Happy Monday, folks! As I mentioned on Friday, I bought a car last week. So for the next few weeks, I’m going to be peppering in some posts about that process – both my general philosophy/methodology and how this latest purchase played out. Today I’m going to talk about why I like to buy used cars. The biggest reason to buy a used car versus a new one is obviously cost. But if you do it right, you can go beyond that and follow my core financial philosophy of keeping costs down WITHOUT sacrificing quality. When you think about cars, you want to think about the total cost per year. That includes, and typically in this order from largest to smallest, depreciation, gas, insurance, and maintenance/repairs.
Depreciation is your largest, most important cost. And the
larger your acquisition cost, the more you’re going to pay in depreciation in
most cases. But the depreciation curve almost always behaves in a fairly
predictable way. For example, a typical $40k car will lose about $20k of its
value in five years. But in the next five years, it will probably only lose
another $10k. And in the next five, probably only $5k. Obviously different years,
makes, models, etc depreciate differently. But that is the general pattern.
My favorite way to exploit this is to buy cars at about the five year mark, drive them another five to ten years, and take good care of them. You can usually still find one that age with 50k miles or less on it and with today’s cars, assuming the previous owner has taken care of a car reasonably well, that is basically the same as new. Just about any car, besides the crappy brands I simply don’t advise you to buy at all (I posted about the best and worst brands here), is going to go around 200k miles if it’s maintained decently and not driven excessively hard. And furthermore, I’ve done very little besides regular maintenance on vehicles with 50-150k miles on them. So to me, that is the range I want to own a vehicle for. By buying and selling when I do, instead of paying roughly $30k over 100k relatively trouble free miles for that $40k car, I pay half that for the same.
So by taking advantage of the differences between the depreciation
cost curve and the maintenance/repair cost curve, I save a ton of money and get
to drive essentially the same cars I otherwise would. But in order for that to
work, I have to be very confident I’m starting with a good car. That requires
first doing the proper research and then knowing and identifying the signs of a
car that has been taken care of versus a car that hasn’t been. I’ll get into
that plenty more before my series of car posts is complete. But that’s enough
for today. Stay tuned for more of these posts and I’ll work my way through the
entire process. And get your week off to a great start!
Happy Friday! You may have noticed I didn’t post on Wednesday this week as I had planned to. That’s because I haven’t had as much time available as usual, which isn’t much anyway (more on that in a minute), because I spent a few days of this week test driving cars and ultimately buying one. With that fiasco behind me, I will return to regular posting again next week. And I will post about that experience and some new things I learned about car buying in the coming weeks.
That said, going forward, I’m going to be posting twice a week instead of three times. My plan is to do it on Monday every week and then again one other day. I may try out different ones over time and choose a particular one to stick to if I notice it working better than the other possibilities. I am enjoying what I’m doing with this blog and I’m certainly going to follow through on my commitment to see it through for at least one full year. However, my life has gotten significantly busier over the last several months. Please note that I’m not complaining; I choose how I spend my time according to my goals and desires. But I’ve been struggling to keep up lately and finally I’ve had to accept that it’s because of simple math.
My job has evolved and now involves significantly more time and travel than it had earlier this year. I figure I’m putting in 60-70 hours a week now – roughly 10-12 hours per weekday and about that many total over a typical weekend. I’m doing my best to dedicate adequate time to my new hobby of learning to fly, which involves attending ground school once a week, reading every day, watching videos, and of course the flying lessons themselves. That’s about another 10 hours a week. My 10 hours a week in the gym (including time spent in the sauna after some of my workouts) are non-negotiable and I feel that’s the bare minimum I’d like to spend there. I spend about twenty minutes a day working on learning Spanish and at least maintaining my current level in German, which adds roughly 2 hours a week. For those keeping score at home, that’s 82-92 hours per week that are already accounted for on what I consider to be essential activities. Given that it takes me about 9 hours to attain my goal of 7.5 hours of sleep on a good night and that sleep is crucial to health so also non-negotiable, that leaves me with 13 to 23 hours per week to do literally anything I haven’t already mentioned – social activities, writing for this blog, you name it.
Simply put, I’m scraping the upper limits of what is possible for me without making sacrifices I believe would hurt me in the long run. I’m passionate about everything I’m doing and I don’t want to give any of it up. But that only leaves me with two options. One, I can find ways to be more efficient. That pursuit is already a regular part of my life and unfortunately, while I’m obviously not 100% efficient, I don’t think there is a lot to be gained in that area either. Two, I can make some cuts. There are occasionally opportunities to ease back on the work time, although that’s already accounted for in the range I used. Aside from that, any savings has to come from much smaller sources and thus, in much smaller amounts. And to add up to a meaningful difference, there need to be several of those small amounts which means nothing non-essential can be held sacred. Each post I write for this blog takes roughly an hour. And while I’m enjoying doing it, I’ve decided to re-purpose one of those three hours. I will give it a try and see how it goes for a while and adjust as necessary from there.
Is this a lengthy explanation? Sure. But in addition to wanting to explain why I’m doing what I’m doing, I thought tallying up my weekly hours was an interesting exercise that might inspire someone to try something similar and figure out something imporant. Have a great Friday and weekend, Everyone!
Happy Tuesday, folks! I hope you enjoyed your Labor Day. As for me, I made a point of NOT laboring and instead, I enjoyed some relaxation time. I’ve been going very hard lately so I was due for some. Anyway, today I’m going to talk about medical expenses. Over 2017 and 2018, I spent an average of $900 in this category. Keep in mind that I don’t include health insurance in this number since I already accounted for it in my insurance category. Most of the spending that brought that average up was in 2018 when I spent months in physical therapy working through a herniated disc in my back. I’m very lucky to have good insurance, but that $50 copay per appointment still added up over time. I also sprained my ankle, making it a very unlucky health year for me. I’ve decided to write this particular post in list form for a change of pace. So here are my tips for saving on medical expenses, in no particular order (although the first one is definitely the most important and you can probably already guess what it is).
“An ounce of prevention is worth a pound of
There is no better way to save on medical expenses than to avoid getting sick. This means investing time, effort, and occasionally money consistently. There is a reason this is one of the first posts I wrote on this blog. In a good year, I spend little or nothing in this potentially very dangerous category. And that is no accident.
Understand how your insurance and the medical
billing system works and mitigate things as much as possible.
Learn about how deductibles, copays,
out of pocket max, etc operate and pay attention to them. Occasionally you can
do yourself a favor here. For example, if you need something done and the timing
is flexible, you haven’t met your deductible yet this year, and you’re close to
the end of the year, wait until next year. That way, you’re giving yourself a
better chance to meet next year’s deductible rather than simply throwing the
spending away on this year’s, which you won’t meet anyway.
Make sure you know something is
covered BEFORE you get the service done. As a young lad of nineteen, I had my
wisdom teeth removed, foolishly assuming my insurance would cover it. Later,
when a bill for a few thousand dollars showed up, I ultimately learned that it
did not – at least not in the particular way I had it done. I don’t remember
the details now. But as a kid that age, that was a tough financial hit. More on
Also, understand that medical
billing is a very inexact science and that it’s done by humans, who do make
mistakes. Pay attention to what’s on your bill and if something doesn’t look
right, call and find out what’s going on. You will definitely encounter some of
the “it’s them, not us” game between doctor’s offices and your health insurer,
but every now and again, you can get something resolved and avoid paying for
something you shouldn’t have to. Plus, in the process, you will gain a valuable
understanding of a system that intimidates a ton of people.
Use your life experience to your advantage
and apply what I call the 1-2 week rule.
Back in the days when insurance
that covered basically everything was commonplace, I would go to the doctor for
basically anything that came up – a minor rash, a cold that lasted a little
longer than usual, a strange pain in my knee, etc. But somewhere along the
line, I noticed a pattern. More often than not, the outcome seemed to be “give
it a week or two and come back if it hasn’t improved.” And those doctors
usually knew what they were doing since in most cases, no return visit was
necessary. Fast forward to today, when many people have to pay at least $25 for
an office visit and some have to pay the entire cost, and my approach has evolved.
As long as something doesn’t seem serious (I use a combination of feel, past
experience, and Dr Google to make that determination), I just self impose that week
or two. Whatever the issue is, it almost always goes away – no copay necessary.
If you don’t have insurance, there are work
Most service providers have a cash
price, and if you don’t have insurance, you should ask for it. From what I’ve
heard, there is some leeway, especially if you’re going to pay up front. And here
is a gem on the prescription side: www.goodrx.com.
If you’re not familiar with it, give it a try and thank me later. I have no
clue how it works, but somehow it does. I’ve even successfully used it when I
had minimalist insurance through a very cheap employer that had a deductible on
prescription coverage. One other thing. Remember my wisdom teeth mishap from
earlier? I didn’t have a few thousand bucks laying around back then. But the
doctor’s office was happy to set up a payment plan for me and six painful
months later, the lesson had been paid for in full. They didn’t even charge
interest, which I thought was very decent of them. From what I’ve heard, this willingness
to set up no cost payment plans is common practice.
As usual, Costco can help.
If you haven’t heard, Costco’s
Kirkland Signature brand is both awesome and incredibly cheap. Since moving to
Texas, I suddenly have allergy issues in the spring and the fall. It’s just one
of those things. But their nasal spray works wonders for me – and costs about
the same for five bottles (enough to get me through probably a decade or so) as
the name brand does for one. And this is just one of many, many examples. I would
go so far as to say that area of the store is the most underrated of all. Oh.
And with most regular household stuff like ibuprofen or that allergy medication
I just mentioned, you can pretty much ignore the expiration dates. Sure, the
effectiveness may go down slightly over time, but not to a noticeable degree in
my experience. I have an entire bathroom closet full of expired stuff that always
gets the job done when needed.
There is only one magic bullet
with medical expenses: prevention. And it isn’t actually magic; it requires
work and discipline. Beyond that, anything else is going to cost money. But
there are ways to keep things from getting out of hand. Hopefully there is an
idea or two in this post that will help you. I hope your short week is off to a
great start and I’ll be back with my regularly scheduled Wednesday post tomorrow.