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May 2009 - Posts - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

May 2009 - Posts

  • What Consumers Should Do About CAFE Changes Today

    Just recently President Obama annouced a change in the CAFE mileage standards. Requirements for passenger vehicles will rise from the current 27.5 mpg to 35.7 mpg by 2015, while light trucks will go from 23.5 mpg to 28.6 mpg. While many are writing about what this means for the environment, auto workers and consumers in the future, we'll look at what consumers should be doing today.

    The first thing that we can recognize is that the cost to buy a new car will increase. Automakers will have to make changes to reach the new standards. Those changes will cost money. That cost will be passed on to the consumer.

    Professor Robert N. Stavins (Harvard Univ.) was quoted in The Belfer Center for Science and International Affiars saying  "according to the administration, the increases in CAFE standards (including both scheduled increases already on the books and the new Obama proposal) will add — on average — $1,300 to the cost of producing a new car".

    Professor Stavins goes on to say "Because CAFE standards increase the price of new cars, the standards have the unintentional effect of keeping older — dirtier and less fuel-efficient — cars on the road longer. There is abundant empirical research on this issue."

    We're going to limit ourselves to the economic factors (not the environmental ones). What the good professor is saying is that you're going to be driving your older car longer. And, he's probably right. On a 5 year loan at today's average 7.56% (courtesy of Bankrate.com), that $1,300 would add $26.09 to your monthly car payment. Or a total of $1,565.40 total over the 5 years.

    And, you can call me skeptical, but the federal government seems to have a pattern of grossly underestimating how much things will cost. So that $1,300 estimate could be short by hundreds of bucks. So you'll probably stay in your old ride a little longer that you had planned.

    What does that mean? It means that you'll need to keep your car in dependable running condition longer. The way to do that is to start taking better care of your wheels now. Preventive maintainense is the cheapest form of car care you can find.

    If you haven't already, get familiar with the service intervals in your owner's manual. It will tell you how often to have the oil and other fluids checked or changed. It will also specify when certain proceedures (like replacing timing belts) need to be performed.

    Don't look at that schedule as something that would be nice to do. If you want your car to last longer, the scheduled maintainence is required. And, don't figure that your car is four years old and it's too late to protect it. Even if you've never changed oil in your car, you'll still help it by beginning regular, routine maintainence now.

    Learn to do some of the maintainence yourself. You'll save half by doing your own oil changes. Only simple tools and training are required. Anyone can do it. You don't need to know one end of a socket wrench from another to follow directions. Wikihow.com  and DoItYourself.com  have step-by-step instructions.

    Let's move to the financial front. It's much better to have the money ready to pay for the extra cost as part of the down payment. If you manage to save it upfront, it'll only cost you $1,300. But, if you include it in your monthly payments it'll add another $1,500 or more (depending on your interest rate). So you should begin setting aside an extra $50 or $100 each month in an account dedicated to your next auto purchase. If you don't do that now the higher auto payment will consume any savings in gasoline.

    While it's always difficult to forecast the future, some things are fairly easy to predict. That CAFE requirements will mean that cars will cost more in the future and that some people will delay purchases is almost a truism. So it's the prudent consumer that will start to make adjustments today to avoid financial pain tomorrow.

    Keep on Stretching those Dollars!

    Gary

  • New Mommy Giveaway!

    Just received this from a friend of our's, Amanda from FamilyCorner.com It's about a contest for new moms. So, if you're a new mom you might want to check it out.

    Enter to win this wonderful package of books and DVD's for the new mom! This prize package includes 4 great books and 2 DVDs. One entry per day per person. Giveaway is open to U.S. residents only. Must be 18 or older to enter. Entries will be accepted through May 31, 2009, midnight CST.

    You can enter here. Please let me know if you're the winner!


    Keep on Stretching those Dollars!

    Gary

     

  • How We Feel About the Economy

    Did you notice that one third of 2009 is over already? It sure went quickly! Thinking back on these last four months, I believe that I've learned something. See if you can relate.

    People are changing their lifestyles. Items that we would have bought without a second thought a year or two ago are skipped now. In a recent TDS poll, nearly 60% of those responding said that they were making changes that would be permanent even if the economy got better. Another 20% said that they were making spending changes, but expected to go back to their spendier ways later. That's 80% of the people who have changed spending levels.

    Many of us are somewhat fearful and carrying more stress than we usually do. An economic downturn is a new experience for many. This isn't like the post 9/11 or Internet bubble burst. Those recessions only affected a few peoples' incomes. The current recession is affecting an awful lot of people, so everyone feels at risk.

    We still like to treat ourselves well. It might be a reaction to the stress, but regardless, we like to feel special occasionally. Guess that's only normal. Part of the human experience. Nothing wrong there!

    One of our most popular features has been the "Little Luxuries" that we've been running with our readers' tips. People really enjoy those inexpensive ways to feel good for a short time. I'm no doctor, but that's probably a healthy way to relieve a little stress.

    A small but growing number of people are giving some serious thought to their lifestyle. Not just their finances, but to their entire lifestyle. It's not just about does my income cover my expenses. It's a deeper thing. Like am I happy with my life?

    We're beginning to hear from some people who have lost their jobs. And, their response isn't to look for a similar paying job. Rather they're moving to the country and reducing their expenses to a fraction of what they were before. A radical change of lifestyle. And, it's not limited to those who have lost jobs. Others are taking the opportunity to look at their lives and decide if they're happy with the path they've chosen to take.

    Still others have used this economy as a spur to start the part-time or home business that they've dreamed of. They need a little extra income and that was enough to encourage them to take the plunge. It's a tough time to start a business. But if they can keep their expenses low and survive now, they should thrive when things pick up.

    Finally, we're finding some people who are finding that even a bad economy has a good side. They're probably related to those folks who are reviewing their lifestyle. This group had a great time last Christmas. Spending less actually meant that they spent more time with friends and family. Instead of buying an expensive gift, they spent the time finding something less expensive but more meaningful for the person receiving it.

    My guess is that we'll see more of that this summer. Instead of spending $100 per person per day at a theme park, we'll take a picnic lunch to a local park and actually talk (and laugh) with the people we love. I can't wait to get the reports from those who take a different kind of summer vacation this year.

    And, to be fair, we've heard many sad cases, too. People who have lost income and can't keep up with living expenses. We'll probably continue to hear more of those stories as the year unfolds.

    So we head into an uncertain future. One that has the possibility to cause stress and to open up new opportunities. Let's close with a quote from Abraham Lincoln: "The best thing about the future is that it comes only one day at a time." It seems to me that's true no matter how you look at the future!

    Keep on Stretching those Dollars!

    Gary

  • Ways to Improve Your Health

    Healthcare costs are important to all of us. Whether you pay for your medical care or it's covered as part of your employment, it can cost quite a bit. Especially if you get really sick. So you might want to check our "25 Simple Habits That Make a Surprisingly Big Difference in Your Health" You'll find it here.

    There are some very frugal habits that you can use to increase the chances that you'll be healthy for a good long time in the future. And, that's something that we all can like!

    Keep on Stretching those Dollars!

    Gary

     

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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