When buying a car, just remember that while its an investment, its a depreciating investment (unlike buying a house which appreciates in value).
So when comparing cars, remember that the true cost of owning a car is broken down to DEPRECIATION COST and OPERATING COST.
All cars depreciate. Typically around 5~10% a year, depending on the size and make of your car. Luxury cars normally depreciate lesser compared to smaller cars.
As for the operating cost, it is normally the cost of your fuel, road tax, insurance, repairs and maintenance.
Here’s a few tips to reduce your operating cost:
1. Service your car regularly. This will help reduce wear and tear and help keep your car running better and longer. Most people think of servicing as “sunk cost” or money wasted. But always remember, that is your family is in the vehicle, do you want it stranded at night when it breaks down? A little servicing not only helps the car but also gives you a peace of mind.
2. Keep your tires at their recommended tire pressure. This is very, very important. Too much air causes uneven wear on your tires. However, too little air may cause the side wall of your car to collapse and this will definitely cause you to have an accident. Remember, the only thing that helps you stop your car is your TIRE. There is no point having excellent break pads if your tires are bald!
3. Cruise at 90 or 100 km/h. This is the most efficient speed for most medium and large size cars. 80km/h is the best speed for small cars. Anything more than this, while fun, increases your fuel consumption. Dont believe me – try it and see. Keep your RPM constant.
4. Keep your windows up. Some may argue that winding down your windows and switching off your air-con gives better efficiency but I believe that winding down your windows increases drag and thus reduces your fuel efficiency. You decide. Besides, I like a quiet drive, you?
5. Leave the junk at home. I see so many cars with junk in their boot. All these junk adds in weight that the car engine must overcome to carry the weight around. Leave the junk at home and your car will thank you.
6. Lastly, and this only applies to manual transmission cars – drive using the correct gear.
Here’s a simple scenario – your bathroom sprung a leak and you will need to replace most of the plumbing and flooring. Should you use a part or all of your savings or get a loan? Let’s assume you’ve got around $50 thousand in savings and the total renovation cost is also $50 thousand.
What say you?
It all boils down to simple mathematics, in my humble opinion.
Ask your banker for the full loan and the monthly repayment for a fixed term of 1-year and 2-year. See how much the monthly repayment comes up to. Then ask your banker how much lower will the repayments be if you paid, lets say $20,000 or $25,000? If the savings in interest payment is low, then take the full loan. But if the savings is about 10% of the loan, then I would humbly suggest taking half the loan with an upfront payment.
Since the home loan or personal loan period is one year (or 2-year) and you will have ample time to repay the balance of the loan and possibly save a little towards your savings, I think this might be a better way to save on some interest.
Your thoughts on this is highly appreciated.
Banks are always finding ways to increase their revenue. And guess what? Their new trick is providing consumers with 0% introductory rates to new credit card customers.
While I do vouch for 0% interest cards for those of us who are carrying large balances on our other cards and want some breathing space to reorganize our finances, but for those of us who are in a better financial position, is there a catch to these 0% credit cards?
You bet.
While I will not be pointing out any cards here, check online. You will find that a normal card might charge you and on-going rate of 11.95% after the introductory period rate of 3.99% is over. But the cards with 0% interest during the introductory period normally end up charging from 17 ~ 21% once the introductory period is over.
Be aware. Always ask the salesperson how long the introductory period is, and what’s the rate after the period is over.
Shop wisely.
Credit card debt is one of societies silent killers. The interest on the card is like a rope around your neck. You know its there and you think you can live with it but slowly, and softly, its tightening around your neck.
So here’s some advice to come out of debt:
1. STOP charging to your credit card. Pay by cash. Dont fool yourself by saying you’ll charge to the card and then repay the card at the end of the month. It doesnt work. I’ve fooled myself for many years by saying the same thing. Unless you have supreme self discipline, mere mortals dont have such self discipline.
2. FIND a new credit card with a 0% interest balance transfer for as long as possible and transfer all your current credit card debts to this cancel. Cancel all the cards except for the new 0% card. Pay down as much as you can on this card and remember Step 1.
3. If you dont want to get a new credit card, then LIST down the cards with the highest interest rate and pay this card down first. If you have 3 cards, pay the bottom 2 cards with the minimum payment. Pay the first card, the one with the highest interest rate the minimum amount + and extra 20%, or more if you can, to bring down this card as soon as possible. Once you’re done with this card, do the same for the next card on the list.
4. Cut down all expenditure as much as possible. This will be tough. Hang in there for a couple of months or even a year or two. Your FINANCIAL FREEDOM is worth this pain. Once you’re debt free, you will have control over your life and know what FREEDOM really is.
5. Change your behaviour. Einstein said only a fool does the same thing and expect different results. So continuing your current habits will only make your debts reappear. So change your lifestyle to life a debt free life.
There is always two sides to this debate
What if I pour every single cent into paying off my credit card debt and then face an emergency – where do I get money from then?
This is a good point.
And my view of this is to always have some money available, maybe a thousand or two. Keep 60% of it in the bank and 40% of it at home (dire emergencies). Pour the balance of your money into reducing your credit car debt.
The reason I say this is because a friend of mine has around $22 thousand of credit card debt. And he pays off $1000 monthly, so within 25 months, he should be debt free. But he has around $6000 in savings. So we had this argument of him being better off using $5000 of his savings and drastically reducing his monthly debt. At 18% interest, that’s a quite a substantial savings every month!
So be smart. In any dire emergencies, take a cash advance against your card if the situation is so dire. But I am sure you will not collapse financially if you don’t have 6 months or so of savings. Getting rid of your ongoing bad debt is a more prudent method.
Let me know your thoughts if you think I am mistaken in this.
To your success!
These days, credit or debit card thefts are becoming quite common. Here are some ways to be more vigilant.
1. Check your credit card statement online every week. These days everyone has online access to their bank account. So check your online credit and savings account (for debit card) transactions weekly ad make sure they tally with your purchases. Report any unusual activities.
2. When keying in your pin number or signing your credit card statement after making a purchase, ensure no one is looking at your pin or how your sign your credit card bill.
3. Never leave your card out of your sight. Crooks can do wonders with your card if you give them time.
4. Know how much maximum you would actually spend on any transaction and consider that as your credit card limit. What I mean is dont leave your credit card limit to the one the bank sets for you. Lower it down to limit your loss.
5. Dispose your credit card bills securely after you have double checked them with your online statement.
If you know of any other tips, do let me know and I will update this list.
In Australia, if you earn more than $31,920, you’re not eligible for any government matching fund for extra contribution into your superannuation fund.
However, if you have extra money, you could put it towards your retirement fund, up to $25,000 per year. Any extra money put into superannuation fund is taxed at 15% and not at your tax bracket.
They key point of this is that this extra money is taken out of your monthly salary before your employer taxes your salary.
This only applies to Australia and I only found this out after talking to a wise man at Swan River. Thank you Robert.
In Australia, if you earn less than AUD$31,920, any extra money you contribute per year (up to a max of AUD$1,000) to your superannuation fund, the Australian government will match it dollar for dollar up tp AUD$1,000.
They key point of this is that this extra money is taken out of your monthly salary before your employer taxes your salary.
If you’re a wine lover, then you might have heard of Wine Selectors. Wine Selectors is a reputable company that offers medium and high quality wine sent right to your doorstep.
If you’re a keen drinker, signing up for their Refer a Friend club allows you to get any of their gifts below if any of your friends purchase wine from them. This is a good way to profit while enjoying a good wine.
Deep in debt?
It’s so easy to ignore the situation and hope it will go away. You might think that you’ll skip a payment here and there and get through it. But this is very risky. Start by acknowledging that you have a serious debt problem.
Then list out all your debts. Prioritise by interest rate, not by amount. A credit card with 20% interest goes way above a $100,000 housing loan on 8% interest.
Then call your credit card company to negotiate for a lower interest rate. If this doesn’t work, tell them you’re looking to move to another company. Rather than losing you as a customer, they would give you a better rate. But, being the prudent customer you are, you will look around for an alternative credit card provider who can provide you with a better rate. Ask for a 0% interest rate for 12 months on your balance transfer. Remember, this is business, not a class on friendship. Every dollar counts.
But before you switch your credit card debt to another card, consider going to your housing loan provider and asking them if they cam merge your current debts to your housing loan. This may be done via another round of financing. Worst case scenario, take out a personal loan with them. Since you already have a housing loan with them, ask for a lower interest rate on the personal loan. Don’t be shy to ask. You have nothing to lose. And they will want you, trust me on this. It is much better to consolidate all your debts into a low interest Personal Loan than into a balance transfer credit card unless you’re sure you can clear the debt on the balance transfer credit card within the time frame.
Consider some financial counselling, if all else fails. It’s good to get some expert help. There are government agencies providing help without the need for any payments. Use these services. Don’t be shy or angry. It’s better to bite the bullet now than to sink deeper into debt. Schools don’t teach use financial planning, so its no surprise that most of us fail in it.
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