photo by ●๋• Cishore ♥

When we don’t know where the market will bottom out, a good investment is in companies that pay out a nice dividend. You can make somewhere between 5 and 7 percent per year on your investment based solely on the dividend. Once I finish buying my house - we close on the 14th of November - and we finish buying furniture and finally get settled, I’m going to start investing in some very big and stable companies that pay out decent dividends. If you are unsure where to put your investment money right now, consider these types of stocks or you can look for dividend focused ETFs (Exchange Traded Funds).

photo by axelsrose

Lunch doesn’t seem like something that would make or break your budget. After all, lunch isn’t as big as replacing the transmission in your car, fixing a leak in the roof, or any other temporary “emergency,” is it?

In my limited experience in the workplace, I have seen many different eating habits from my coworkers, but by far the most common habit is to eat out every day, or nearly every day. If we assume that this is the norm, then we should see how much money we can save each year by deviating from the norm.

Lets assume that your average lunch is a $5.99 sandwich, with a $0.75 bag of chips, and a $1.50 drink. With tax, that comes out to $8.82. You might not spend that much every day, but some days you might spend much more. You probably work somewhere around 240 days per year, not including holidays, weekends, or vacation days. We will exclude those days for the sake of this exercise, but lets be realistic - you will eat out on those days too.

• 240 days x $8.82 = $2,116.80

If your spouse works, multiply that by 2 to $4,233.60. You should tailor this to fit your situation. If on average you spend 20 percent more than $8.82, multiply the total by 1.2; and likewise, if you spend less then adjust down from there. Lets not forget that you are probably addicted to caffeine, and if you have a Starbucks coffee each day along with a muffin or bagel, lets add that in too, just for kicks.

• 1 Starbucks Coffee - $2 or $4 if you get a latte.
• 1 Muffin or Bagel w/ cream cheese - $1.75

When you add your breakfast habit to your already expensive lunch habit, you’re looking at $3,256.80 per person. $6,513.60 for both you and your spouse.

What if I told you that you could eat a healthy and enjoyable lunch for much less than $1,000 per year per person. If you give up Starbucks for home and office brewed coffee and Starbucks muffins for store bought muffins you could have breakfast and lunch for less than $1,000 per year.

On average, my wife and I spend between $1.50 and $3.00 for our packed lunches. We cook almost every night and use the leftovers as our lunch, or we make a sandwich or other simple and inexpensive meal to take with us into the office. Instead of purchasing a soda at a vending machine for $1.50, I bring a can of Arizona Green Tea with me that costs about $0.25. My wife only drinks tea or water. Instead of buying an individual bag of chips, I bring a piece of fruit or on occasion I might buy a big bag of chips and use it to fill up sandwich bags at home. By choosing much cheaper alternatives, we do not sacrifice quality or quantity in our lunches but we save literally thousands of dollars a year.
With that money invested long term in the stock market, we are talking about saving hundreds of thousands if not millions of dollars over our career by simply choosing to bring a lunch instead of eating out. Are you willing to throw away that much money, just so you can eat out at lunch every day?

Consumer Reports Article Comparing Leasing To Financing A Car:
The Money Lab determined that buying a car—in this case, the best-selling 2008 Honda Accord EX, at $24,495—would cost $4,597 less over five years than closed-end leasing for exactly the same model.

Consumer Reports calculated that it would cost the average consumer nearly $4,597 more to lease a Honda Accord than to finance the same car over a 5 year period. Assuming that you get an average loan rate of 7%, the final cost of the Honda Accord is $29,100. That is $4,500 more than buying the vehicle outright. What about buying a used car instead of a new one. Can you guess how much you would save by buying a 3 year old Honda Accord with cash, instead of financing a new one? According to Kelly Blue Book, a 2005 Honda Accord EX in excellent condition with 45,000 miles should retail for $18,095. It would cost $15,890 if you bought it from an individual.

Lets recap, shall we:

• Brand new Accord: $24,495
• Brand new Accord with loan: $29,100
• Brand new Accord with lease: $33,697
• Used Accord with 45,000 miles: $18,095

By choosing to buy a used model with cash, instead of leasing a new model, you can save $15,600. You could buy a second car with that.

photo by flickr user mjmyap

Here are a couple of blog posts that I have especially liked, courtesy of The Simple Dollar and I Will Teach You To Be Rich.

• If You Ask “What’s the Monthly Payment?” You’re Asking the Wrong Question - Trent at The Simple Dollar points out that people who only care about the monthly payment do not understand the actual cost. He also points out that paying with cash is by far the cheapest and therefore the best method for buying a car.

• 10 Links To Walk You Through Today’s Financial Crisis - Ramit at I Will Teach You To Be Rich has a fantastic group of links to get you through your day. I enjoyed this post very much, but was upset to see one of the links where Ramit tried to justify his purchase of a brand new car as being the best financial decision, and then he advocated that people take out loans to purchase their cars. He is not teaching anyone to be rich with that example.
• Getting Things Done by David Allen - I’m about half way done with this popular book that spurred the GTD lifestyle that is apparent all over the internet. It’s got a lot of good ideas in it, and I will probably discuss it further when I finish.

This is the first post in a series of posts on how to buy a car. I won’t give you tips for haggling with salespeople, but I will tell you how to pay for the car and which cars you should look for.

In the United States of America there is an unwritten law that says every car commericial must end by telling the consumer about the APR (Annual Percentage Rate) on the car loan -or- the cost to lease the vehicle. I have not seen a commercial in years, if ever, that advertised either a dealership or a specific brand of car without mentioning auto financing. This is endemic of the mindset of American car buyes; which states, “No man, woman, or child can purchase a vehicle without first obtaining a loan or a lease.”

In America, you’re weird if you pay cash. It’s just unheard of. My wife drives a fairly new car (2006 model year) and when she bought it, the most common question we had was, “did you get a good interest rate?” Needless to say, they were blown away when we said that we paid cash for it. While not paying cash is one of the worst sins that most people make when shopping for a new car, it isn’t the only one.

The Rules Of Buying A Car

A coworker of mine purchased a brand new Minivan not too long ago, and they managed to break every rule in my car buying book. The first rule that they broke was that they bought a vehicle the first time they went looking. Except in very interesting circumstances, I would never recommend buying something as expensive as a car or a house the first time you go out looking. I especially would not buy at the first dealership I visited, as there are many others that might offer a better price.

The second rule they broke, which is more like a guideline, is that they purchased a new car. In his brilliant book The Millionaire Next Door Dr. Thomas Stanley surveyed and interviewed thousands of millionaires living in the United States to determin what qualities they had in common. One of his most surprising discoveries was that the average millionaire is not who you think he is. He doesn’t flaunt his wealth by spending a lot of money on material goods, which is probably how he became a millionaire in the first place. The average millionaire buys used cars with cash, and doesn’t drive a recent model car. They don’t behave like this because they have poor taste, it was this behavior that made them rich in the first place.

The third rule they broke, was they did not read their contract. They had a verbal deal with the salesperson to purchase the van for one price, lets say $25k, but when the salesperson brought them the contract it was for $32,000. Honest mistake or ruthless trick, I have no idea- but it doesn’t matter, because it cost my coworker $7,000 either way. I believe that people spend less time and energy researching and purchasing their car, than they do their HDTVs. People get the idea that they need a new car (usually when their existing 2-year old car is still working fine), and then let the salesperson talk them into buying something they don’t need and can’t afford. It is just the wrong way to operate. Always do your research, and always read the contract.

The fourth and final rule they broke was that they financed the entire thing. They didn’t really care how much they paid for the vehicle because it didn’t cost them a dime when they left the store. Sure, they’ll have $500 car payments for 7 years, but it didn’t cost them a dime that day. It’s a pretty sweet racket for the car dealers, signing people up for long term financial commitments with practically no short-term consequences, all while showing them beautiful new cars. Who could resist? The truth is that getting a loan on a car is way more expensive than buying it with cash, because the dealership doesn’t make much money on the sale of the car - they make money on interest. Leasing is just a more profitable method of loaning money for a car. In a future article I will break down the cost differential between buying with cash, getting a loan, and getting a lease.

Realign Your Expectations

A big part of shopping correctly for the right car, is to realign your expectations to something reasonable. If you make $40,000 per year, then buying a $20,000 car is probably not the right move. In this situation, you can get a very nice used car that will last 5 or more years for less than $10,000. Today I saw a car for sale for $4000 that had only 60,000 miles on it, and appeared to be in great shape. If you are desperate for a car, one like that would last you many years. Changing your expectations for your next car could be the best financial decision you’ve made in a decade.