even with budgeting software, logging all the information can be time-consuming.

Budgets are "restrictive." Yes, a budget will restrict you from buying what you want--especially if you can’t afford it.

So now you know: Budgeting isn’t fun. But that's true about many things in life that are good for us. Watching what we eat and sweating it out at the gym aren’t easy, for example. But the satisfaction you can get from a trim, healthy body makes the effort worthwhile.

Financial talk-show host Dave Ramsey likes to say that folks who get on a monthly budget often feel like they’ve gotten a raise. Such can be the power of planning and knowing where your dollars are going each month. And that can lead to some fun--that you really can afford--in the long run.

Lessons learned from buying a used van

The search is over. I wrote in January that M and I were in the market for a minivan and we finally bought one: a silver-blue 1999 Honda Odyssey EX that has just 89,000 miles. It’s already proven a nice addition to the family; on a road trip last weekend, we buckled CJ Jr. into his carseat and peeled off wet jackets while staying warm and dry within its spacious interior, as a Nor’easter raged outside our windows.

As an added benefit, we saved about $1,000 on the purchase price—money we plan to shift toward our goal of building an emergency fund of three months cash reserves.

As thrilled as M and I are with our purchase, it wasn’t easy. At times, we both longed for the convenience and security of buying brand new. But I did learn a few good lessons from our Odyssey-shopping “odyssey.”

Be patient
The search was slow, lasting six weeks start to finish. Along the way, I visited nine dealerships within a 50-mile radius of our home. I responded to four private ads, even test driving one vehicle while on the way to a family function (for which we ended up being late). And I spent many evening and weekend hours hunting for prospects on cars.com, kbb.com, and phillycars.com.

Even more maddening than the time spent was the time wasted, checking out vehicles that didn’t live up to their billing. Opening the hood of an Odyssey at one small dealer revealed what looked like actual tumbleweeds lodged in a grime-covered engine. A 2001 Nissan Quest advertised as “well-maintained” vibrated unnervingly as M eased it out of the driveway on a test drive.

Was the time and effort worth the ultimate benefit? It didn’t always feel like it. More than once we considered throwing in the towel and diving deeper into savings to increase the $10,000 maximum pricetag we wanted to pay. Now, as we enjoy the extra space and the automatic sliding doors (which CJ Jr. opens with an enthusiastic “Abracadabra!”)—all within our original budget and requirements—I’m glad we patiently stuck to our plan.

Be skeptical
I’m smart enough to raise an eyebrow when a vehicle’s seller says the emergency brake-indicator that continually stays on during my test drive “doesn’t mean anything.” But I almost gave in on one of my key buying criteria—having my own mechanic inspect the vehicle I wanted to buy—because I wasn’t skeptical enough.

Several used car dealers told me I couldn’t drive their vehicle to my mechanic before buying it. The reason? Insurance wouldn’t cover it (my mechanic is near my home, so it usually meant a trip of several miles). After the first few dealers threw up the same roadblock, I was almost ready to concede the point.

But my father, an attorney with lots of experience suing car dealerships, said the dealers’ rationale was nonsense. It was unlikely the vehicles weren’t insured, and even if that was the case, I had coverage as a driver. Most likely, the dealers didn’t want to take the chance that my mechanic would find something wrong.

Sure enough, the dealership that eventually won my business had no problem with me driving the Odyssey the 25-plus miles to my mechanic before I paid a cent. Jason, the salesperson, didn’t ask for a deposit or even the keys to my car. “We’re confident that our guys found everything and anything, so have at it,” he said. My mechanic gave the van a nice thumbs-up (“It’s got a lot of life left in it,” he said) and I had some much-needed peace of mind.

Make an offer
Like many people, I don’t like haggling over a car’s price. But I know that haggling can mean money in my pocket, and I am cheap by nature. So I haggle.

And it works. In buying our Odyssey, I made an initial offer of $8,000, 20% below the dealer’s $10,000 advertised price. I thought it absurdly low for one of the best vans I’d seen, and Jason seemed to confirm it by quickly shaking his head.

“No way,” he said. “There might be some wiggle room, but not that much. We don’t price our cars artificially high and then discount them thousand of dollars during the sale to make buyers think they got a great deal. We advertise what we feel is our best price.”

I took a breath. The Odyssey’s price was certainly in line with others I’d seen advertised for similar vans, I said. But it wasn’t the lowest either, and besides, we had no real idea what other vans were actually selling for. It was probably less than $10,000, I concluded.

“Let me take it to my sales manager and see what we can do,” Jason said.

Five minutes later, he came back with a $9,000 offer. I shook his hand and sealed the deal. Looking back, I wonder if I my “absurdly low” offer was really too high.

The path to wealth is usually a slow one

There are no shortcuts to financial success, but you wouldn’t know it by the Internet. Just Google the phrase “get rich quick” and you get advertisements like these:

“Bring in $100,000 a month: I can teach you how!”

“Turn $600 into $39,000 with the Forgotten Commodity!”

“Earn money fast and LEGALLY!”

Seeking quick riches can spell trouble
The absurdity of the ads’ claims is worth a chuckle. And maybe you've never felt tempted to click one just to “see what it’s all about.” But someone is clicking, and buying into the ads’ promises—otherwise they wouldn’t exist.

“Quick and easy” is a good description for making a box of Mac n' Cheese, not building wealth. After all, “The trustworthy person will get a rich reward, but a person who wants quick riches will get into trouble.” (Psalms 28:20)

Overnight wealth, or lasting peace?
In their research for the bestselling book, The Millionaire Next Door, Drs. Thomas Stanley and William Danko found that “building wealth takes sacrifice, discipline, and hard work”—hardly the stuff offered by the Internet ads above. But chances are most folks wouldn’t click on ads like these:

“Learn the secret to financial success: Spend less, save more!”

“Retire a multimillionaire—in just 30 years!”

“Be content with what you have. Find out how!”

Living below your means, using a monthly spending plan (budget), setting aside money for the future, and avoiding debt won’t you get rich overnight. But they can vastly improve your chances of accumulating wealth in the long run. More importantly, they offer the promise of something much better: lasting peace and contentment.

Charged up about the cost of a cell phone battery

I've been debating getting rid of M and my cell phones. Buying a cell phone battery has pushed me a little closer to hitting "End Call" permanently.

I've had my LG VX3300 cell phone for about 15 months--not that long, in my estimation. I use it only moderately; I rarely go over the minutes in my service plan and I turn it off when I'm at work. So the fact that the factory model battery recently stopped holding its charge for any length of time was annoying enough.

Then I went to my friendly local Verizon accessory dealer for a replacement. The pricetag: an appalling $49. More than twice as much as I expected. As M pointed out after I got back, "For that, you could have gotten a whole new phone."

I want what I want
Yes, I could have. But I didn't want a new phone. My phone serves my purposes well enough. I don't need a cameraphone, a webphone, or a phone with the ability to answer e-mail.

And I definitely don't want a new cell phone plan, which cheap new phones often come with. I can't wait for our current two-year contract to run out so we can unload it from our monthly budget. I'd rather put $82 toward CJ Jr's college fund--which we've temporarily stopped contributing to, since we went to one income--than give it to Verizon.

I've considered paying the cancellation fee. Dishing out the $150 for each of our two phones is less than half than amount we'll pay ($738) for the next nine months to finish out the contract. But I just can't stomach putting out that kind of money for absolutely nothing.

Two big errors
I do shoulder some of the blame for my battery "overcharge." I didn't shop around beforehand, as I normally do. Afterwards I found one online for half the price.

I also took CJ Jr. with me on my little errand. I may have been more inclined to go to a couple different places, or even ask the Verizon guy about other options, if I had been able to keep both eyes on the cash register instead of one eye on CJ.

Now M and I have to revisit our January spending plan and figure out where that extra $30 or so will come from. That may not sound like much, but it eats up a little chunk of our expected household expenses for the month, which we try to keep as fixed as possible.

Besides, I just wanted a battery, at a reasonable price. Is that too much to ask?

Time to shop for a van

The CJ family is growing. M and I have just found out she’s pregnant, God bless, due in late summer.

While we still have to get through that crucial first trimester—as M cautions, she is 39, which means a greater chance of complications—I’m throwing caution to the wind and proceeding full-speed ahead to prepare for the new arrival. So this weekend I’ll start shopping for a minivan to replace M’s 2002 Honda Civic.

A new experience
I bought my last car, the slightly used 1998 Sentra I drive to this day, eight years ago. Back then I traded in my 1988 Ford Festiva, took out a five-year loan, and made all 60 payments.

This time, I’ll be putting some of the personal finance wisdom I’ve learned to the test. I’ll be selling M’s car privately instead of trading it in. I’ll be looking for a vehicle around three to five years old and between 75,000 and 100,000 miles on it, instead of just slightly used. And I’ll be paying cash instead of carrying around a car loan for half a decade of my life.

Private sale means more cash
The advantages of this approach: First, by selling M’s car privately, I should be able to get more money for it than I would as a trade-in. According to Kelley Blue Book, a good condition Civic like M's sells privately in my area for about $9,400, nearly $1,400 more than its trade-in value. It’s also paid off, so every dollar we get for it goes to us.

Sure, showing the car to buyers will probably be a hassle and it may cost a few bucks to run some ads. But will the time and money be worth another $1,400 that we can apply to the van purchase? I think so. We’ll see.

Used doesn’t mean unreliable
Second, we can in no way afford a brand new Honda Odyssey—the van M prefers—which currently has a minimum pricetag of $26,000. Even if we could, I’d have a hard time shelling out that kind of money for something that will likely worth about half that amount in a couple years.

A high-mileage Odyssey is still relatively pricey—around $9,000 to $12,000—but much of that cost should be covered by the sale of M’s Civic. And while we do run the risk of buying something with unforeseen mechanical problems, Honda and Odysseys have a great reputation for reliability. I also plan to check certified pre-owned vehicles first to see if they are in our price range.

In the end, I expect we’ll pay an additional $2,000 to $4,000 for the luxury of not having to hear my teenage stepdaughter complain about being wedged between two carseats. That’s family peace at an affordable price.

No borrowing costs, less risk
Lastly, I’m looking forward to telling a car salesperson that I want to pay by check instead of taking out a loan. Financing mostly benefits the dealer, since loans are often where auto retailers make their biggest profits.

For buyers, however, a new car’s value drops like an anvil in its first couple years on the road. Used car values still lose ground each year, though not as quickly. Having a car loan is like borrowing money to buy a stock you know is going to lose money. It doesn’t really make sense.

Plus, say M and I hit dire financial straits down the road and had to sell the van. We may owe more on it than we can sell it for—what’s known as being “upside down” in a loan. That would likely make our tough money situation only slightly better.

Paying cash might mean a dealer and salesperson are less willing to negotiate on a van’s price, since that’s where their only profits will come from. But I’m willing to take that chance. Last I checked, there were lots of used Odysseys for sale in my area.

Stash some cash for emergencies

As I mentioned in my last post, I knew the personal finance books I received for Christmas would yield some good fodder this blog. Here's the first interesting tidbit to share.

In The Wall Street Journal Complete Personal Finance Guidebook, Jeff Opdyke recommends stashing a few hundred dollars cash in a very secure spot in your home, just in case the power goes out in your area for an extended period of time. Though M and I have started using cash on a more regular basis, we get that cash from an electronic ATM. Plus, we're still pretty tied to using our debit card to pay for things.

Other than big snowstorms or the occasional flooding, natural disasters are rare in South Jersey, but having some cash around to pay for groceries in an emergency isn't a bad idea. Now I just have to find a secure place in my home to keep it (something I won't be writing about here).

By the way, the Carnival of Personal Finance is up at My Personal Finance Blog. Check it out if you have a chance.

Good personal finance advice for your ears

I love my iPod. Listening to podcasts of radio shows from Dave Ramsey, Crown Financial Ministries, and Charles Stanley make my hour-long commute to and from work an education rather than just a grind. (In fact, I rarely listen to music.)

I'm going to add another show to my podcast favorites: "The Color of Money" from National Public Radio (NPR). It airs every week on NPR's "Day to Day" show. Michelle Singletary, the personal finance columnist for the Washington Post, is the primary contributor. The segment covers the usual range of topics, from saving for retirement, college, etc. to tips on starting a business.

Maybe the best part about it: It's informative and short, about four minutes long. Plus, with the podcast, no endless NPR fundraising segments to sit through in the fall and spring.

A Penny Saved hosts Carnival
The list of submissions to the weekly Carnival of Personal Finance seems to get longer and longer. This week's carnival is at A Penny Saved, and since there are so many choices, here are a few from the bottom of the list you otherwise may not have seen:

• The pursuit of the perfect savings rate at "My financial journey."
• 13 ways to save on gasoline, at "How to save money" (though you need to live near an Indian reservation for one tip).
• How persistence will make you rich someday, on "Money Smart Life."

How to save $1,000,000 and have your own jet, too

My friend Tim, hero of my recent "Shopping tips from a savvy online bargain hunter" post, proved again that he really knows how to find good deals online. Check out this one he found advertised a couple weeks ago on Dealnews.com for a Cessna Citation Mustang Light Jet from Sam's Club.

Sure, the $2.7 million pricetag might seem a bit steep. But consider that it's $1 million off the list price and comes with a Sam's Club lifetime membership. Chances to be a wise spender like that just don't come around every day. No wonder Sam's Club is already showing the jet as "sold."

High taxes may be the least of your problems

The politicians here in New Jersey are at it again--trying to figure out a way to lower the highest state taxes in the country. Few Jersey residents believe they'll make much headway, as this Philadelphia Inquirer article points out, and I, too, will believe it when I see it.

But if you think that lower taxes will make a big difference in your personal finances, think again. If you're complaining that taxes are too high and are a big reason you don't have enough money to live, you just might be looking at the wrong side of the equation.

It's not the taxes that are killing you

I was struck by this quote at the end of the Inquirer article linked to above:

"I just spent $200 on beauty products and makeup and had to pay $14 in sales tax," said Elisa, a woman shopping in Atlantic County. "I think that's ridiculous. They better start giving us something back or people are going to start moving to states where they have to pay out less money in taxes."

Now I'm trying hard not to rush to judgment. I've been with my wife M when she's bought makeup and I know it can cost a pretty penny (even at our local drugstore). Plus, I know that M wears makeup to look nice, mostly for me, and so I can be held responsible for the lipsticks and eyeliners in her purse. Guilty as charged. (Though she looks beautiful naturally, too--seriously.)

But $200? For makeup? And then complaining about $14 from a 7% state sales tax?

I can't make that kind of logic add up.

Taxes are a good, not great, deal
No one likes a big tax bill. And I've done my share of griping about the big chunk of our family income that goes to our federal and state governments.

But taxes are a fact of life. They pay for things our country and states couldn't do without, like roads, schools, and the protection of our homes and families. In the big scheme of things they might not be a bargain, but they could be considered a pretty good deal.

Being money-wise is less taxing
I don't know if Elisa is rich or poor. I don't know if that $200 in makeup will last her a year or a month. I don't know if she carefully included the expense in her monthly spending plan.

But if she's in a financial mess, I know one thing: Paying $14 less in taxes--or moving to another state with no sales or income tax--isn't going to get her out. Her best chance at financial redemption is to change how she thinks about her money, and how she behaves in regards to it. Save more, spend less, know where every dollar goes. That's taking a wise approach to managing your money.

It's good advice for every person to follow. And come to think of it, for every legislator too.

New cars may be more affordable, but still don't buy one

Cnnmoney.com ran an article recently that cars are at their most affordable levels since 1980. According to Comerica Bank's "Auto Affordability Index," better productivity in the auto industry combined with intense competition has driven the cost of a new car downward since its high in 1994. Meanwhile, the average family income has risen five percent over the same period.

"It's a pretty happy story for the consumer," Dana Johnson, chief economist at Comerica, is quoted as saying.

Not this consumer. Including finance charges, Comerica estimates the cost of the average passenger vehicle sold in the third quarter of 2006 at $26,500. That's about five percent less than the same period a year before, but still an awful lot of money to pay for something that's going to be worth about half that amount in a year or two.

If you are trying to get your finances on track--working to pay off debt, amass funds for your retirement or your kids' college, build up an emergency cash reserve--then a new car is a sure way to run yourself off the road. Just say no to buying one.

Used cars are a lot better deals than they used to be. I saved a few thousand dollars buying a 1998 Nissan Sentra with 12,000 miles on it eight years ago. It just passed the 170,000-mile mark. Best of all, it's completely paid for, giving M and I the freedom to work on our other financial goals--like trying to move up to a single-family home without mortgaging our life away.