Budget Sense

It is time to replace my aging 2006 Chevy Equinox, as it quickly approaches 300K in mileage! 

I have done my research and narrowed it down to just two models (both are crossovers). And between these two, there is very little difference except for gas mileage. One of them has superior gas mileage, and with gas being so expensive these days, I will go for the model that saves me the most on gas; all other things being equal.

But there is one issue. The model I am eying is new. In fact, the only model available is 2013. So the only option is to buy brand new, as it is virtually impossible to buy used. Which means I am forced to pay some $1900 for freight and PDI.

Why it does makes sense to buy a new car in this case:

But it still makes sense to buy a new car in this case. Why? Having done my homework on this, this car will save me a lot in the long term.  And in my case, long term really is long term. On average, I like to own a car for at least 5 years or more. And with this being a new car, I plan to keep it for a lot longer, so potential for saving in the long term is real.

• Gas

Compared to my current vehicle, the new car has a gas tank that is about 7 liters smaller. Which means every fill-up will save me about $9,  given today’s gas prices. But the real savings are in the actual performance of the car. To begin with, it is a 4 cylinder, newly-engineered engine that has already garnered so much attention and good feedback on its efficiency. Comparing the engine on this CUV to my current vehicle, I could save an estimated $15-20 per fill-up. At about 5 to 6 fill-ups a months, I could be looking at more than $110 in gas savings a month.

• Insurance costs:

Having called my insurance broker about this new model already, I was shocked to find out that it will cost me about $25 less per month to insure this car, for the exact same coverage.

• Maintenance Costs:

Due to the high mileage on my current car, I am forced to use ‘High Mileage’ grade when changing my oil, and this is about $10 more than regular oil. Besides that, due to the old age of the car, I have to do frequent maintenance on it, some of which cost in the hundreds. On average, this is close to $100 or more a month.

• Resale value:

While it is true that new cars lose a big portion of their value, just shortly after driving them off the lot, the car I have in mind is of a very reputable manufacturer and will not lose much value even after many years of driving. This was a big part of my decision on which car to choose. Its residual value will remain high even years of driving it (assuming the mileage is not too high)

• Peace of Mind:

With a new car, you get peace of mind knowing that you are covered, for years, should something goes wrong with the car. And as part of the warranty, you also get the courtesy of free road side assistance, something you may need in the future in an emergency.

• Getting something out of the current car:

Given my current mileage, I am still able to get some decent offers from interested buyers for my current car. But once my mileage hits 300K or more, it will be very hard to get anything significant for it. So now would be just the right timing to sell it or trade it in.

Based on all of this, you can see my case for a new car. The savings alone from reduced insurance, gas and maintenance costs will add up to well over $200 a month, which in and of itself will pay for the monthly financing amount. And after the car has been paid off, I will continue to save more and more money, especially on gas!

Buying a new car may not make sense in most cases, but in a  rare case like this and after doing your homework and research, it may very well be.

Canadians have often been known for being polite, soft, apologetic, charitable  and generally friendly. But could these nice attributes be the very reason why Canadians are also such sloppy and not very wise consumers? Unlike their neighbors to the south, they let retailers and companies gouge and walk all over them, and not say or voice their opinion? It could very well be.

That is all about to change.  Looks like this soft Canadian attitude is starting to change, at least from a consumers’ prospective. Good news for the consumer. Bad for retailers.   It is time we dropped our nice and friendly labels. As consumers, we need to be informed, proactive and speak with our money and not hearts.

Canadians are simply tired and fed up with being gouged, whether it is at the car dealership, buying airfare, filling up gas, buying shoes and electronics etc.

This frustrating was magnified and given an extra boost yesterday, thanks to a new report from the ‘Conference Board of Canada. This report tells that about five million Canadians now cross the U.S. border by land annually to fly out of American airports. Think about that number for a second and the potential lost revenues for the Canadian economy overall.

In reaction to this report, I read and heard from many frustrated consumers, each giving real examples of how much money they saved by flying out of the US. The savings were close to 100% or more in some cases, and averaging at least 30% or more in most cases. This was such a one-sided argument. Virtually no one argued in favor of our airports and airlines and why they charge this much.

Canadians’ new ‘War on Gouging’ (#WarOnGouging)

It is time Canadians start a new war. An economic war. Unfortunately, one against their own country. It is the new ‘war on gouging.’

I, for one, want to spend every penny I have in Canada. In fact, I don’t remember ever crossing the boarder strictly for shopping or flying out of the US. But after hearing and reading all these stories, I feel like I don’t have a choice and will start joining this battle against gouging. Enough is enough. We Canadians deserve better for being so supportive and patriotic about our economy. Buffalo and other cross-boarder US cities will be more than glad to take our business, at this time of continuous bad news for the US economy.

The government has to act too. They will not only be doing what we elected them to do, they will also score huge political points. This hits the pocketbook of most Canadians, on a daily and hourly basis, and it is the government’s responsibility to step in and do something. They can’t just simply blame it on ‘market forces’

Until then, Canadians will and should look south for their shopping and transportation needs. If your house is constantly robbed by a thief, and that thief happens to be your neighborhood’s local baker, you wouldn’t be foolish enough to buy from him. That is what Canadians are unintentionally and irrationally doing: supporting and buying from the very retailers and businesses that are robbing them off their hard earned money. And let us not cut the government some slack here, as they deserve a fair share of blame, given all these ever increasing taxes and fees.

If consumers bands together, the ‘war on gouging’ will be decisive and quick. Otherwise, we will continue to be gouged.

I have talked and warned about ‘impulse buying’ in the past and  recent bank polls re-affirmed and legitimized my warnings and fear: impulse buying is indeed killing the budgets of Canadians.  According to a BMO poll, Canadians spend an average of $3720 on impulse purchases, which include clothing, shoes, electronics and even food (possibly leading to another problem: obesity) Think about that amount for a second. It is a lot of money, probably more than what an average Canadian is able to save a year (assuming savings of 5-10% on a a net income of about $25,000) In other words, halving or eliminating impulse purchases could help those who couldn’t save before, to start saving thousands per year.

Men’s top 5 impulse purchases were the following

1-Dinning Out (53%)
2-Clothing (47%)
3-Books/Magazines (32%)
4-Shoes (29%)
5-Software/apps (26%)

For women, the top ‘impulse purchases’ were”

1-Clothing (66%)
2-Dining out (50%)
3-Shoes (48%)
4-Books/Magazines (44%)
5-Make-up (36%)

So what is exactly meant by ‘impulse buying’? Think of it as money spent on things that you didn’t need just a few moments earlier or at least not right away. It is the purchase you make as a result of passing by a shoe store and seeing a new style you like, but don’t really need because you already have a gazillion pair of shoes. Or that trip you make to McDonald with your coworkers to buy lunch even though your spouse or mom has already packed lunch.  In conclusion, it is a purchase decision that didn’t involve much thinking or time and was made on the fly.

We always knew how dangerous impulse purchasing really is to our pockets but this poll has cemented and legitimized this concern.  Canadian finance and government officials have been warning people not to take on too much debt or risk going the same downward path that the US and various European nations went through. We are constantly being told to tone it down with our debt and save more. But who is listening?  Recent surveys and polls are indicating that more Canadians have started to save money. But debt-to-income levels remain high and in fact approaching dangerous levels.

Needless to say, if an economy or a household wants to decrease the risk of a recession, depression or even bankruptcy, they out to lower how much money is spent on impulse as opposed to purchasing things out of necessity, research or need.

Ways to lower or eliminate ‘impulse purchases’

For some, impulse buying is not a big deal and may be able to deal with it with ease. For others-an ever increasing number of people-it requires more than that. It requires something akin to a therapy.

It starts by acknowledging that ‘impulse purchasing’ is a problem and one that is costing you a lot of money. Ensure that when you go out to a mall or with friends, to only take money that you know you will need and if possible, leave your debit and credit cards behind. Don’t worry, there won’t be an extreme emergency where you will need them right away.  While in a mall or a retail store, observe triggers that lead you to want to buy something. Is it a certain ‘for sale’ sign? is it because the item is featured in the middle of the store? Is it because no one else has it and you want to be the first? Once you identify these triggers, it becomes easier to deal with them and cut them out as a source of your impulse buying.

Another way is to literally take the money that you would otherwise spend on food on other things you don’t need, and set it on a side for one or two weeks. At the end of this exercise, count how much money you have saved, that would otherwise be wasted on ‘impulse purchases’ and then you will realize how much money you are burning.  It helps to physically and literally feel and see the money that you are wasting, for you to appreciate its value.

It also helps to start logging all your purchases and then go through them to determine what can be considered an impulse purchase.  And last but not least, don’t ignore the important of budgeting, the very core of every financial planning or strategy!  Look at your budget. It most likely has little room, if any, for impulse purchases. And if it does, be sure not to exceed it. Note: don’t confuse an ’emergency fund’  in your budget with money allocated for ‘impulse buying’!