Transportation: Fuel Costs

1941 Adler Diplomat - Gasifier

Driving a car is expensive. What if you didn't own a car? (This question is of course directed at you who in fact do own one.) If you didn't own a car you would have to live relatively close to your work. Alternatives might be walking, biking, public transportation, van pools, or finding a job that involves teleworking.

If you are in fact one of those who does own a car and can not do the above suggestions you can do other things to make driving your car less expensive. Fuel costs are a major factor in my daily commute; I drive 66 miles round trip for work. I know other people who go as far as 88 miles daily for work.

Free Ride Project Progress Report - End of Year 2013

This is the first progress report of the "Free Ride Project".  When we begun this experiment we had the following cars:

• Car A: Ramsey Rover - 2000 Ford Windstar Mini-Van with around 208,000 miles
• Car B: Green Machine - 1998 Jeep Cherokee with 230,000 miles
• Savings assigned to car: $4000

The following changes happened:

• Phase I car purchased: The Sportscar - 1994 Honda Accord with  168,570 miles (but with a new engine with only 10,000 miles) - Purchased for $3400
• The Ramsey Rover was deemed beyond economic repair - Sold for $700
• Insurance was changed to have better coverage and $100 less per month
•  $1400 was put into the car to improve the ride

The following results are:

• Cost of the car was $4142 (Initial Cost + Repairs/Upgrades - Sale of RamseyRover)
• Gas savings for first seven months $840 ($120 a month by using Accord and not Windstar)
• Gas savings for first seven months $700 ($100 a month by carpooling 2x a week with wife)
• Savings on insurance rate for first seven months $700 ($100 a month difference)

In seven months the complete savings by the changes is $2240 which means the car actually cost me $1902 out of pocket to buy. At this rate the car will be "paid" for from the initial investment within six months.

The mileage on the Sportscar went from 168,570 miles (10,000 mile engine) to 178,660 miles (20,420 miles on the engine) The Green Machine now has 241,000 miles on it.

So let me know with a comment of what you think.

How Much Is a Human Being Worth?

 $2,909,130

Upon seeing the web site HumanForSale.com I was able to value myself at $2,909,130. I felt like a cheap discount at a 1 dollar store. How can they just value me at such a low price? According to the web site the highest male was just over 4 million dollars while the average male was worth $2,106,266.  I guess I'm a little above average but, not quite top commodity material.

I live in the United States where the average income is $40,000 per year. If the average person works 30 years they would have generated $1,200,000 just being average. If they invest in themselves they can increase income. If they invest some more wealth will be generated.

10% of $40,000 is $4000 per year. If I take that $4000 and invest it for 10% return on investment compounded annually I would realize $793,571. Then the average American person's worth is then $1,993,571 after 30 years. (Calculating this way a human being is not worth much.) Maybe there is a different way to value human beings, maybe there are some factors missing in this way of calculating.

 Betty Grable

Zig Ziglar had stated on one of his recorded lectures the value of Betty Grable's legs were worth $1,000,000 (they were insured for $1,000,000 by Lloyds of London around 1940). That got me wondering if there were other celebrities with body parts valued.

Troy Polamalu

Troy Polamalu of the Pittsburgh Steelers football team has his hair insured for $1,000,000 by Lloyds of London  (The same company who insured Betty Grable's legs) Hedi Klum had her legs insured for $2.2 Million. I wonder what the difference is from Betty Grable's legs? I think Betty's are worth more than Hedi's after you account for the value of 1940 dollars in today's dollars. (1940-->$1 Million = 2012-->$16.5 Million in real price)

It was kind of a tongue-in-cheek joking around with the celebrities insurance policies, but still you have to think these people are insuring what can be lost if these parts of their bodies are lost. Betty Grable was making about $300,000 a film when she was insured. So basically she was insuring herself for three films and some poster sales.

Really Betty was selling herself short, I'm pretty sure she wouldn't trade her legs for 1 million dollars. They are worth more to Betty than 20th Century-Fox who insured her legs. While the studio was only looking at the revenue side of what they would lose if Betty lost her legs, I'm sure Betty herself would be looking at the quality of life and her loss of mobility.

This makes the point you are worth more to yourself then others think you are worth. It also points to the idea people are worth more then meets the eye. What a human being is worth is directly related to the impact they had on others. Even Betty Grable's legs was worth a lot to many G.I.s in WWII, some who may have kept their moral up enough to make it home alive. Betty's legs motivated some moviegoers to buy tickets to see her movies which provided jobs for many people in the movie industry. How many movie industry people supported their families because of those ticket sales?

It is like the proverb "For Want of a Nail" but, in a more positive way Betty Grable was able to impact many people by having kept nice legs. Something like nice legs is relatively small but, think of the impact.

For want of a nail the shoe was lost, for want of a shoe the horse was lost; and for want of a horse the rider was lost; being overtaken and slain by the enemy,

all for want of care about a horse-shoe nail. 

-Benjamin Franklin

(The Way to Wealth 1758)

You don't just have to be some movie star or celebrity to make an impact you just have to add value to someone's life other then your own. Your value depends on the value you are to other people. Think what a parent is to a child.

Priceless is what a human being is worth because you can always add value to someone else's life.        

Free Ride Project - The Application Plan

Free Ride Applied is the outline of "The Plan" to apply the Dave Ramsey "Drive Free for Life" video / concept. The difference is I'm going to actually apply the concept to real life. Of course the example in the video will be changed to my liking as outlined below:

Dave Ramsey Example w/ Assumptions:

• New car cost: $26,000
• Car Payment: $475 per month
• Loan Term: 6 years @ 9.6%

My Start w/ Starter Cars:

• Car A: Ramsey Rover - 2000 Ford Windstar Mini-Van with around 208,000 miles
• Car B: Green Machine - 1998 Jeep Cherokee with 230,000 miles
• Savings assigned to car: $4000

The basic breakdown I'm going to follow is:

1. Save, Sell & Upgrade Stage
2. Keep & Invest Stage
3. Ride, Upgrade and Invest Stage
4. Invest, and Rest Stage

Save, Sell & Upgrade

1. Save at least $1500 for phase 1 car (this is the initial car to get you from point A to B)
2. Buy at least a $1500 - $4000 value car (do due diligence on purchase) This is the phase 1 car. Of course the more I can put down the faster I can get to my goal of having a paid for nice car
3. Save for 10 months a "car payment" we would normally be putting towards a car bought with borrowed money. Dave Ramsey's video says $475 per month, we decided on at least $200 per month (knowing it will take loner to get to our goal)
4. Sell phase 1 car and add the 10 month savings to purchase phase 2 car. This would be the upgraded car better than phase1 but, not at our goal yet.
5. Repeat steps 3-4 until a car is purchased which is at the level we feel good driving at. (most likely at the $10,000 level.) This is the phase X car.

Keep & Invest

1. Keep the Phase X car
2. Ride it for the remainder of what would have been the 6 year term had we bought a car at the beginning of the project with debt, instead of buying a phase 1 car.
3. Invest in a DRIP Index Mutual Fund

Ride, Upgrade & Invest

1. Sell the Phase X car (hopefully to someone else as a phase 1 or 2 car for them)
2. Get the cash from the Phase X car and some of the gains from the DRIP Index Mutual Fund and purchase a major upgrade car (My MUC car) The MUC car will be the one I would want to drive and not worry about the gas mileage so much, it has to still be reliable, it will be comfortable. I haven't found my MUC yet but, I look forward to researching it and having the cash to buy it outright.
3. Continue to invest in the DRIP Index Mutual Fund while I ride the MUC for an extended period (10 years)

Invest and Rest

1. Take some of the DRIP Index Mutual Fund and buy other style investments like real estate or a business.
2. Take some of the earnings and send to a charity that makes a difference; one that I most likely already support by this point.

The Debt Card - Why Be Minimum?

Why be minimum be Maximum. Max out your life not your debt. Debt is a tool but, like a knife it cuts both ways. You can get a house with debt or you can get a boat with debt. You can live in a house and having debt to acquire one may be a good deal (you have to live somewhere). Acquire debt to buy a boat seems to me to be a bad deal (unless you live in your boat). Using a debt card to buy a want rather then a need is a bad deal. I'd buy a text book for school over a comic book but, I would prefer not to buy with debt  in the first place.

The reason is explained in this wonderful video of the major reason to avoid "Debt Cards" :
 

 Credit Card Debt Explained with a Glass of Water 

The most basic point is to pay off any Debt Cards as soon as possible with the maximum payments you can make to build financial momentum in the positive direction. (of course have an emergency fund)

Here is a quick example with hypothetical numbers for illustration purposes:

Suppose you have a $1000 Debt Card debt.   

The minimum payment is $100 per month.

You have the potential to pay $200 per month of with discretionary money.

The monthly interest is 10% (compounded monthly)

It would take you 24 months to pay it off with the above minimum payment. The maximum payment using your discretionary money would have the debt paid in six months. Of course not everyone is able to pay double towards a debt but the point was pay more then the minimum and reap the reward. (Look at the below chart and see what happens when you invest at 5% the same $200 payments after the debt is paid off!) 

Maximum Debt Payments - Maximum Investment Payments 2 Years

 

Even if the investment payment was decreased to the minimum payment the investment interest works for you instead of against you.

Maximum Debt Payments - Minimum Investment Payments 2 Years

 

The difference of investing in yourself by maximizing your payments instead of investing in a Debt Card Company.  Better yet buy stocks of the Debt Card Company and own them instead of them owning you.  Do some calculations yourself and see what happens.

*Tool - Great On Line Calculator ! 

Not a serious strategy but, another great way to reduce debt on a Debt Card is to write your own terms like Dimitry Agarkov !  He scanned a bank credit card offer, rewrote the terms to be 0% interest, no fees, and no credit limit and if the bank didn't stick to the rules they would be fined $91,000 or if the bank broke the contract they would pay $182,000. The only hitch to this one is you have to get the bank to agree to the terms and issue a card like Tinkoff Credit Systems did. I do believe the banks are going to read the fine print after Mr. Agarkov contract writing career.

The bottom line is if you invest in yourself by paying off debt to the maximum you will have money to invest in your future. Pay the minimum towards your debt and the Debt Card Company will have a great future. The choice of who's future you want to build is yours.

The Debt Card - You can always leave home without it...

If it looks like a duck, walks like a duck, & quacks like a duck then,

 most likely you have a duck. 

 

Call A Duck A Duck

A credit card is a Debt Card*. It gives you debt, it tacks interest on that debt in a self replicating fashion, often it charges service charges creating more debt, there are late charges creating more debt, on top of that it creates more interest debt on all that previous debt. There is no such thing as a credit card there is only a debt card.

I would like every time you hear the words "credit card" replace it with "debt card". Debt card doesn't sound sweet but, call a duck a duck. Maybe you don't want this duck in your house (or in your bathtub).

It amazes me sometimes when people I meet will drive all over town to save 5% here, 10% there, clipping coupons, burning gasoline while using a debt card at 17% to purchase everything.

The down side is the ways the Debt Card Companies can charge you:

• Interest fee
• Late fee
• Currency Exchange fee when traveling abroad
• Cash Advance - increased interest paid
• Phone payment fee
• Bait and switch interest rate; the loss of introductory rate if late - could be applied retroactively
• Ability for Debt Card Company to change interest rate
• Ability to side step each state's Usury Laws (due to Marquette Nat. Bank of Minneapolis v. First Omaha Service Corp.) 

Time should be your friend not a fiend. If you spend money with the Debt Cart (with interest and self replicating charges) you can't invest the money yourself. You lose twice; the Debt Card compounds against you and you have nothing to invest with compounding for you.

Here is a little challenge:

Leave home without a Debt Card for one day.

Doing this opens up a number of questions. What would you have to do that day to have a successful day? Would you have to get cash out of your savings to pay for gas, lunch, groceries, etc?  To get cash out you would have to have savings to begin with. Where does that cash come from?  Would you make lunch? Would you postpone buying something?

This may be easier for some people then others. If this is easy challenge yourself for two days; or more days if this is still to easy. The idea is to live with a little more immediate risk and encourage planning a little bit ahead. People lived without Debt Cards for years before they were invented.

The funny thing is your net worth can not go below zero if you have no debt. So someone without a Debt Card is without a potential financial hole in his future, while a person with a Debt Card has a hole predicted in their future.

If you want to build a financial building you need to build a foundation. To build a skyscraper or a one bedroom house you still need the same thing - a solid foundation. Spend the time digging holes you have to fill them before building on them. Xavier Serbia writes about foundations in his book "La Riqueza en Cu4tro Pisos" (Spanish only). Thomas Stanley writes about where those foundations can take you in his book "The Millionaire Next Door"

Time is finite; don't waste it by paying more and having to work more just to pay down the Debt Card.

*Note- "Debt Card" will be used on this blog instead of  "Credit Card"

Wealth and Time - Time Is Money

 "Time Is Money" - Benjamin Franklin

Often it is said "time is money". Many people don't know where the phrase comes from. It comes from an letter by one of the Founding Fathers of the United States, Benjamin Franklin. There is much wisdom that comes from the past. I have outlined the highlights for me here:

My Highlights (look for your own highlights after reading what Ben Franklin wrote) : 

• Time is money - Time spent not working loses the money that could be earned and the money spent
• Credit is money - Interest on a loan is lost money to the borrower
• Money can create more money - Interest on savings creates more money
• Use your savings and end the ability to earn compound interest
• Small sums wasted over time add up to big sums wasted
• Be on time and truthful in business - people don't like to do business if you are late and dis-honest
• Little perceptions can have a big effect on your credibility
• Pay back loans on time and in full - keep your word with promises
• Keep track of what you owe - it helps keep you honest in business
• Have debt and you don't own the things in your possession - true ownership is debt paid in full
• The way to wealth is use industry and frugality, therefore wasting neither time or money
• Have faith in God's wisdom whether he blesses you or not with being wealthy

Phase 1 - The Sportscar (Almost)

With $4000.00 cash in hand the stage was set to get our Phase 1 car on the "Drive Free for Life" project. After searching for a couple of weeks straight and bringing a car to my mechanic to check out with a thumbs down we found a winner. My wife saw a 1994 Honda Accord with a new engine for sale on craigslist for $3500.00 . The car was on the other side of the city (80 miles away) but, after calling the guy selling the car it seemed like a good deal which needed to be looked into more deeply.

 Stock Photo of the 1994 Honda Accord

The first thing that made me interested was the new engine. I spoke with the seller and he explained it was installed 10K miles ago and he was using it as a daily commuter locally. The MPG is 22 City / 29 Hwy (25 combined) This would be a big change in gasoline usage (2000 Ford Windstar 15 City / 21 Hwy (21 combined)) To put this in real terms: 

I drive 66 miles round trip to and from work daily which is 17,160 miles per year.

Realistically I'm getting about 19 MPG on the Ford which is about $3161 in gas per year compared to the Honda at $2071 per year. This is with $3.50 per gallon assumption and the Honda at 29 mpg. The difference is $1090 per year. So in about 3.5 years the initial cost would pay off for itself. This is an important factor because in 1 year I can resell the car for less then what I spent on it and still have a positive cash for the year.

Initial cost      $3500

Gas Savings -  1000

---------------------

Before real loss $2500

What if I were to instead put the gas savings into the Phase 2 car fund to accelerate the quality upgrade?

That is $90 per month bonus on top of the regular savings.

The deal starts to look more interesting for me with these type of numbers. The big risks I saw was the car was over 10 years old (the age of reliability drop) and was the guys honest about the engine being new rather then rebuild. Both cars my wife and I have are over 10 years old and over 200,000 miles and both brands were on the bottom of the bucket of reliability. The 1994 Honda Accord ranked top on reliability, I saw many others for sale with excess of 250,000 miles at the same price as my target, and I had a friend who still had one in pretty bad shape still as a daily commuter so the confidence in this model and year was up. 

I saw the car with a friend and the car looked good except for the tires. The engine looked like a new car engine including all new wiring. I talked him down $100 for the tires and we became the owners.

About 5 miles down the road the car started to overheat. I guessed it had to be something stupid and I was right, one of the coolant lines had came off due to the clamp not being tight. It was a big sign of relief because you have the immediate knee jerk reaction to think you made a bad deal or got ripped off.

At the 10 mile mark the car started to vibrate at about 50 miles per hour and then get good again at 65 miles per hour. I hoped it was not the steering.

When I got home I web searched for any issues I saw with this model. The world wide web is a great money saver. I saw it was caused by not round tires. (I knew I needed to replace them anyway.) I also had the advantage of a friend who had first had knowledge of the year and model car.

So the Phase 1 car was acquired; how good a deal it was is yet to be determined but, the momentum is building to get to free car land. 

Reliability equals Value

The one factor that bugged me about the "Drive Free for Life" plan was the lack of any mention of choice of car in the equation of moving up in vehicles. If you have a bad choice in vehicle it could have an effect on your bottom line. One factor I would like to focus on is reliability.

Often people don't factor in this when purchasing a car. This is a universal factor which should be taken into account no matter what car you get whether new or used, compact electric or diesel bus, etc. I'm a firm believer in momentum building and working out issues to keep my momentum from stopping. The plain truth is I prefer to avoid issues and limit risk.

There is a big gap in the reliability of a vehicle in model and manufacturer. Keep in mind these factors are in constant flux and change all the time.

Value is also not just a function of cost. My example of this is the Yugo

1986 YUGO $3990

Invest in Yourself - Drive Free

I had come across an interesting video from Dave Ramsey's YouTube page ~ "Drive Free - Retire Rich". I would like to suggest watch the video before you read my comments.

Watch Now.

Done? Read on....

How much is my car worth?

I have a car that has 207000 miles on it from the year 2000. I would like to know what people think of how much it is worth. How do I value such a beast?

How can I value it? It has an engine that runs OK but, needs oil every once in a while. (It burns some as extra fuel.) I've heard some people tell me just look up the blue book value. Some have said I need to know the miles per gallon. There seems to be as many opinions on the value of my car as there are people.

I started the blog by asking the question of how much my car is worth. It was partially a rhetorical question. My answer is as follows:

My 207000 mile year 2000 mini-van is worth more than the blue book value. It is worth more than the car was when the original owner purchased it in 2000. In 2000 the mini-van's suggested retail price was $24,600. I purchased it for $2700 in 2009 with 155000 miles on it. In 13 years the retail price decreased by almost ten fold. It is worth to me the price of transportation to get to work to enable me to increase my income.

The increase of income will be because I have transportation to work that is higher paying then my local area. The value of my car comes not from the value it can obtain on the open market but, how I use it as a tool to reach my goals.