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Monday, November 08, 2010

Budgeting Primer: With the Savings, You Can Pay for the Next (Used) Car in Cash

There is a new blog on the blog, and one I'm watching with interested. Struggling Who is attempting to make the case for the so-called "strugglers" after another blogger made quite a splash making a case for the "Chumps."

Quite frankly, I have no interest in class warfare, even though it seems to be the hot topic of the week. What I do have an interest is seeing people prosper! Struggling Who comments, in regards to tuition discounts, states the schools tell us [those on discount] what to pay and what is left is for extra. Personally, I'd like to see the "extra" used to get ahead. Unfortunately, it seems that the "extra" is all too often used to fund increased consumption.

To make a case for the Strugglers, Struggling Who posts Yoni's budget. He doesn't want readers to pick it apart line by line, but it is really hard to ignore a budget of $6,900 that includes too much house ($2,761 mortgage payment, 40% of take home pay, granted that is after salary cuts), too much car ($625 in monthly payments bringing payments to 50% of take home pay) and too much food ($1,050 for food, including Shabbat).

I have consistently found that the difference between those who prosper and those who struggle has less to do with income, and more to do with spending habits. It breaks my heart to see families that could be comfortable or even prospering, struggling because they didn't get ahead when they could have. Let me demonstrate by using Yoni's own budget.

Yoni spends $1050 on food per month for a household of 5, including 2 school aged children and a pre-schooler (my assessment from the description). Anyway you cut it, $1050 is a lot of money to spend on food. Let's say that Yoni decides to really attack this line item of the budget and through a combination of different eating and shopping habits, lower the food line item to a still generous $650.

For the next 3 years, the $400 difference is locked into a savings account called "car." In three years, Yoni will have $14,400, a rather generous amount, which he can now turn around and spend on a quality (used) van, eliminating another massive line item, the $625 in lease and car payments (presumably the car payments will be complete, or almost complete in 3 years and the now owned car will be ready to drive into the ground).

Should Yoni continue to manage the grocery budget ($400) and eliminate the car payments ($625), there is now over $1000 extra to work with.

Now, Yoni and others like Yoni are fighting an uphill battle as school aged children are already in the picture and it still remains a mystery to me how scholarship committees come to a decision as to how tuition is charged. But, those who are starting out should take note. Controlling costs, even without high salaries, can and will result in real savings. Savings work for you. Debt works against you.

90 comments:

tesyaa said...

As a working parent I understand the difficulty of shopping around for cheaper food, and at one time I thought we couldn't have done it, but we've significantly cut our food costs, and we could cut more. Here's what worked for us:

1) shopping at a wholesale produce market saves us, conservatively, $40 per WEEK. (We have a large family and buy a lot of produce). It's worth the minor inconvenience of an extra food shopping early on Sunday morning.

2) Everyone has a Shabbos splurge. Are you really enjoying yours? We used to buy 3 containers of Tofutti each week for Shabbos, for a total of at least $10, but you know what? There are cheaper and tastier desserts (mostly homemade, I'll admit).

3) I buy challah since I just can't get it together to bake challah every week. This past week, though, our bakery raised its prices. I can't see spending $13.50 per week on challah that can be made with $2 worth of ingredients. I'm not sure what to do - buy cheaper challah at the supermarket? Bake once a month to offset the higher prices the rest of the time? I'm thinking about it.

4) I buy a big block of cheese to grate instead of buying pregrated cheese, but in Costco I saw they have pregrated kosher cheese even cheaper, per pound, than the big block. Definitely worth stopping in at Costco (you're probably a regular there anyway) for $4.29 per pound instead of the smaller packages that work out at double the price.

Akiva said...

You are directly in error. When you arrive at the tuition committee, debts work for you and savings works against you. You don't get any discount until you have NO savings that you could devote to the tuition.

Note that credit cards work against you (because you can and will be asked to charge your tuition up the limit) but loans work for you...because they're debts the tuition committee can't ask you to get rid of.

So in frum communities, it PAYS to be in serious debt and overspending. Because NO ONE can pay their tuitions (let me know how anyone can come up with disposable spending of $55,000 per year) but you don't get the break until you are obviously seriously under water.

Abba's Rantings said...

TESYAA:

"I can't see spending $13.50 per week on challah"

we buy one chalah. friday night we use a matzah for the lehem mishneh. for lunch we use 2 pieces of matzah for motzi and then cut up what remains from friday night.

regarding costco, i'm the world's biggest fan of costco, but their chalah has no crust

someone bought us a bread machine for our wedding. my wife used it a few times to bake chalah, but now it collects dust.

JS said...

I'm not going to address how exactly scholarship committees work because frankly, I have no idea. So, maybe Akiva is correct and this is all a waste of time.

I think a lot of people make the following mistakes: 1) They think small amounts of money don't make that much of a difference; 2) They don't understand how important it is to start off on the right foot financially; and 3) They live in the moment too much.

The example in your post is spot on. Taking $400/month and turning that into a car savings account to eliminate car costs is precisely how smart people use money as a tool to build wealth.

When we used to live in apartments all the young couples we knew made the same stupid mistakes. They got 2 bedroom apartments even though they didn't have kids (only an extra $300-$400 a month), they all had premium cable packages (only $100 a month), they all leased expensive cars (only $400 or so a month), etc. All those "only's" easily added up to around $1,000 per month.

Over the years that we lived in the apartments before buying our house, we easily saved over $45,000 by living more frugally and recognizing that whatever sacrifices we were making were temporary and in exchange for far greater amenities down the line. Sadly, I don't think any of these people picked up on this "strategy". I think they just chalked it up to the fact that we have higher incomes.

A friend recently shared a similar story in which after the friend told a sibling they were buying a house the sibling accused the friend of getting money from the in-laws because it's impossible they can afford a house when the sibling has a much better job with a much higher income and can barely afford the monthly bills. Even after the friend pointed out to the sibling that the sibling rents a very expensive apartment, has a SAHM as a wife, eats out all the time, leases expensive cars, etc. the sibling was still incredulous and said stuff like, "If we didn't eat out as much we'd only save like $250 a month."

Some people just don't get it.

Orthonomics said...

JS--We heard plenty of the same from friends and family who assume that the reason we can save, buy a home, buy a vehicle is because we have a lot of income. While we make a respectable income, the real key is keeping spending under control.

Savings add up. Let's say we have two sisters who have have husband's earning nearly equivalent amounts (enough to cover needs without debt even). Sister A does what is done and Sister B shaves off something from every area of the budget:

Spend $400 less per month on housing
Spend $100 less per month on utilities
Spend $350 less on operating a vehicle
Spend $300 less per month on food
Spend $120 less per month on a cleaning lady
Spend $100 less per month on consumption by shopping used
Spend $50 less per month on telecommunications
Spend $50 less per month on things like sheitel care and manicures
Spend $30 less per month on pizza and eating out

Sister B has $1,500 MORE per month to work with, or $18,000 MORE per year. Extend that over 5 years and Sister B has $90K to work with than Sister A, who is falling behind every month.

And that is just the start of it. . .

Miami Al said...

Ditto that. If you routinely spend 105% of what you earn, you will fall further and further behind.

Setbacks happen, lack of steady work happens. It's easy to get into a debt hole or wipe out years of savings.

That said, those that live within their means get ahead each month, the rest fall behind. $18k/year is a HUGE swing, and as you shown, builds up over a few years.

Orthonomics said...

And that is only the start of it:

Sister A spend $2000 more a year on camps and extracurriculars while the kids are little. Sister B spends $500 on some memberships and museum visits.

The along comes camp and Sister A spends $2500 more a summer because sleepaway camp is a "necessity." Sister B keeps the kids home or in daycamp if she needs childcare for work.

Come Bar Mitzvah time, and Sister A spends $7,000 more because you have to put on a respectable affair. Sister B is happy to put on a nice kiddush and a small luncheon for family.

Sister A and Sister B remodel their kitchens. Sister A goes top of the line. Sister B doesn't need top of the line. Cost difference $6,000.

Time to send the kids to college, Sister A has nothing saved and the kids take out loans. Sister B pays cash for tuition costs.

Shoshana Z. said...

Last night I went to our local kosher grocery for the handful of items that I can't buy anywhere else. Even my very small purchase came to $25. I handed over my debit card with a barely audible whimper and the non-Jewish cashier looked at me with such pity. This is her direct quote, "I don't understand how you people are supposed to uphold the tents of your faith and then the store makes it impossible for you to afford to." Then she hit the 10% discount button and said, "Happy Thanksgiving." It was embarassing and uplifting all at the same time. Not sure how this relates to the post, but I think it does somehow.

Shoshana Z. said...

Sorry, that was "tenets" not "tents." Although holding up the proverbial tent can be tricky too! :)

Mara ~ Kosher on a Budget said...

You *know* I'm loving this post! I couldn't agree more -- both with your original post and with your comments. Being normal = being broke these days, no matter how much income you have. That $600+ a month toward car loans just kills me!

Shoshana Z. said...

The Sister A and Sister B illustration is encouraging. We have tried to implement small (and not so small) adjustments to our budget and will hopefully see big changes after Jan. 1. Here are a few moves we made that should pay off: took a less expensive medical plan through dh's work; bought life insurance for him and me through his work instead of our very expensive private policies; changed our land and cell phone plans; drastically cut back on our power use in the house. This last item netted us $100 this billing cycle. I'm also using a fixed menu plan which has taken a lot of guess-work and excess out of the grocery shopping. And happily, I have found some new stores with great products at better prices. As always, we continue to buy almost all clothing second hand. I can't emphasize enough how families will save literally thousands of dollars in this way.

conservative scifi said...

As someone whose frugality (most credit due to my ayshet chayil) during graduate school has paid off with plenty of excess cash flow for retirement, tuition, college savings and tzedekah, I am blown away by spending 1,050 on food for a month.

I do the cooking, and if you use the bread machine, you can make two tasty challot for around $3.50 (I got rave reviews from a bunch of teens last week). (If you want, I can post the recipe). Our local kosher stores have chicken breasts (my kids favorite) for around 4.99-5.99 per pound, so three pounds (enough for my family of five for shabbos and Sunday night) costs $18 plus another $5-15 to dress it up. If you make rice/potatoes/couscous/kasha/kugel for another few dollars, maybe an expensive vegetable like artichokes or asparagus for $5-10, and chicken soup (my kids prefer the cubes) you get two meals for $50 or so. Our other meals are usually much less expensive since they don't require meat (e.g. lasagna, tuna noodle casserole, pasta night or wraps/blintz souffle/quiche night, with a vegetable, a fruit and starch, and maybe a protein if none is present. Lunches are simple and breakfasts are cereal or waffles or yogurt. We don't eat out much, so our total monthly food bill is probably close to $500, and we have two teens.

Sorry to be so long winded, but if you are spending over $1000 a month on food for five, you are either eating out a lot, having a lot of guests, or using some sort of convenience foods rather than simply cooking.

clotheshorse said...

Sorry for the dumb question, but where do you shop for secondhand clothes, besides eBay? If one buys clothing secondhand I assume the return policy is nonexistent, so I'd want to try the clothes on in person. I'm not looking for designer, but clothing at the level of Gap etc. would be nice. Any tips for used maternity clothing?

Shoshana Z. said...

Where I live there are several options. My two favorites are Goodwill and the ARC. I actually never go to consignment stores because there is just too much mark-up. Both of the aforementioned stores accept returns with tags and a receipt. A couple of weeks ago I got a brand new (tag still on) pair of designer boots for $10. To really make this work, though, you have to be willing to shop fairly regularly. It is also helpful to ask the staff which days are the best stocked. I have never bought anything used online because I can't try it on or return it.

The next best thing to second hand is really keeping an eye on the sale racks at the basic stores: Target, Sears, JC Penny, etc. as well as Children's Place and others like that. At the end of each season it is very easy to buy brand new items for between $1-$5. This is how I get tznius summer shirts for my daughters - by buying the long-sleeve Ts that they clearance out in February.

CJ Srullowitz said...

I'm confused over the 625 in car payments - unless we suppose there are two cars, which I would have to assume are necessary for work-related reasons.

Personally, I use public transportation to get to work (along with the occasional car rental, and my bicycle) so we don't need a second car. We do need a first car, however, and had been driving around in a 2000 Honda Odyssey, which we bought used six years ago. It was no bargain. I calculated that the car cost me, on average, 400 dollars a month between what we paid for it and the repairs it needed over the years, which were substantial.

So when the transmission gave out just before Sukkos, and I was told that it would cost $3,500 to repair, I threw in the towel.

Then came the decision: Buy (used, of course) or lease. I never saw myself as the leasing type. I don't need, nor do I particularly want, a new car. I always got a kick driving carpool and watching the kids wait at the car door expecting it to open before them. What a shock that they had to use their hands to MANUALLY open the door. Also the CD player had been broken since the day my daughter put quarters into it.

It's not a jukebox, sweetheart!

At least the tape deck (remember those?) still worked.

BUT, when I ran a cost analysis, I could not figure out why leasing was a bad idea. After my experiences, one thing I was certain of was that I wanted a vehicle under warranty. I wanted to know that my car was going to be a fixed cost on my budget and not subject to sudden, budget-busting repair issues. Having the tranny go on you twice(!) can do that to a person. To get a decent certified pre-owned minivan, 3-4 years old, I was looking at 15-16K. Even without interest that would be around 4000 a year for four years, at which point I would own a 7-8 year old car. That's when the repairs would start kick in, I figured.

At the same time, being that the 2011 models were about to be released and the lots were looking to unload the last of their 2010s, I was able to get an Odyssey for 333 a month, with only 425 down for title. (I would have rather had a Sienna but it was considerably more money. No other van would do, as we need eight seats for carpooling reasons.)

So for the same 4K a year, I get a brand new car, (hopefully) no headaches, and my financial commitment is over in three years. Granted I won't own anything in three years, but as I mentioned above, owning a 7-8 year old vehicle outright is, in my limited experience, no bargain, as that's when the vehicle starts to break down.

CJ Srullowitz said...

Clotheshorse,

Funny you should ask!

This, from today's Yahoo!Finance via the AP:

http://finance.yahoo.com/news/In-a-tough-economy-old-apf-1900468838.html?x=0&sec=topStories&pos=9&asset=&ccode=

PARAMUS, N.J. (AP) -- The Goodwill store in this middle-class New York suburb is buzzing on a recent weekend afternoon. A steady flow of shoppers comb through racks filled with second-hand clothes, shoes, blankets and dishes.

A few years ago, opening a Goodwill store here wouldn't have made sense. Paramus is one of the biggest ZIP codes in the country for retail sales. Shoppers have their pick of hundreds of respected names like Macy's and Lord &Taylor along this busy highway strip.

But in the wake of the Great Recession, the stigma attached to certain consumer behavior has fallen away. What some people once thought of as lowbrow, they now accept -- even consider a frugal badge of honor.

(cont.)

tesyaa said...

CJ, we have a 12 year old minivan we bought new (as well as a newer van). Granted, we don't have a lot of miles on it, just over 70K. I was reading that today's new vehicles are really built to last; 200,000 miles is the new 100,000. Something like that. You really can keep a car for 10 years or more (sometimes much more).

Anonymous said...

I am in despair over 2 line items in our budget: food and utilities. Our utilies for a 5 bedroom house is $600/month year round! We have electricity, gas (for stove), and oil (water and heat). Is the oil ($350/mth) what's killing us?

My food bill is exhorbitant (I'm embarrased to say how much, >$1000 for family of 5) and here's partly why:

I work full-time and run my home completely by myself. I even work Sundays. I am exhausted at the end of the day. Too tired to shop around for deals -- usually my shopping consists of 6 am runs to the local grocery store. Too tired to make nutritious and satisfying non-meat meals. Cater to food whims of my household (3 different kinds of chicken on Shabbos including a lot of chix breast, ie when I make cholent noone eats it, plenty of morningstar items which are incredibly expensive).

Tesyaa I appreciate your acknowledgement of how hard it is as a working parent to keep your food bills down. I used to belong to BJ's but I seriously never make it over there and I never thought I was really saving money.

Honestly though, I still don't know where it goes! And is it really cheaper to eat cheese than meat every night?

I keep trying but I am discouraged. We never ever ever eat out. We only ever eat ground beef (hamburgers and meatballs). I can make a whole chicken last for 2 or 3 meals.

As for the utility bill -- the monthly year round oil bill is $350. Crazy! And that's not including electricity (air conditioning)! Is it the oil? I still have not figured out how to find out whether switching to gas would be cheaper.

Anonymous said...

One more comment on food bill -- I applied for assistance last year because we experienced extended unemployment. They use the govt guidelines for determining your expected monthly bills.

For my family of 5 they calculated our monthly food budget at $1,000/mth and of course they are not considering the kosher factor.

I still say mine could be a lot better.

Anon 11:17

CJ Srullowitz said...

Tes,

I hear what you're saying; we probably had an outlier experience. Our transmission went out twice, radiator once (though that was on some sort of warranty) and even the engine had to be rebuilt.

We went through four mechanics and they agreed that this car "shouldn't" have had so much trouble. But it did. So invoking the "Once bit; twice shy" rule, we leased.

Btw, our mileage was 132K, significantly more than yours.

JS said...

A few thoughts:

1) In terms of lease vs. buy, it's funny, we recently got a certified car to replace our 16 year old car. I did the same math CJ did, but came to the opposite conclusion. I don't see how leasing is better than buying a certified used car. Same price and I have a warranty to 100k miles/7 years. You do research on reliable cars and you can easily find one that will last to 200k miles. Plus, at the end of 3 years I actually own something. Worst case, I can trade it in then for a few thousand on another car.

2) In terms of utility bills, I highly recommend people install CFL bulbs. You can get them at Home Depot very cheap if you get the contractor packs. The bulbs take a while to get to maximum brightness, but they use around 1/4 to 1/5 the energy. Plus, they last longer. We are already very energy conscious (shutting off lights when leaving rooms, not having more lights on than we need) and we found our electric bill went down around 1/2 if not more. The biggest savings are probably over Shabbos when more lights are on for longer.

3) Another energy tip is we used to have a blech that went on our stovetop and our gas bill was ridiculous. We bought a professional warming tray (almost 4 feet long!) which gets super hot, is big enough to fit lots of dishes when you have company and can be put on a timer. This thing has already paid for itself in energy savings.

4) My wife and I work 12+ hours and are out the house another 2 hours commuting. Granted we don't have kids, so we're not cooking for 5 or 6, but I understand how time pressured things are. I think the trick is to keep things simple. Making 3 kinds of chicken is expensive and exhausting. When we buy chicken breast, we cut it up then and there and divide the cut up pieces into sing-serving ziploc freezer bags. We'll often dump a marinade into the bag and freeze it. This way, you put it in the fridge the night before, it marinades as it defrosts, and you can quickly make a meal. We buy in bulk whenever we're in Brooklyn and just freeze it. When we make soup, we make a 12 quart pot and freeze it in the quart sized chinese takeout containers. If you serve the right things and prepare right in advance, meals can be cheap and really fast to prepare. We can make Shabbos in maybe 2-2.5 hours and have enough leftovers for the week supplemented with buying some deli and making quick sandwiches.

ProfK said...

I'd just like to point out that the $1000 in Yoni's budget under food is not all food related. Check the budget and there are no line expenditures for the myriad other items that are purchased in supermarkets and food emporiums that are not actually to be eaten. Things like laundry detergents and cleaning supplies, toilet paper and tissues, the variety of paper, plastic and foil items commonly found in a home, shampoos, soaps, tooth care supplies and a whole slew of others. Hard to make a recommendation on cutting down on the price of edibles when you don't know what percentage of that $1K is actually for edible items.

CJ Srullowitz said...

JS,

At the risk of sounding defensive, the pre-certs that I looked at were 3-5 year warranties. Seven years would only be on a new car. I put about 12000 miles a year on a car so you're still looking at the car going off warranty 7-8 years from the time the car rolled out of the lot, not from the time I bought it 3-4 years later.

Once that 7-yr/100,000 mile milestone is reached, based on MY experience (a worst-case, I grant you), I'm looking at 3000-5000 dollar repair bills each year. It got to the point where we would joke about how we need to put away money for the car, because, like clockwork, something serious would happen every six months or so.

Also, due to our significant carpool commitments (we have eight different sets of carpools) we need eight seats. Our choices were the Odyssey or the Sienna. That was it. With more car possibilities something else might have opened up, but I'm pretty happy with the deal we got.

Anonymous said...

Shoshana: I like your suggestions, but want to caution you about one - you said you ditched your private life insurance policies in favor of buying life insurance through your employers. You need to check whether those policies are portable - can you take them with you if you leave/lose your job? If so, do the rates go up when you leave your job and are no longer on the group plan? Are the rates guaranteed? For how long? If you don't know the answers to these questions and g-d forbid you and your husband get sick and can no longer get affordable insurance and lose/leave your current job, you could be in for a rude awakening. Investing in individual life insurance that you can keep forever and know what the rates will be in the future while you are young and healthy is critical. Saving a few dollars now could end up being penny wise and pound foolish. BTW - the same goes for disability policies.

Anonymous said...

CJ: One way to save on a used car is to start shopping well before the old one goes, IF you are lucky enough not to have the sudden transmission death, hit a pothole that breaks an axle/tie rod, etc. It took us 4 months of watching the local Craigs List entries and ended up buying a car that goes new for almost $40K that we got when it was 7 years old, but with only 12,000 miles and in perfect condition. We paid $11,000 cash. The car literally had only been driven to church by a little old lady who finally gave up her license at age 92 and therefore had to sell her car. You only find those deals by shopping around for a long time, which of course you can't do if your current car gives you a surprise.

Miami Al said...

When I got my current vehicle, I was looking for a new one because of the financing deals. In the end, they just wanted too much money.

One of the no-haggle used places had a 12 month, 7500 mile vehicle of a similar type, for about 6k less than they wanted a new one. Within 4 months of my 5 year, no money down loan (well, I got 1000 for my falling apart car, so I guess that was down, covered tax+title) was right side up. 3 years into the loan on my wife's minivan and we're still upside down because of the first year hit... and we got a very good deal at the time on it.

I can do the math on why leasing isn't better, but the people with leased vehicles seem to be less aggravated, always have a new vehicle to drive, and have a lower monthly outlay in the beginning.

If you drive the car into the ground AND save the "missing" car payments then you might be able to go 6 year, 3 year, cash on your car purchases, but that is some very delayed gratification.

My brother always leases, drives very expensive cars, and is happy with his choices. OTOH, he's neither broke nor struggling, so he can afford some luxury in life.

Abba's Rantings said...

re. saving $ on food, stay away from the heimish brands. a small example from this morning. regular and heimish pasta were both $1.59, except that the regular brand gave you an extra 4 ounces. of course even $1.59 was expensive for the regular brand, but that leads to the second warning: stay away from the heimish stores.

(i also noticed this morning that they charge $15 for the same brick of cheese that costs 10 and change in costco)

Paying Parent said...

We bought a certified 2006 KIA Sedona 2 years ago for 13,000 with only 30,0000 miles on it. We then bought from the dealer an extended 7 year warranty ON TOP of the 5 year manufacturer warranty that also covers everything a manufacturer doesnt during the 5 years for $1,500. We are paying less per month than it would cost to lease AND we will own the vehicle after 5 years.

Abba's Rantings said...

honda has a very reputable certified program, the problem is

a) it may be difficult to find a minivan if that's what you want (we were looking for an accord)

b) be aware that the 7yr/70k miles JS referred to is generally for the powertrain (at least with honda). bumper-to-bumper is only one year.
(of course if it makes you feel better, you can buy an extended bumper-to-bumper warranty from honda)

CJ:

until my present car i've always driven money pits so i understand your apprehension, but your numbers just don't seem to make sense if you buy a reliable care and don't abuse it. all my cars until the present have been money pits, but i have no idea how you figure 3-5k a year of repairs. you really need a lawyer, because either you bought a lemon or your mechanic is a ganav. yes, a tranny can go (but shouldn't if you have a reliable car and don't abuse it) and cost big $, but not every year.

Paying Parent said...

Food Bill Comment:
I'm a working mom with 2 kids and my husband's appetite may count as an adult plus another small child. Notime during the week to shop. I know how hard it is to keep the food bill down. When I am organized here is how I do it:
Make a monthly menu! (Mara, I was happy to see your website since Ive actually been doing this for years- it works!)
Shabbos- make things that are easy to pack for lunch and make enough for at least 1 night of leftovers:
meatballs
sesame noodles with chicken
bean salads
chicken/veggie wraps
grilled veggies
roasted potatoes and onions
meatloaf
Make things in bulk and FREEZE, especially soups adn meats. If you like pickles, save your pickle containers to freeze soup.
Make your own challah and use the leftover challah for french toast Sunday morning.
For the remaining 4 nights of the week, make 2 1 pot meals that can stretch 2 nights each:
chicken on a bed of rice
lasagna
mac and cheese
spaghetti and meat sauce
Make these dishes on Sunday or Monday night so you are not scrambling on Thursday.
Only go "real" grocery shopping once every 3 weeks. Use once a week shopping to pick up milk and produce, no more.
Analyze your Shabbos "go to" meal. The meal that you make when you have no time and just need to bang it out.
See what costs the most. Potato Kugel doesn't cost very much. 1 Deli Roll costs much more than chicken, but lasts less time. See if you can substitute other go to dishes for your most expensive items.

Abba said...

ANON:

"One way to save on a used car is to start shopping well before the old one goes"

yes. except i would say that being patient is not just the key to saving, but to not getting outright ripped off. especially if you buy from dealers, who thrive on people who feel desperate to make the purchase. one reason i feel that i got a decent deal (nothing like your deal) is because i waited a few months and i was even willing to get up and walk out at one point even when we were about to sign.


PAYING PARENT:

"We then bought from the dealer an extended 7 year warranty ON TOP of the 5 year manufacturer warranty that also covers everything a manufacturer doesnt during the 5 years for $1,500."

i don't know about kia, but with honda, when you buy a "7 year warranty" the clock ticks not from when your purcahse the warranty but retroactively from the date that the car went into service. we did buy the extended warranty but the returned it because it seemed too expenseive (unforteunatelyt a court ruling shortly before i bought the car made the warranties much more expensive). although in the negotiations, the fact tht i bought the warranty did help n overall negotiations. (of course in of itself that shoudn't be a reason to get it.)

Paying Parent said...

How to make challah if you are a working mom (no bread machine):
Option 1:
Put ingredients out on Wednesday night. Thursday mornign get up 15 minutes early (I usually get up at 5:15- so 5:00). Mix the ingredients (I do this by hand). Let Sit. Come home thursday from work, braid dough adn let sit another hour. Bake 1/2 hour.
Option 2 (for the mom who is up late Thursday nights):
Mix ingredients when you get home from work on Thursday, let sit 5 hours. Braid the dough right before you go to bed. Wake up in the morning and put in oven for 1/2 hour while you get ready for work.
Option 3 (for the summer, when mom is lucky to get home more than 10 minutes before shabbos):
Mix ingredients before you go to bed Thursday night, braid challah friday morning, before work adn let sit until you get home and bake.
Other Option:

Paying Parent said...

The 7 year warranty we bought was from when we bought the car- I checked.

Abba's Rantings said...

PAYING PARENT:

did you buy it from the manufacturer or a third party?

powertrain or bumper-to-bumper?

Paying Parent said...

3rd party

Anonymous said...

Another way to save big is to not have two minivans/suv's if at all possible. I realize that won't work for everyone if you have a big family, both parents work and can't easily switch off vehicles -- i.e. mom drops kids off at school on way to work and dad picks them up on his way home. However if you can swing it, making the vehicle a smaller fuel efficient car and have the parent with the longer commute use that one can save big time both in the aquisition costs and fuel costs, and perhaps on insurance. Many families have two minivans for the convenience, not out of true need.

Abba's Rantings said...

PAYING PARENT:

there were too many issues with the 3-party plans that made me nervous: deductibles, payout limits, preauthorizations, long-term reliability, venue for repairs, powertrain only (or other restrictions on types of repairs), new vs. rebuilt, etc.

Shoshana Z. said...

Life Insurance:
Thank you Anonymous for pointing out the risks associated with employer based life insurance. I think we have gotten good answers to the questions you posed, but I am going to relate your specific wording to my husband and have him ask again.

Related, can anyone mention companies that they currently use for term life insurance? We have Northwestern Mutual and I feel that we are overpaying, but maybe not. My husband has $750K coverage and I have $400K coverage. That costs us $150 per month.

gavra@work said...

How to buy Challah:

Go to store sunday morning.

Buy Challah marked down to $1 - $1.25.

Stick in freezer until needed.

My wife only bakes Challah when she enjoys it, not to save money.

And I agree with JS, it is the little things that put you in the mindset of saving.

gavra@work said...

Shoshana:

Term has gone up since the great recession started, but we pay about that amount for 1.25 each.

Shop around. It will also depend on you health.

Abba's Rantings said...

GAVRA:

how do you get frozen challah to taste good?

SHOSHANA:

my wife and i use prudental, but sadly i can't tell you if it was a good deal.

as to the employer vs. private life insurance question, my wife could have bought a cheap policy through work, but in addition to the problems mentioned above, the policy was much lower than what we were interested in.

tesyaa said...

I don't think my husband would go for buying two day old challah and freezing it, but if you freeze a fresh challah you can easily rejuvenate it on the blech or the warming tray.

JS said...

In terms of challah, we only buy rolls unless we're having company. We don't have time to bake, and don't want all the empty calories from challah anyways. You can get rolls for maybe 50 cents each if not less. I know many families who insist on full challahs for each meal on Shabbos/Yom Tov (some for shalashudis too) - that means 3-4 challahs each week! Forget the cost, the number of calories from that is astronomical.

Yes, when you buy a certified pre-owned, the manufacturer's warranty is from the car's original purchase date, not yours. But, it's really not too hard to find, say, a 2008 car that is cheap with low mileage even without months of research. You get a good brand car (high reliability, like Honda) and you're looking at at least 7-8 years of no problems, only regular, scheduled maintenance. That comes out way cheaper than a lease and the car is likely still worth a few thousand if you want to trade it in at that point. CJ, you either had the worst luck ever or were dealing with a bunch of thieves. Just to be clear, I'm talking about saving money here, leases are great as Al points out if you want the luxury of never having to worry about the car and driving expensive brands.

As for insurance, it's worth looking into whether you can join a professional society. Many professions have such societies and joining for maybe $100 a year gets you access to their group insurance plans. Other organizations have such group plans too, which may be worth looking into.

Orthonomics said...

Hard to make a recommendation on cutting down on the price of edibles when you don't know what percentage of that $1K is actually for edible items.

Actually it is quite easy to make a recommendation because I have over 7 years of my own budgets, I have confirmation from other posters here who know their own budgets, and I have some other budgets from other families I have helped in my files.

I always aggregate food + disposables + diapers + hygiene products onto the line item "Food and Household Goods" because it is easiest just to put all grocery store and non-prescription purchases at the pharmacy on one line item.

Bottom line, this part of the budget is very inflated and is holding the family back from achieving some level of prosperity.

Miami Al said...

Orthonomics:

Ditto, our combination is "groceries" on Mint.com. All of that is in one place.

Otherwise, you might think you are saving money because you buy diapers at the grocery store for double the price as when you buy them at Wal-mart, which is what our analysis was doing when we called one food and one household goods.

Aggregating it made sense, since those stores are heavily overlapped.

If you make extensive clothing purchases as a Costco/BJs/Sam's, you can estimate and break that out, but otherwise, it doesn't really matter to me what you bought there.

Anonymous said...

As a working parent, I find a slow cooker both a money and time saver. I make soup, stews, roast,meatballs, chicken, meat loaf, roast vegetables etc. all in my crock pot. I cook my food while at work or overnight as I sleep. This stops impulsive food shopping, short Friday cooking pressures etc. Supper is on the table as soon as I get home. I use a 6qt crockpot so there is always something left to freeze. Crockpot cookery makes the cheapest cut of meat taste good by braising.

Mara ~ Kosher on a Budget said...

We also aggregate food and household expenses, which includes baby stuff, pet stuff, cleaning stuff, etc. It just makes more sense since most of those things are bought at the same stores (Target, Walmart, grocery stores, etc.)

Our total budget for *all* those things is $500/month for 5 people, which includes bulk orders, like from Golden West Glatt for our meat. Now granted, I WAH so I have "more time" to scout out the deals + I've been avidly coupon shopping for 2 years, so I've learned how to stockpile when stuff is on sale. But I firmly believe that with even the most basic of menu planning, list-making and paying attention to what you're doing at the store, pretty much all families should be able to spend well under $1K/month.

Re. the life insurance: I shopped a lot of companies and got quotes from a broker as well. The cost varied widely and since we recently lived in Israel, a lot of companies wanted to tack on a higher premium for that so we had to be careful. I know that Dave Ramsey recommends zander.com - but b/c of our Israel issues, we did better with a local broker. We are paying $60/month for $250K on each of us. (The rest of our policies are still in Israel.) HTH.

tesyaa said...

Mara, with 3 kids you should have more life insurance!

JRKmommy said...

I love this blog!

I see this with people I know.

My sister and her husband don't have large incomes. However, they are just about mortgage-free and are building up retirement savings. The cars are used. They shop for used clothes at Value Village. Their kids don't feel deprived, and they can sleep at night. Thanks to the savings and virtual absence of debt, they felt that they weren't stuck in their jobs, so she was able to relocate closer to home (they have young children) while he was able to go back to school. Meanwhile, I know other people around us living in fancier places with fancier cars, who are in financial crisis.

Re grocery shopping:

As a working mom, these are my tips:

1. Find the right store. Near me, there is a huge difference between the higher-end huge kosher supermarket, and the discount supermarket that still has a large kosher selection.

2. Don't shop for non-perishables every week. Stock up at the discount store.

3. For fresh items, find the store that has both the freshest produce and the best prices. It is not a bargain if it is rotten. Shop 2x/week for fresh produce - but make it JUST produce, so that you are in and out, and get only what you need for the next 1/2 week. That will eliminate waste from stuff that goes bad.

4. Research the best time to shop. Does the store have early or late hours (I go to the discount store between 9 and 10 p.m. when my kids are asleep). When do the shipments of kosher meat and fresh produce arrive? When is the store not crowded?

5. Think about good ways to dress up cheap food. Herbs and spices are great (and healthy).

6. As others have said, MENU! Have a plan to use up leftovers, and to have stuff prepped and ready to cook. Don't be ashamed to keep it REALLY simple - our Thurs. night staple is scrambled egg, because the kids know that it is the busiest night. Don't make anything that takes more than 5 min. of prep time.

7. Pay attention to lower-cost substitutions for similar items. Pink salmon is cheaper than sockeye. Chicken leg quarters are cheaper than buying thighs and drums separately. Look for regular items that have a hechsher but aren't in the kosher aisle (like olives and BBQ sauce).

Leah Goodman said...

We like to have a "real" challah on Shabbat, so we usually buy a challah and 2 rolls. We cut it on Friday night, and since Shabbat lunch is always sandwiches, we usually end up finishing most of the bread in the two meals. If we bought two challot, we'd end up with 2 leftover halves. (3rd meal is either crackers/mezonot or eaten at my parents' house, and they serve thawed pita for lechem mishne.)

Paying Parent said...

Fellow working moms- What are some of your favorite "cook in bulk and freeze" dishes?
Mine's meatloaf- my recipe makes 3 of them, it freezes easily and each loaf is easily 2-3 nights of dinner for about $6/ loaf.

Commenter Abbi said...

Anon 9:12- OMG, pple in the states have a minivan and SUV in the same family? Wow. I can't imagine that. Most families in Israel have one or no car. We are a "luxury" family with a company car and clunker, both sedans (with three kids- no carpools for us)

Mara ~ Kosher on a Budget said...

@Tessya - We do have more! The other policies are in Israel (I wrote that but it was probably unclear what I meant.) This was just a new policy we added when my daughter was born.

Also, I looked up the insurance company I mentioned and the link is actually zanderins.com.

We eat veggie during the week, but our make-ahead meals include bean burritos, "taco pie" (with either beans or veggie crumbles), crustless quiches, and lasagna.

nuqotw said...

It's not clear to me how Yoni even knows how much is going into each category and/or how much is left over, since the follow up says explicitly that tzedakah, for example, is not included in the budget. It makes me wonder what is (However, pointing that out was pretty unpopular over there. Apparently that is a chumpy thing to do.)

SL - you say that $650/month is generous for food and household items. Based on that, I have a new (lower, adjusted for household size) target. Thanks for inspiring me!

Chaim said...

I hope this is considered on topic: two “unrelated" articles today about Chardei pop growth & Priority 7 cuts: 1) http://tinyurl.com/2dufeet & 2) http://tinyurl.com/23pa2sf

Mark said...

CJ - BUT, when I ran a cost analysis, I could not figure out why leasing was a bad idea.

You really couldn't figure it out????? Leasing is a kind of a trap, it's a treadmill, that once you get on, is very hard to get off. So now you are paying $333/mo, then in 36 months from now? NOTHING. What to do? Oh, no problem, just lease another one. Ooops, now it's $383/mo. Then 3 years later, whoops, it's 423/mo. And so on, and so on, and so on....

Mark said...

How I buy cars -

My first car cost me $500. It was a junker that I bought from my uncle and drove back and forth to college periodically, and sometimes used for dates. Only sometimes because it scared the girls away. Instead I would borrow my parents more sedate and comfortable sedan. After I graduated, I used this car to get back and forth to my first [real] job, but it was rather unreliable and had various issues that would sometimes cause me to be late. So it had to go (I donated it to a charitable organization).

So I bought my second car about 6 months after working at my job. But since I had no money, I had to take a car loan. I hated that car loan, I mean, really despised it. Between the loan, the insurance (single+20 years old+NJ=$2200/yr insurance), gasoline, and the infernal maintenance (I will never buy a Ford again!) I was spending more than 30% of my net income on the car. It was destroying my budget. I vowed to never have a car loan again in my life and took steps toward achieving that goal.

The car loan was from the credit union at my office. I paid off that car loan as quickly as possible. But after it was paid off, I continued to "pay" it ... into a savings account ("share" draft account or whatever the credit union called it at the time), and that account grew in value over the years. When my car was stolen and damaged beyond repair, I purchased another used car IN CASH, and still had a bunch of money left in that savings account. And I still continued making my "car payment" of course.

Since then I've owned many cars, but have never taken another car loan. See I just make the car payments in reverse. All the payments are made before I purchase the car. Then I simply take the money in the account and pay CASH for the car.

I even did that while living in Israel. For the first 3 years I did without a car, but still made that phantom "car payment". Then after 3 years, the savings was nearly enough (had to convert a few dollars from savings to cover the balance) to cover the entire car, and it was a NEW car that time.

Nowadays, we buy replacement cars about every 10 years. We have 2 minivans, one was purchased in 2004, and the other in 2005. And they will likely last until 2014/2015, though our minivans seem to wear and tear faster than the sedans we drove previously, so they may only last 8-9 years rather than the usual 10. We have 5 kids, I drive them to school in the morning, and my wife drives them home in the afternoon.

In short, I highly recommend "car payments", just make them for the 48-60 months before buying the car!

Mad Hatter said...

SL and your readers,

While the other blog was trying to gin up sympathy in their budget and everyone has correctly pointed out all of the ways "yoni" could save on the budget, you all missed the unsaid between the lines critical message:

Yoni doesn't care if his car or food is too much. He has no incentive to cut them back since there is no consequence to his overspending and he gets the positive of not having to work too hard in shopping or cooking himself.

He is being subsidized by the community and is happy being there. I know he says he isn't but saving money doesn't change his personal situation. It might change the community's exposure (especially with the hundreds of yonis on scholarship) but he doesn't see it that way.

tdr said...

Paying Parent, check out http://kosheronabudget.com the blog SL posted about a few days ago.

There is a whole section over there where people are posting recipes. There aren't many yet, but I'd be interested to see your meatloaf recipe.

As for $650/month for household and food, I agree it is an excellent target, but I have to point out that SL's kids are small and a) are not requiring school lunches yet at least not big ones and b) don't eat as much as pre-teens or teenagers.

My 11 yr old hungry son is in school from 7:30 until around 5:00. He gets a huge and probably pricey lunch (good-quality bagel, several mornginstar buffalo wings, as well as pudding, raisins, a couple pieces of fruit, pretzels and a drink).

Yes this could be more economical, but it would be less satisfying and give me a break the kid is away from home for almost 10 hrs/day! I don't really want to give him a skimpy lunch. I also don't want him to be tempted to spend his rather meager allowance on pizza which he is more likely to do if he is starving.

AND he's only in 6th grade! His meal requirements are not going down anytime soon.

I would like to see discussions of monthly food budgets also mention family size and ages of children as the food budget is directly proportionate to both of these numbers.

JS said...

Mark,

Agree with everything you said except for the buying new part (only because this is a discussion on saving money). You can get a 1-2 year old car with under 20,000 miles (which is nothing nowadays) for significantly cheaper than a new car - usually around 15-20% less.

JS said...

Mad Hatter,

I don't really understand exactly how scholarships work, so maybe I'm wrong, but you seem to be making the following assumption: If "Yoni" overspends by $X, his scholarship will be increased by $X. Again, maybe I'm wrong, but I find that hard to believe. You also seem to be assuming that if "Yoni" saves $X, his scholarship will be decreased by $X. This may be true, to a lesser extent, such that saving $X results in a scholarship reduction of $X/2, for example.

Either way, I don't think many people on scholarship are "happy" to be there. My understanding is that it's an invasive and embarrassing process. Granted people could perhaps do more to try to get off of scholarship, but I simply don't think this is realistic given the tremendous increases in tuition every year. The system is set up to make the situation hopeless - just as you begin to make enough to pay in full for 2 kids, the 3rd kid enters yeshiva, or the tuition goes up 5% from last year or this grade has far higher tuition than last year's grade. Even the "chumps" find it hard to pay full tuition - imagine if you were say, $15k off from paying it, you'd never be able to catch up. Even if you got that second job to make up the $15k, before you know it, the school requires you to be making up $17k, then $20k, then a jump to $25k, etc. It's just impossible to keep up.

If you want people to get off of scholarship the tuition structure has to be changed somehow - whether that's cheaper tuition, different funding, a low-cost school, etc. doesn't matter, but the current model makes it impossible to get off the dole (and thus decreases people even trying). Plus, the current incentive model is completely out of whack - the schools shouldn't be paying people's tuitions, it should be paying people to make more money - for example, by offering extended child care services free of charge or highly subsidized. This would allow more parents to go fully into the work force and build up earnings instead of languishing in part time positions because child care is too expensive.

We need creative thinking, not playing the blame game while keeping the model unchanged even as we all complain it doesn't work.

Orthonomics said...

tdr--My kids are all in school and the oldest is out for about 9 hours a day. Maybe we just don't eat a lot :) I actually used to send more, but things were coming back uneaten, so I now send a bagel sandwitch, fruit for lunch and snack, and either homemade pudding, chopped veggies, or a hard boiled egg.

I'm sure when we are feeding teens, we will need to have more food around. But, at least around here, diets ebb and flow. When my littlest was around 2 years old, we would be full after 2 or 3 meatballs and she'd be downing her 5th or 6th. I thought she'd eat us out of house and home.

I invite readers to submit their food budget numbers with pertinent detail. If I get enough, I can put together a post to share and compare so people can accurately target.

Miami Al said...

JS,

Agreed on the used car with one caveat...

If your expected lifespan of a is 10 years, and you buy a 2 year old car, then you get 20% less car. If you save 30% on the car, great, if you save 20%, then all you are doing is swapping cars more often.

That said, here is my "lease" math...

If I divide the price of the new vehicle by 96 months, 8 years, I generally get a payment that is comparable to a 4 year lease. With the 4 year lease, I get a new car every 4 years. With a new car purchase, I "own" the car after 8 years, so I guess 9 and 10 are free (obviously, in the real world the car is paid over 3-6 years, it's a though experiment), but I paid interest. As far as I can tell, in return for owning an older car, I get my 10th year free, though I can expect some repair bills there.

Bonus 1: I get whatever residual value in the vehicle, run it into the ground, $500, take decent care of it, $3k - $4k.

Bonus 2: Any dings/damages to the vehicle are taken out of the trade-in/resale value at a discounted rate, with a lease, I have to pay to repair

Drawback: I have an older car

I agree that historically, leasing was "very bad" and those of you that bought your first car 20 years ago are seeing leasing in those terms.

OTOH: the modern lease is a sophisticated financial instrument, secured by the vehicle and sold off in bundles. The cost of a lease is:

Price of Car New - Residual Value at end of lease + Interest on the "loan" during the length of the lease...

Given that interest rates are so low, the "advantage" of "car payments to yourself" are in the 1% interest vs. the "car payments/lease payments to finance company" are in the 5%-6% range.

So the swing is 7%.

If you guys first looked at leasing vs. buying when you started this behavior in the early 1980s, savings accounts paid 5% via statute, money markets were 7% or so, and car loans were 13% - 18%.

So leasing vs. owning and driving into the ground was a financial no brainer then. It's not as clear cut now.

There IS a financial benefit to owning, but it's small.

Miami Al said...

JS,

If Yoni bought his house pre-scholarship, then the money spent on his housing directly increases his scholarship. Same thing for car leases.

The way it works is:
Income
-Housing
-Car
-Other "good" expenses
= Money for Tuition

That's a hard core scholarship family.

The hagglers get something for asking... If you fill out the paperwork, you'll save $1000/kid or so, because nobody wants to say no when you ask.

Now, these are all "scholarships," but that's not all tuition assistance.

Let's say Yoni's school calculated that he can pay $12k in tuition. That's $1k/month, so he drops off 12 post-dated checks.

The one around Pesach bounces, which Yoni says he'll replace, but obviously Yoni can't get ahead by $1000, so it's gone.

Over the summer, Yoni closes his bank account and opens a new one, the June check bounces, as do July/August.

Come September, maybe you ask him to pay $4000 owes + $1000 for September, but where is Yoni going to come up with $5000. You registered the kid, you aren't kicking him out, where will he go, it's September, blah, blah, blah.

Net-Net, Yoni's full tuition bill of $24k was paid as follows:
$8k Cash
$12k Scholarship
$4k Sitting on the books in Accounts Receivables, but will never be collected

Sure, if Yoni hits the lottery he'll pay his $4k, and he'll tell you that, but drive two $1000 "clunkers" for a year or two each so he can pay off his debt. Absolutely not, driving an old beat up car would humiliate Yoni.

tesyaa said...

Al, while you may have a few misconceptions (most schools do not hand out scholarships of $1000 per kid just because you filled out the paperwork), you hit on the important point that yeshivas mostly don't turn away families simply because they are behind on their payments. As long as every Jewish child is owed a yeshiva education, schools try to accommodate. I can't believe they're kicking people out for nonpayment unless there's egregious abuse. More likely, come in with a sob story, debt is forgiven or turned into a permanent "loan".

Miami Al said...

Tesyaa,

I only know the South Florida schools, and they DO give you "something" for asking.

Some very wealthy high earning families got some scholarship because they asked, and "if we say no, they'll pull their kids out."

The whole situation is backwards. Instead of every parent striving to give their child a Jewish education, the schools are striving to get every child a Jewish education, and then collect whatever they can.

Mark said...

Miami Al - There IS a financial benefit to owning, but it's small.

Al, my comment above about a "treadmill" wasn't clear enough. The issue is that psychological behavior ALSO affects financial well-being (perhaps even more so than many purely financial decisions). One of the other big problems with leasing is that the time at which a decision needs to be made is FIXED, and that increases the overall RISK of taking that action.

Thought experiment: You lease a car for 36 months. In month 33 of the lease, you lose your job. You are desperately searching for a new job, but it's taking longer than you thought it would. The lease is ending next week. What do you do? In this case, you are being forced to make an important financial decision at a very inopportune time, not to mention that without a job, credit (whether a loan or a lease) may be hard to come by or more expensive.

Now contrast this case of the person who leased his car, with the person who purchased their car. That person in this situation can simply hold tight, keep the "old" car and push the decision into the future, to be made at a hopefully better time.

The other risk of having a fixed end date is that interest rates may work against you. What if you get unlucky and the month in which your lease ends interest rates shoot up for some reason? Again, another instance of timing causing your options to be severely limited and more expensive.

When you own your car, you can use timing to your advantage. When times are right to buy a car, you can choose to buy one. For example, after a slow period of car sales, you will get a better deal. Sometimes you might even get a sizable government incentive to buy a new car at that time!

Risk counts, and it counts a lot.

The other big issue, of course, is that people who lease tend to rapidly become "serial leasers". That means that they always have a "car payment" (or two) of some sort. That has been shown to severely impede savings. Sure it's nice to always drive a "new" car (i.e. one between 0 and 3 years old), but having savings is a lot nicer.

By the way, the way I look at it, leasing is essentially the same as buying with a car loan, except with leasing the "down-payment" is at the end of the term rather than at the start of the term.

the "advantage" of "car payments to yourself" are in the 1% interest

Also, why are you assuming only 1% interest? When I save money over a period of 8-10 years, I don't put it into simple savings accounts or money market accounts/funds. That's a medium term and the money can be put into other instruments that have higher returns (even a simple 5 year CD returns 2.5% or so today, and there are other better options if you are willing to take on slightly more risk). Finally, 1% interest rates won't last forever, definitely not for the next 10 years.

Miami Al said...

Mark,

People that are more conservative with expenses and more aggressive about saving money accumulate more wealth, no shock there.

Agreed on the timing with leases vs. ownership.

HOWEVER, the raw financial decision on a lease/own basis isn't HUGE. The lease is a loan. You borrow the money for the "amount of the car" you use... If in the first 3 years, 50% of the value is "used up," you pay for that 50% plus the interest rate. If you bought it, and sold after 3 years, you should be in roughly the same space.

Regarding timing, you can always "extend" the least by a month or two, it's financially stupid, but if your new car is a special order, so be it.

We set a goal, when the cars are paid off, we're going to make "car payments" into a savings account, and we'll have that toward the next vehicles. I don't know that we'll be able to pay cash for them, but it would be nice. Maybe we'll pay cash for 1, and do a loan on the other, then at the next of the next cycle be paying cash.

Not everyone can be rich... While every person COULD choose to be (spend less than they earn, build wealth), some people will be richer or poorer than others, it's natural to have a distribution.

JS said...

Al,

Here are the numbers as I see them:

I'm giving list prices to keep things even. I assume you can haggle a comparable percentage off each option.

New car: $21,000.
2 year old car, low-mileage: $18,000
Lease: $0 down, $250/month, 36 months

Figure a car loan nowadays is 1% over 60 months.

So, monthly cost for new/old over 60 months:
New: $359
Old: $308

So, look at cost per month over the length of 2 lease periods, 72 months:
New: $299
Old: $257
Lease: $250

You can see that the "old" car is basically equivalent in cost to the lease option and would quickly become far cheaper over 3 lease periods, 108 months (9 years):
New: $200
Old: $171
Lease: $250

Even if you figure a car needs an extra $3,000 of repairs over 9 years as compared to a leased car:
New: $227
Old: $198
Lease: $250

Shoshana Z. said...

Back to food and groceries: I strongly advocate that how you cook is just as important as what you cook. Bulk cooking a freezing is more efficient in terms of both time and money. Investing in a good sized freezer chest is money well spent.

Shoshana Z. said...

http://www.food.com/recipe-collection/crock-pot/popular

For whatever reason, alot of the crockpot recipes are treif (meaning meat and dairy). But there are filters on the site that will let you eliminate ingredients you don't want.

tesyaa said...

Shoshana, if you find a macaroni & cheese recipe for the crockpot where you don't have to boil the noodles first, I will buy a milchik crockpot (bli neder).

I will also consider sharing my lasagna that uses regular lasagna noodles but you don't need to preboil.

:)

JN said...

tesyaa -
i have made tomato based pasta sauce in the crockpot, and then added the pasta during the last 30 -40 minutes of cooking (the recipe came from a vegetarian crock pot cookbook). the pasta was a little softer than what i usually eat, but overall tasted very good.

tdr said...

Sorry, SL, I thought your kids were all still pretty small.

You are truly the master of household budgeting and finance and a shining example to the rest of us. :-)

My son eats his whole huge lunch every day.

According to this http://www.dss.mo.gov/fsd/b_iss/2010coupons10.pdf the govt allocates to a 5-person household making no money at all $793/mth for food stamps.

Add in to that the kosher factor and the various and sundry household items and $1,000 does not seem so crazy for a monthly food budget.

I'm NOT say there is no room for improvement in people's food budgets -- definitely there is in mine.

All I'm saying is that $1,000 on food/month is not as outrageous as some of you are suggesting.

Upper West Side Mom said...

Here's a radical idea for all the Yoni's out there. Rent your home instead of buying. It's not like your monthly payments are even going towards your equity. It's going to the bank! The Dean of Columbia's Business school rents his apartment. He believes that buying a home is not always financially prudent.

We rent our apartment in Manhattan and we don't have to pay for a lot of the expenses that home owners have to pay for. We get free oil and heat. We never have to fix or replace our appliances when they break. We never worry about having to spend thousands of dollars on a new roof or a new boiler.

We also never have to worry about a change in our income. All we would need to do is move to a cheaper apartment. There's no worry about getting stuck in a home that can't be sold because the market has crashed.

You may not have your dream kitchen or bathroom and you might not have a basement to store all your junk in (which should probably be thrown out anyway!) but you will have piece of mind.

Abba's Rantings said...

UWSM:

"We also never have to worry about a change in our income. All we would need to do is move to a cheaper apartment."

not that i advocate this, but if you live on the upper west side you can probably get away without paying rent for 1-2 years while you try to get another (or better) job

SHOSHANA Z:

"Back to food and groceries"

would it kill you to let the guys talk about cars a little more?

Abba's Rantings said...

JS:

"You can get a 1-2 year old car with under 20,000 miles (which is nothing nowadays) for significantly cheaper than a new car - usually around 15-20% less."

in general i agree with you (i bought 3 year-old certified with 20k miles). but i just heard on the radio last night (no, not in an adv. for a dealership) that because of various factors right now some new cars are cheaper than their older brothers

AL

"Given that interest rates are so low . . . 1%"

i don't know how it works in miami, but where i live almost no one qualifies for those super-low interest car loans (and especially not for used cars), and if by some miracle you do qualify, you can bet you still won't get it unless the dealer finds another way to make some $ off of you (e.g., they won't go much below MSRP or they'll undervalue your trade in or they'll tie the loan to some overpriced extras you don't need like window etching, seat treatments, extended warranties, etc.)

tdr said...

Upper West Side Mom: "Here's a radical idea for all the Yoni's out there. Rent your home instead of buying."

As a homeowner now for 10 years I believe that homeownership is WAY over-rated. If I could do it again I would definitely rent and not buy.

Ah that elusive peace of mind...I yearn for it.

Avi said...

Our strategy is to buy new cars with cash and drive them until they die. But I don't think the issue is whether leasing is a good deal relative to buying. The problem is that Yoni is spending too much of his income on cars.

Miami Al said...

Avi,

The problem is that if Yoni drops his cars by $300, his tuition goes up by $300, and he gets an identical education, while his kids get made fun of for being in a clunker.

tesyaa said...

Wonder if anyone has any reaction to Emes V'emunah's impassioned plea for junk food to be available for sale in yeshivot. He reasons that he eats a lot of junk food, but he's still in great shape.

At the very least, it should be pointed out that a soda and a bag of potato chips from a vending machine every day adds up to a lot of $$$ !

http://haemtza.blogspot.com/2010/11/food-nazis.html

Mike S. said...

UWSM--The difference between Manhattan and some sensible place to live is far larger than that between home ownership and renting. Nor is renting always more economical. Also, in many communities it is essentially impossible to rent anything more than a 1 br or small 2 br apartment, as there isn't enough demand to sustain a rental market for larger units. Rental markets in many places are geared to young adults and seniors. New York is a major exception, as are the urban cores of other large Eastern cities. However, those tend to be very expensive places to live. Not only is my brother's rent on the Upper West Side (3 br apartment) 5 times what I pay for a mortgage on a 5 br house elsewhere, he pays more for everything else he buys locally for the privilege of living in Manhattan, from groceries to hardware to clothes to babysitting.

JS said...

True,

But there are plenty of houses for rent in Teaneck, for example. You can get a nice 3 BR house for around $1,700/month or so.

Anonymous said...

"not that i advocate this, but if you live on the upper west side you can probably get away without paying rent for 1-2 years while you try to get another (or better) job"

Huh? Please explain.

Avi said...

Miami Al,

True. Now, Yoni did say he wants to pay full tuition - he just can't. And we shouldn't look too closely at each line item. And all that.

Miami Al said...

Avi,

Of course he wants to pay full tuition. He would love for an extra $100k to fall out of the sky each year from the lottery.

He just doesn't want to work a second job to make it happen, doesn't want to live in a rental home to make it happen, etc.

He wants to just magically have more money.

tesyaa said...

Al, I posted the following comment on the Struggling Who blog because I don't think people really expect $100K to fall from the sky:

when the Struggler says he would like to pay full tuition, he's not exactly lying. He would like to, but not enough to seriously economize. It's not just that the fruits of his frugality will go directly to the school. It's also that people have given up on ever being able to pay full tuition, maybe before they've even had kids. They rationalize that it is just too hard, that "no one" can do it except the superwealthy, and it's OK to just pay whatever sum they can and don't worry about the rest. It's not that they don't care, exactly. It's just that they tell themselves it's so far out of reach that it's not even worth trying.

And if that's the case, why not have an bakery dessert on Shabbos or a better car? Because everyone else does.

Mark said...

tesyaa - At the very least, it should be pointed out that a soda and a bag of potato chips from a vending machine every day adds up to a lot of $$$ !

For my kids, buying something from a vending machine, whether at school or elsewhere, is a very rare treat. I mean a once-a-year rare kind of thing.

And they've been well educated by my wife, they all know that for the $1.50 in the vending machine, we can get 6 of them at the supermarket when on sale with a coupon. I'm so proud of them! :-)

Anonymous said...

There is a fantastic and super-easy bread-machine challah recipe in Susie Fishbein's "Kosher by Design" cookbook. It makes 2 loaves (or 3 small ones.) I start it when my little ones are napping on Friday after lunch. The dough takes an hour, then I braid it and let it rise for 30 minutes while the oven preheats, then it bakes for 30 minutes. 2 hours start to finish. This could easily be done the night before. I add raisins and a tablespoon of honey after the first "knead".

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Shoshana Z.

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