Everybody Loves Your Money

CNN Money has an article that says you should buy a car and drive it for 15 years.  They used data from Consumer Reports and cited some owners that have really racked up the miles on their cars.

http://money.cnn.com/2007/08/30/autos/cr_drive_200k/index.htm?postversion=2007083113

I think I need to bookmark this article and read it once per day.  I shudder to think about how much money I’ve given away over the years by doing exactly what the article says you shouldn’t do.  I owned my last truck for around 7 years and thought I was doing pretty well.  I guess I should have driven it for another 8 years to really reap the benefits.  The sad thing is that I took such good care of that truck that I have no doubt that it will make it 200,000 miles.

I guess my only hope is that I can keep my current truck for the next 15 years.  Unfortunately I’m not all that happy with this truck but I’m going to do everything I can to keep it indefinitely.  One of the reasons that I bought a Toyota Tacoma was because it has a good solid reputation for being reliable and holding it’s resale value.  I better hope that turns out to be true over the next 14 years.

The good news is that we are still driving our Honda.  It has 75,000 miles on it and is a 2000.  We hope to keep driving it for a long time to come.  My wife likes the car and it is comfortable so I don’t think it’s too unrealistic to get a total of 15 years out of it.

If, for some reason, we can’t keep both of our cars for the next 10+ years, I can tell you that we’ll be buying a good solid used car.  I’d rather someone else take the first big depreciation hit.

It’s all gloom and doom these days.  Families, by the thousands, are losing their homes.  Mortgage rates are going up and the latest people to get hit by this are the poor families trying to secure “jumbo” loans for their Mcmansions.  Okay, that’s a little harsh.  In some areas of the country you pretty much have to get a jumbo loan to buy even a starter house (think: California).

Anyway, apparently there are plenty of people out there seeing their closings going down the tube because the funds for their loans are disappearing right before closing.  It doesn’t matter that they were prequalified, or approved.  It’s all about the size of the loan.

http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=jumbo26&date=20070826

And then there is the story in the paper today about housing prices dropping faster than at any time since 1987.  Ouch.  I guess I should feel a little bit better about this since Seattle bucked the trend and actually saw an increase.  I guess that’s a good sign although who knows how long that will last.

http://seattletimes.nwsource.com/html/businesstechnology/2003857155_webhomeprices28.html

This probably isn’t the best time to try to start flipping houses.  Luckily our plans are long term and we aren’t “flipping”.  I feel a little exposed with the lake house that we are building but I know that, no matter what, I won’t lose money on it if I had to sell it in a jam.  Worst case scenario I’d break even.  The only way we would ever consider selling is if I lost my job.  Hopefully that won’t happen any time soon.  I’ve been at the same company for just over 6 years and the company is selling the heck out of it’s product.  As long as I don’t get “sourced” I should be okay.

I feel sorry for the people that are being impacted by the adjustable rates going up.  I’m sure this is really cramping their budgets.  Some of them will be okay, while others are clearly SCREWED.  As the media covers the housing crunch, I keep hearing more and more stories about surprise loan terms at closing etc.  People definitely need to really keep their wits about them.  Do you know someone that ended up with loan terms that they didn’t anticipate?

Have you noticed the market hasn’t been doing so well lately? 

Yeah, me too.  My 401k has taken a bit of a beating lately but I know that I just have to hold on for the ride.  Rather than fret about the unrealized losses I’ve been seeing, I need to remember that the dips give me an opportunity to buy the same investments at a cheaper rate every two weeks.  That’s always a good thing as long as the market eventually goes up.

For the first time in a couple years, our net worth saw a negative change in value this month.  Bummer.  We were close to hitting some great milestones and unfortunately the market has held us back from those.  Oh well, give it time.

I’ll be heading out to work on the lake house again this weekend.  Hopefully we’ll have insulation in it by Friday and I can get that inspected.  Once that is signed off, we’ll be getting sheet rock done.  Then I’ll be more excited!  I’ll work at completing some of the decking this weekend as well as some other miscellaneous tasks.  I need to spend some time adding up receipts etc.  I think we have somewhere in the neighborhood of $130k in this now.  I’d estimate it’s probably worth around $165k or so, although I have a lower value in my net worth calculation.  When it’s completed I think we’ll be in the $215k range.

I’m still fighting the urge to buy a new PC.  I had one in the shopping cart (at Dell.com) yesterday but just couldn’t pull the trigger.  Part of the reason is that the deal wasn’t really hot and the other is that I am getting by with my current PC, although I’m really noticing how slow it is running.  It’s funny how my mind starts really obsessing about the speed of my PC once I start thinking about buying a new one.  Just another tendency I need to fight.

Other than that, it’s just the daily grind around here.  I found out that a girl in my daughter’s class has the chicken pox.  Lovely.  I’ve never had them but have had the vaccine.  I’m really hoping that the vaccine will protect me from it but I’ve heard it doesn’t keep you from getting it but makes the symptoms more mild.  Ugh.

I had some free time yesterday so I decided to do a little window shopping.  Why? you ask.  I just don’t know.  I haven’t wandered the aisles of stores in months.  I figured I’d just kill a little time.  As I headed towards the local shopping district I was amazed at the sheer number of cars on the road for a Sunday afternoon.  It almost felt like rush hour.

This area is just south of Seattle and is one of the main destinations for shoppers in the south end of Seattle and all the area suburbs.  It contains a huge mall, a Costco, Best Buy, Bed Bath & Beyond, Target, Borders, Barnes and Noble, Babies R Us, Toys R Us, Old Navy, Sears, JC Penney, Nordstrom, Macy’s, Lowes, Home Depot, Gart Sports, and pretty much every other national chain of stores and restaurants and another huge shopping center being built in the same area that will bring even more.

If you are wanting to indulge yourself in a massive consumer orgy, this is the place to go.  Normally when I head down there I try to go during a slow time and get in and out quick.  Yesterday I decided to just immerse myself in it.  Yeah, I had a purpose.  I was looking for the perfect impulse buy.  Why?  I don’t know.  I guess I just had the urge to acquire something new.  (Oh man, that just sounded really pathetic)

I started my retail expedition at a massive car audio tent sale in the parking lot of the mall.  Car Toys puts on an annual event where they put up massive tents (I’ll call them circus tents) with massive amounts of generator power and more car electronics than you have ever seen in one place.  There were probably a few hundred people there at any one time and at least 100 cars with unbelievable car stereo systems in them.  Most of them were cranked up and the sound was deafening.  By the time I got done, my ears were ringing.  I was somewhat mortified to see people bringing their small children and babies in there.  I think they should have put a department of social services employee at the entrance to coldly stare at these parents.  Believe me, we are talking permanent hearing damage for those poor kids.  All that being said, it was a little bit fun to see the crazy stuff that people have done to their cars.  Many of these cars had car audio/video systems in them that were worth far more than the vehicles.  I would guess most of them had at least $5000 invested in them with some well over $20K.  That doesn’t include the value of the cars.  Pretty much every car had at least 4 video screens in them.  They clearly had no function other than to win the “I have more video screens in my car than you do” competition.  One car even had two 23+” screens in it’s trunk.  I can only assume that is for all the crazy tailgating that they do with it.  Purchased: NOTHING

After being completely overpowered by subwoofers and people I decided to continue my browsing at Best Buy.  I wandered all through the store, played the PS3 that they had there for a minute, wandered through the computer area trying out all the various laptops and PC’s, hit the home audio section (which seemed strangely very small) and ended up in the car audio section.  The whole time I was there I couldn’t help but think of the article I read last year of the 80 people that all dressed up like Best Buy employees and all went in to Best Buy at the same time.  Purchased: NOTHING

After Best Buy I decided to head over to the HUGE mall.  I hadn’t been there in at least a year and it’s undergoing a major remodel.  It was bought buy Westfield shopping centers a couple years ago and they have embarked on a massive upgrade.  I have to admit it was pretty nice inside and they had added a TON of new stores.  I was amazed at how many people were there.  You would have thought it was the Christmas rush.  As I wandered the mall I kept one eye out for a blank staring trench coat wearing mall rat that might be hell bent on going out in one last blaze of glory but only saw gangsta wannabe’s trying not to trip on their pants that were falling down around their ankles. 

Ahhh.  The Apple store.  I always have a few minutes of good old fashioned salivating when I’m in there.  I finally put my hands on one of those Iphones.  I have to admit I’m really glad that I signed back up for another two years of punishment with Sprint so that I have no options for getting an Iphone.  Since you can only use the Iphone on AT&T, I can safely look at an Iphone with no fear of an impulse purchase.  You know what?  The Iphone really is cool.  I could write 10 pages on all the things they did right with that phone and I only looked at it for a few minutes.  Besides the Iphone, they also had a lot of Mac laptops.  I’d love to have one but the cheapskate in me just can’t spend that much for a computer.  I can buy two Windows based laptops for the price of a Mac.  If the prices were the same, there is no question I’d switch.  Purchased: NOTHING

After spending some time in the Apple store and cleaning up the drool on my shirt, I headed over to the Dell kiosk.  I love going by there to see what’s new and to actually be able to touch and feel the laptops before I’d potentially buy them from Dell.com.  Sadly, there was nothing too exciting at the kiosk.  Unlike the Macs, their pc’s feel really flimsy and plastic.  I guess that’s why they are half price.  Purchased: NOTHING

All that shopping was making me hungry.  There was really only one thing I could do.  Head on over to Mrs. Fields Cookies and spend 5 times as much as I should on a cookie.  Purchased: $3.50 worth of cookies (aka 2 cookies)

With the sugar and fat fueled energy boost I was back in the shopping mood.  Since I’d already hit the stores I was most interested in I figured I’d wander through Sears on my way out of the mall.  Wandering around Sears is not as efficient as browsing through their catalog like I did when I was a kid but it’s much more interactive.  To say I made a bee line to the 3rd floor is an understatement.  I have no desire to look at women’s clothes, which it seems half the store is full of.  The 3rd floor has always been a crowd pleaser with both the electronics and tools taking up the whole floor.  Unfortunately there was nothing new there.  Same wrenches.  Same tv’s.  Same appliances.  I left sadly disappointed that I hadn’t found anything to blow some money on.  Purchased: Nothing

For an impulsive hedonistic shopping trip, this wasn’t turning out too well.  So far all I’d done was bought a couple ridiculous priced cookies.  What is this world coming to?  There was really only one way out of this.  Costco.  I have never ever been to Costco and not found something that I just had to have.  I drove the half mile from the mall to Costco and was met with a line of cars trying to get in.  This is one of, or is, the busiest Costco in the state.  It’s huge and is filled with treasures.  I finally got in the store and headed straight to the electronics section.  22″ widescreen LCD’s for $229?  Ahhhh.  A quad processor PC with 2 gigs of ram and a 24″ screen?  I’m home.  If not for the fact that I’d have a massive money hangover in the morning and my wife would cease all communication with me I would have spent about $5000 there.  In the end I left without even having a food sample.  Purchased: NOTHING

What is wrong with me?  Am I sick?  Am I getting old?  I don’t know.  I suppose my frugal nature was firmly in control as I tempted myself in the land of the retail vultures.  It could have something to do with the fact that we have so many expenses ahead of us as we finish our lake house or just knowing our main house will need a roof in the next couple years or it could be a multitude of other expenses I know are coming.  I do have to admit it was nice not to wake up with a money hangover this morning.

I don’t know what the deal is lately but I find myself yearning for stuff.  Unfortunately it isn’t cheap stuff either.  In the last week I have been looking at:

-A new laptop

-A new desktop PC

-A GPS unit

-Granite counters for the lake house

-A different truck

I definitely don’t need a new laptop.  No question about that.  If I end up buying a laptop I need to be taken out to the woodshed.  Luckily I haven’t actually seen an Iphone in person either or I’d probably be lusting for one of those too.

A new PC?  This is probably the most realistic purchase that I could make, but I don’t absolutely need one.  I’m getting by with the one that I have.  Yeah, I peak out on memory consumption and find myself waiting more than I’d like as the processor cranks away but it’s very useable.  There are a few excuses running around in my head working hard to justify spending the dough on a new desktop PC but I’m not sure if they’ll win or not.  If Dell has a really good sale in the next little while, I may be vulnerable.

I really don’t need a GPS unit.  If you recall, awhile back I posted about the fact that GPS units are dropping in price fairly quickly.  I’m seeing them in the $150 range.  Sooner or later, we are going to pick up a cheap one.  It’s just too handy not to have one.

As we continue work on the lake house, we are getting to that point that we will really start shelling out the dough as we have to buy the bathroom and kitchen fixtures and cabinets.  Since these items are the most visible in the house and we’ll have to look at them all the time, I don’t want to skimp on them.  The only question is whether we really want to throw caution to the wind, or be a bit more conservative with some tile, or laminate counters.  Time will tell.

Don’t even get me started on the truck.  I’m probably not going to move on this at all.  I think I punish myself now and then for having so much money tied up in my 2006 Toyota Tacoma.  I paid cash for it when I bought it new (broke the rule of never buying new).  I suppose if the truck had been built well, I might not be feeling this way but I’m extremely disappointed in this truck.  The quality is not nearly as good as my previous truck and I’ve had a couple chronic problems with it that really make me regret the purchase.  I’ve considered selling it and buying a little older truck for half the money.  We could really use the extra cash on the lake house but I’d really be taking it in the shorts if I sold it.  If I could just get Toyota to fix the problems, I’d feel much better about it.

Anyway, that’s my week in review from a “I want, I want, I want” perspective.  Somehow I managed to fend off these purchases even though my wife and I went to Fry’s electronics on Friday night.  We walked all through the store admiring various things.  In the end, all we bought was an Ipod charger, and Ipod case for the Ipod Nano that my wife seems to have inherited from me.  Of course this is twisted and wrong.  When a coupe goes to the electronics store together, it’s supposed to be the husband that buys something…….. 

The carnival of personal finance is up and hosted at one of my favorite blogs.  (My Open Wallet).  Go check it out.  My article, “How free is my computer” was an editor’s pick.  (Thanks Madame X).

Anyway, go check it out.

Great news.  I received a letter in the mail today from Countrywide home loans.  Apparently they’ve done the math for me and I could be paying less every month for my mortgage by switching to a 40 year loan.  Here are the benefits that they listed:

-Lower your monthly payments

-Consolidate or pay down higher interest debt

-Get cash to do the things you want to do

-Streamline your finances

Talk about fluff.  It’s too bad that they don’t show you a graph of how bad you’d be screwing yourself by turning a loan that has 26 years left on it into a new 40 year loan.  Imagine the additional interest that you’d pay them.  Heck, a 30 year mortgage is bad enough.  I definitely wouldn’t want to extend it any farther.  I ran the numbers once before out of curiousity and was amazed to see less than a $200 monthly reduction for another 10 years of debt.  It’s definitely not for me.  I can see where people in much more frothy markets might opt for it though, just to get in to a house.

Before you get too excited, I should probably tell you that this is an invitation only offer.  Without a reservation number they won’t talk to you………  unless you have a pulse.

This article is a crowd pleaser.  Robert Frank attended a summer camp for rich kids that was specifically created to teach the children of rich people how to manage money so that they don’t just blow it all.  It’s interesting to read some of Frank’s observations about these people who are mostly in their twenties:

“When I got to the Skills Retreat, I thought it would confirm my worst fears about growing inequality. Here was a camp designed specifically to help rich kids get richer (or at least, keep them from getting poorer). It was yet another way for the children of wealth to get a leg up on members of the middle class, who can’t afford financial education camps and won’t have big inheritances to carry them through life.

Yet after two days, I realized I was wrong. Today’s rich kids may be cash-rich, but many are skills-poor, with little chance of growing their wealth or landing top jobs. Raised in a bubble of privilege and insulated from the competitive pressures of the everyday world, many tend to have low self-confidence, little drive and few of the necessary tools to succeed in today’s global economy. Only a few of the kids, for instance, could explain the difference between a stock and a mutual fund.

In the end, I concluded that these kids wouldn’t be tomorrow’s chief executives and billionaire entrepreneurs. Most would probably drift through life spending their parents’ money and hoping it would last. Tomorrow’s economic superstars will more likely come from the striving middle class, just as they have for much of American history.

And all that inherited wealth will wind up going to people who actually earned it — an encouraging sign for those of us worried about the wealth gap.”

Read the rest of the article.  It’s a great read.

http://www.latimes.com/news/opinion/sunday/commentary/la-op-frank29jul29,0,6843733.story?coll=la-sunday-commentary

I know this is probably starting to sound repetitious but we spent the weekend out at the lake working on the house.  We were able to complete the siding over the deck (cedar peak) which I’ve been wanting to do for quite some time.  We also got the heat pump delivered and I wired it in.  In the next couple weeks we’ll have the company come out and fire the system up to make sure it all works.

The main item we worked on was the deck.  We previously framed it up but had not installed any of the decking.  I opted to use the Trex composite decking.  It is supposed to last a LONG time and is pretty durable.  Our plan is to use Trex on the deck boards and then we’ll use all cedar wood for the railing and posts.  We’ll also wrap the beams in cedar as well.

On Wednesday of last week I called Home Depot to order up the decking.  I ordered 32 16 foot boards and prepaid for them so that I wouldn’t have to worry about them running out before we picked them up.  They were supposed to put them in will call but they never did.  When we went to pick them up they were short.  I explained that this was a problem because we were going out to do the work when we were picking up the boards.  I was nice but firm.  I asked the employee to call the manager on his phone to explain the predicament.  They did have 12 foot boards but I didn’t tell them that we would be able to make those work.  After talking to the manager for a bit, the employee came back over to me and said the manager was sorry and that they would sell me as many 12 foot boards as I needed at 50% off.  Ahhhhhhhhhh.  We took 25 of the 16 foot boards and then bought 10 of the 12 footers at 50% off.  I had also used a 10% off coupon on the first order of 16 foot boards so I saved a total of over $400 on the decking material.  I love saving money.

Previously, I had been talking to a friend of mine out at the lake.  He is building a new house and has a ton of extra cedar 2X2’s and 4X4’s.  He offered to give me all the 4X4’s and 2X2’s I needed to build the deck railing.  That is also saving me a ton of money.  I would guess that it will save me another $400-$500.  I’ll be using all of this money that I saved to pay for insulation for the place.  I did buy my friend 4 cases of beer to say thanks and I’ll probably pick him up a few more later on, but I’m still saving a TON of money.  In the end the deck will have cost me about $1200.  That’s for a 30 by 8 foot deck with Trex decking and the rest of it all cedar.  If I had paid full price for all of the materials I could have easily gone over $2500.  That’s not including labor.  So, needless to say, I’m happy with the progress over the weekend.

One other major milestone we hit was that we passed our framing/mechanical inspection on Friday.  We got approval to insulate the place and then we’ll have the drywall installed.  It looks like I’ll meet our goal to have it insulated and heated before winter.  I can feel the weight slowly lifting off of my back……… 

I’m back out working on the cabin.  I decided to take a couple days off this week since the weather is so nice.  I’ve got a few things lined up to get completed on the cabin.  I’ve asked the heating company to come out tomorrow and finish the install of the heat pump and fire the system up.  I have run the wiring out for the pump and they just need to hook it up.  I also have requested a framing/mechanical inspection for tomorrow.  If they approve our work, we will be ready for insulation.  I had one insulation company come out and give me a bid today and have one more coming tomorrow.  The first bid was $2600 which is less than I thought it would be.  I am saving some money by doing all the interior caulking myself.  I have already filled all the holes with fire rated caulk and have sealed some of the windows etc.  I don’t expect that the bid tomorrow will be lower than this but I’m always happy to be surprised!

My friend is coming up tomorrow morning and we’ll start putting the decking on and also finish the cedar siding above the deck.  I’m looking forward to having the outside totally complete so that I can focus on the inside.  Once insulation is in, we’ll be in pretty good shape for winter.

Last weekend I was out at the cabin as well and we went down to a party at a friend’s on the lake.  I have been getting to know a lot of the people in the neighborhood and was talking to one of the guys that lives on the lake.  He appears to be pretty well off and owns a successful business.  He currently has two properties in the neighborhood and has a pretty good handle of the values of the properties around us.  I had mentioned that I hoped my place would be worth around $200K when it was completed.  He said, “If you decide to sell it for $200K, let me know.  I’ll write you a check”.  It’s nice to hear that he thinks it’s worth even more than that.  At $200K, it would mean a profit of about $55K (when it’s complete) and since we are paying cash as we go, our equity in the place will be much higher than that.

Anyway, by sitting here typing this post, I’m avoiding work.  I’m going to head back down to the cabin (across the street) and see if I can finish up a bit more.  There’s nothing like working upstairs on a 85 degree day with no insulation.  The sun beating on the roof really spikes the temperature in there.