Category Archives: Saving

What Will You Do With Your $550 Savings?

old-gas-pumpVarious news sources (ABC, CNN) are reporting that the current low gas prices will save the average driver $550 in 2015. The average driver will spend $1,962 on gas next year, according to the Energy Information Institute, which is down about 20% from this year. So, what will you do with your $550 savings?

I will first tell you what we won’t do. We¬†will not use cheap oil as an excuse to trade in our gas-sipping Prius for a gas-guzzling luxury car that may have a smoother or quieter ride. The American auto industry is always saying that average Americans prefer large vehicles. Well, they haven’t spoken to me or my wife.

I do not expect the lower cost of gas to change our driving habits, although some sources are saying it’s cheaper to drive than fly for distances up to 2,500 miles. I might be up for driving around 400 miles to save money and have my own car and supplies to use at my destination, but I’m at a point in my life (part of getting old?) where driving for days and days just isn’t fun anymore.

I do expect to roll that extra $46/month into our taxable savings every month. And if we realize lower costs on things like electricity due to the low cost of oil in 2015, who am I to look a gift horse in the mouth? I will do as I always have done and roll all money that is left over after our monthly expenses into our taxable savings and investments. Right now, I am amassing $20,000 in our high-interest savings account to purchase our annual allotment of i-bonds for 2015. I may wait until May to make the purchase in the hopes that the fixed interest rate will be something higher than the current rate of 0%, though.

Cheap Technology Geek

Apple-techLots of people I know are all atwitter about what Apple will announce on September 9th. The pundits think it will be a larger iPhone. Some people are wondering if we will hear about the next generation iPad. And many are wondering when they can get their hands on the new iPhone.

My take on this, as it is for most all new technology, is “Meh. Do I really need this stuff?”

My cell phone is a dumb Tracfone. I can use it in emergencies and it can take pictures if I am ever in an accident to help prove who hit whom. I typically pay $100 per year for something like 1,200 minutes, which is way more than I ever use. Our 13-year-old son also has a Tracfone that we pay $11/month to give him more minutes than he uses. He broke his phone last year, and a replacement only cost $12 from Tracfone. That’s the type of technology that I like.

Sure, it would be nice to have Google maps on my cell phone, but we already have navigation built into our car, and my wife’s Galaxy 3 phone does have Google maps when we are out and about. Her Samsung Galaxy 3 phone was bought at Walmart along with Straightalk’s unlimited service for $45/month. If I had the need or desire to have a smartphone, I would also use Straightalk’s phone’s and service.

The newest, latest and greatest technology is almost always going to be more expensive than slightly older technology. There is a point in the cost versus technology curve where you can get the most technology for the least amount of money. I typically do not try to purchase technology when it is at its minimum cost because it is bound to become obsolete and unsupported in a short period of time. I try to buy technology that is just above the cusp. That is, I look for technology items that are perhaps a year or two old that will likely still be supported for some years to come, but are not on the bleeding edge of technology, where you almost always pay a premium price.

cost-vs-technology

The server that hosts saveandconquer.com is running Linux on an old Core 2 Duo with 4 GB of RAM. For what our family is using it for (hosting websites, email, and video), the server does not have to be any more powerful. We buy affordable technology to fit our needs.

Do you purchase the latest and greatest technology gadgets? Or do you wait a year or so to get an optimal price?

5 Indicators a Home Buyer Can Risk Making a Low Offer

ChecklistBy Tali Wee of Zillow

Buying a home is an incredibly expensive purchase that all home shoppers hope to make with confidence. The best way for buyers to feel assured about their purchases is to get a great deal. So, house hunters should look for homes where they’ll get the most quality home for their money.

As the housing market recovers and home prices appreciate once again, it’s difficult for buyers to find affordable homes. Most markets are intensely competitive since inventory of for-sale homes remains low. Therefore, the current real estate market is a seller’s market.

House hunters looking to score homes below asking prices should watch for these five instances where sellers might entertain low offers.

1. When Listings Are Stale

price-reduced-againIn most cases, home shoppers completely overlook listings sitting on the market for numerous days. Even if properties fit all buyers’ criteria for their dream homes, the fact that no one has expressed interest tells buyers the properties are not wise purchases.

Maybe the home wasn’t staged properly for it’s first open house or perhaps the marketing photos exaggerated the spaciousness of the home. In any case, when a home doesn’t receive offers in a competitive market it indicates to buyers that something must be wrong with the home. Stale listings are nightmares for sellers. However, discouraged sellers become ideal opportunities for buyers to offer less than asking price.

2. When Comparable Homes are Much Cheaper

Another instance where home shoppers might gamble offering less than asking price is when homes are clearly overpriced. Part of a buyer’s due diligence is to understand the market value of properties. After months of reviewing home sale prices, buyers begin to understand the current value of homes. Then, they can judge fair pricing and justify paying costly mortgages for potentially the next 30 years.

For-sale homes should list at prices similar to the selling prices of comparable properties. If a buyer notices the home he or she plans to purchase is more expensive than properties in the same area, built about the same time, with similar lot sizes, square footage and number of bedrooms/bathrooms, then the house is likely overpriced.

When homes are priced competitively, multiple buyers make offers. Buyers sometimes engage in bidding wars where sale prices end up above asking prices. Overpriced homes receive fewer offers, so sellers might be motivated to accept slightly lower prices. When listings are overpriced and stale they are even better opportunities to risk making a low offer.

3. When Shoppers Are Unimpressed

House hunters should pay close attention to other shoppers at open houses. The quiet conversations between husbands and wives might indicate the overall competitiveness of a property. Are shoppers excited and interested? Or, are shoppers disappointed and complaining? Homebuyers should review properties with their own judgments first, checking off their lists of must-have qualities and then spend time watching for cues from other shoppers. If no one seems interested a property, the seller might not receive many offers, making it a good option for low offers.

4. When Properties Are Not Staged

In general, prospective buyers should avoid fixer-uppers that require loads of time, hard labor and money. However, house hunters should pay careful attention to the type of upgrades properties need. Homes requiring a few cosmetic improvements are great opportunities for buyers to make low offers. In many cases, sellers don’t have time to make upgrades, and proactive buyers can sometimes make minor updates during ownership for less than $10,000.

Busy or lazy sellers often leave chipping paint and overgrown landscaping on home exteriors and stained carpet or overcrowded layouts inside. These eyesores distract shoppers from the positive elements of properties, limiting the number of interested parties.

Additionally, shoppers should visit homes with poor-quality online marketing photos. Even though unprofessional images might make properties seem undesirable, many buyers will overlook these properties, leaving the door open for lower offers.

foreclosure-house

5. When Sellers Are Motivated

Lastly, bargain shoppers should look for desperate sellers. When owners are motivated to sell they tend to accept their first offers, even those below asking price. At open houses, buyers can eavesdrop on conversations between seller’s agents and other shoppers to measure the seller’s desperation. Socialize with other shoppers; sometimes neighbors peruse open houses and share details about the history of the community and sellers.

Did the seller recently relocate for work or a divorce? Is the owner juggling multiple mortgages? Did the owner recently pass away and his or her heirs are trying to offload the property as soon as possible? In many of these instances, the current owners are rushed to sell. These are the perfect scenarios for buyers to make low offers.

Since home shoppers are preparing to make the largest purchases of their lives, they want to feel like they’re getting the best bargain. When trying to strike the best deal, consider these circumstances to submit a lower-than-asking offer.

Save Before Buying That New Car

amd-used-car-salesmanI just read a headline that said, “Shop for car loans before heading to showroom.” This could be good advice if you plan to purchase a car using credit, but why use credit? It seems to me that buying a car in our society has become synonymous with taking on debt. Have the banks brainwashed most people into believing that paying an excessive amount (the additional interest you will pay) for a large purchase is the American way? I suppose the banks are feeding on the “I want it now” little child in all of us.

Here’s a thought. How about saving your money before purchasing that car?

According to TrueCar.com, the average cost for a new car in August 2013 was $31,252. The National Automobile Dealers Association says that he average used car in the U.S. currently costs $14,375. The average used car loan rate at banks and credit unions is 4.85% for a three-year used car loan and is 4.25% for a five-year new car loan, according to Bankrate.com.

My question to you is, how difficult is it to save $15,000 prior to buying a used car or $31,000 prior to buying a new car?

If you were to finance your entire $15,000 purchase at 4.85% over 3 years, your monthly car payments would be $448.55. At the end, you would have not only paid $15,000 for the car, but you would have paid an additional $1,147.80 in interest. In other words, you will have paid a total of $16,147.80 for a $15,000 car. And of course, it’s worse if you try to lower your payments with a longer term loan. A loan for a new car that costs $31,252 with 4.25% interest over 5 years will cost a total of $34,745.40 for that $31,252 car. Payments would be $579.09 and total interest paid would be $3,493.40.

If you were to save the used car monthly payment of $448.55 into a dedicated bank account, you can have $15,000 in 33.4 months. And it won’t hurt that the bank will pay you interest on your savings, such as the 0.85% interest currently being paid by Ally Bank. I would much rather save ahead of time and keep the $1,147.80 in interest charges.

Also don’t forget that there is no penalty if you are saving for a future purchase and you miss a payment or two. You will only have to answer to yourself. Try that with a loan payment.


Do you buy cars and other big ticket items using credit, or do you save ahead of time?

CDs Can Be Best For Short Term Savings

piggy-bankCNN/Money had a recent article in which they posed the issue of what to do with short-term savings:

My wife and I are selling our condo and plan on renting for the next year or two before buying a house. We will be netting $40,000 from the sale… [and] plan on eventually using this money as part of a down payment. Until then, I would like to put the money in a lower risk mutual fund so that we can get more than the 0.85% yield that our online savings account offers. Do you think the potential upside is worth the risk or should we keep it in savings? — Ben, Chicago.

The article talked about CDs, but advised against them since this money would be used in one or two years. The article continued with,

While earning less than 1% on your cash might not seem like a great deal, in today’s savings environment it’s probably your best bet.

But finding a higher yield for your savings boils down to following two basic rules: Either take more risk or allow the cash to be tied up for more time. For example, a six-month CD currently pays an average of 0.41% while a 5-year CD will earn more than double that amount, at an average 1.28%, according to Bankrate.com.

However, given your relatively short-time period (one to two years), savings goal (a down payment on a home) and the current volatile market conditions, following either of those rules is not your best move, said Joe Lucey, a Minnesota-based financial adviser and president of Secured Retirement Advisors.

“You don’t want to add additional risk and then end up at the end of three years wishing you had your money back,” he said.

That is a mistake. 5-year CDs at Ally bank are currently paying 1.49%. Ally has one of the more-lenient penalties for early CD withdrawal of 60 days of forfeited interest.

The following table compares the interest earned on $40,000 after early CD withdrawals with 60-day penalty against a regular savings account paying 0.85% interest compounded daily. Accounting for the early CD withdrawal penalty, the savings account will pay more for the first 139 days. After that, the CD will pay more. If the money is withdrawn from the CD after 2 years (730 days), and bank interest rates don’t change, the Ally CD will have paid $423.30 more than the bank’s savings account. And of course, if you leave the money in the CD for longer than 2 years, like 3 or 4 years as shown in the table, its earnings will continue to pull away from the savings account.

ally-cd-early-withdrawal

Disclosure, my wife and I own 5-year Ally CDs. We do not own Ally stock, nor are we affiliated with Ally Bank.