I was driving down the road when a commercial came on the radio from a local car dealership. The ad wasn’t your typical advertisement for new or pre-owned cars touting the safety or reliability of the cars, nor was it even an American auto dealer. The dealer had a personal plea to prospective buyers that asked listeners to help jump start the economy and buy a new car. He went on to say that he thought the economy would be fixed if we just went back to doing what we were doing and buy items to help grow our economy. I was amazed that the entire car commercial was about forgetting our financial problems and just buy a high end automobile. His message was clear, we won’t get out of the financial mess until we start buying again.

Several questions came to mind listening to this car commercial.

1. What happens if a customer loses a job? The assumption is that a new car buyer will be employed for the 5-7 years it takes to repay a car loan. I suppose a new car buyer could pay cash for the car, but my assumption is most people need to take out a loan. If the new car buyer loses a job and the car bank takes possession of the new car, how does that help the economy?

2. Is a used car a better investment? Buying a used car that meets your family budget would allow you to pay your other bills on time. Buying a new car might stretch your family budget, increase car insurance, not to mention the increase in our California vehicle license fee.

3. What about your current debt? Even if you purchase a new car with a fixed monthly payment, you might be surprised to find out your credit card companies are changing your rates. Credit card companies are allowed to alter your credit card terms and can increase rates. That new tv you purchased last year for 9.99% interest could increase to 19.99%. Check your terms and conditions of all your credit cards. If you don’t have a copy available, contact your card companies to get the latest terms and conditions. You don’t want to be surprised by your next months bill.

Before making a major purchase like a new car, be sure you have an adequate emergency savings account and that you have a plan for paying down your credit card debt. If you have an adequate savings account, no debt, job security, and your retirements on track, maybe you can consider buying a new car. Or, buy a newer one with low miles.

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photo credit: timparkinson

I recently visited a Home Depot that is closing in our area and had to use extreme caution and utilize my own money saving tips. We have a local Home Depot that is closing and they are offering discounts starting at 15% and some deals can be found for 40%. Immediately I thought about the various projects I would like to complete around the house over the coming year. New sidewalk bricks, landscaping, paint, flooring, lighting, and more. I decided to start a list and figure out what was my short term necessities and what were my long term projects. Would buying items now on sale save me money on future projects? Here is an example of the Home Depot ad from this week. Cleaning supplies like Windex or Clorox bleach are 15% off. Fasteners like screws and nails are priced at 40% off. Power tools like Dewalt and Makita are priced at 20% off. I then put together a list of items I would normally buy at the store for common household maintenance. These are items I could use right now.

Here was my list:

light bulbs
gardening seeds
9 volt batteries
duct tape
sprinklers
2 stroke oil
water and gas shut-off tool

All of the items above I plan to use in the next 2 months and felt that they would be a good deal to buy now. I did see several items that would be “nice” to have, but aren’t needed for 6 months or more. Does it make sense to carry an inventory of items laying around collecting dust? Does it make sense to purchase a box full of deck screws if I don’t plan on attempting a project for 6 months or more? What happens if the deck screws aren’t even the right size? Setting boundaries when a sale item is found can be very important for your family budget and for your garage space. Buying a box of screws for $4.00 may seem like a bargain now, but not using those screws can end up costing you more. In this simple example, if I were to use a credit card and pay the minimum balance, the $4.00 screws might cost more like $20. By not using cash I would be paying for the $4 screws over the next several months or year.

Do you consider your garage or home space when stocking up on sale items? If you have a high turnover rate in your family for canned goods like tuna or chicken, then it would probably make sense to buy a large quantity of meat when it goes on sale. What about a gallon of pink paint for $5.00? I actually saw a gallon of pink Gliddon paint on sale at Home Depot for five bucks. Could I find a project that required pink paint? Maybe, but not in the next few months. It would just end up collecting dust and going bad on a shelf in my garage. Have you ever purchased items because the deal was to good to pass up? Are you able to show restraint, even if the deal is almost free?

What I did to help determine if I “needed” an item was to create a list based on projects and shelf life. If the item was going to be used relatively quickly within a few months and it was something I would normally purchase at Home Depot, then it went in my basket. Light bulbs, 9 volt batteries for smoke detectors, and 2 stroke oil are all examples of items I would normally purchase at Home Depot. Buying a flat of bricks at 25% off appears to be a wonderful “deal”, but I wouldn’t use them for months and I don’t have the project underway.

Do you stay focused while shopping? Do you have your family budget and household goals or projects understood before you shop? A sale on paint, wood, or even a flat of bricks can be tempting, but keeping your project time frame in mind can save you some serious money and cluttered space.

I spent a total of $35 for the above items and could have spent hundreds more if I didn’t prepare a list before visiting Home Depot. What do you consider before shopping for home improvement projects or home maintenance items?

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I recently wrote about Mint.com and how I started using the site to track our personal finances. After a few weeks I am still very impressed with Mint and the ability to track daily transactions for our bank accounts and our credit cards. In fact, I think it has already saved us about $500 a month in our living expenses. I actually enjoy games and challenges and have started to establish some tight restrictions on spending categories. My goal is to be more aggressive and start saving more money with our grocery budget. I feel that with a little work I can make some smarter decisions with our grocery item and still buy quality food for our family. I’m not willing to sacrifice quality, but I will drive a little further for a bargain.

How did we save $200 on groceries in January? Since I abandoned my old excel spreadsheet I was able to watch our transactions hit Mint the very next day. This allowed me to track spending more closely and defer or hold off on several purchases. For instance, our grocery budget was set to $500 which might seem a bit high for a family of 4, but still well below our average of $600-$700. As we approached the $500 in our food budget I would buy only the necessities to make it through the end of the month. Milk, eggs, cereal and some basics helped stretch our budget to $500 for groceries in January. I didn’t buy large containers of fresh fruit from Costco and stayed away from store bought cookies or soda. In fact my wife bought an ice cream maker and we have been enjoying some wonderful treats. Could I save even more each month? Sure. You might be feeding your family of 4 for far less and I would love to hear your feedback on your personal budget. Could I be using the cash envelope system to help lower my grocery bills? Probably, but I’m happy to see the progress so far with over $100-$200 in grocery savings.

We didn’t use coupons and I’m actually very bad at clipping coupons from the newspaper and trying to find coupons for products we actually use each month. I remember when we were first married that I would fall for buying items just because we had a coupon. I think I bought a huge bottle of Tums when we were 25 years old. I think I ate two of them and finally threw the bottle away. Some of you coupon clippers could probably help me shed another $40 or more of my monthly grocery budget. I would appreciate any tips you might have. Any fun and easy website you would recommend would be appreciated.

We bought 90% of our groceries from Raley’s supermarket. This is not a discount grocery store like Walmart or FoodMaxx, but a regular grocery store chain. Could we save more by shopping at a deep discount store like FoodMaxx? Probably, and in February I plan to do most of our shopping at Foodmaxx. Why haven’t I done this before? Foodmaxx is about 10 miles from my house and it’s not convenient. I know I should probably buy more bulk items and go twice a month to save more money. Believe me, my frugal friends who have a $350 grocery budget remind me all the time. In case you are wondering, the other 10% of groceries are purchased from Costco. I mostly buy coffee and paper items from them. What is my food budget going to be for February? I’m hoping to spend $450 on groceries from Foodmaxx.

How about you? Are you making any changes to your grocery budget next month? How have you saved money on groceries? I would love to hear some of your stories.

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Last night, my wife and I were watching TV and came across a show on TLC about the Jeub family called “Kids by the dozen”. You may remember a show about the Duggar family that has made news with having 17 kids. I remember watching a couple episodes and was taken back by the size of the house they were building for the family. I believe the husband was a real estate developer and the boys helped build the house. Very impressive to be able to organize and motivate the kids to help build a house.

The Jeub Family has a large family as well with 14 kids. I was most impressed and challenged by the frugal lifestyle they lived and devotion to home schooling. They also have older children as leaders, I guess you really have to rely on the older children to help organize the younger children and form a buddy system to get tasks done. I had to stop and replay our DVR when I heard the Jeub’s family income was less than $40,000 a year. I realize they don’t live in New York city or San Francisco, but $40k? This is an inspiring family that challenged my thinking on so many topics. I had to stop the program and ask my wife the following question. How can you raise 14 kids on less than $40k a year? What about emergency accounts, dental bills, braces, vacations, college savings, and retirement? She just laughed at me.

The Jeub’s also spend about $100-$150 a week on groceries for 14 children. I know many friends that spend more than $150 on a family of 4. The Jeub’s really made me challenge some of my thoughts about spending on kids and luxuries of ours. For instance, birthday parties. Would you ever combine your kids birthday parties to save money? I have it set in my head that our kids deserve a special day to celebrate. Do they?

But really, how would you do it? I realize you have to live a frugal lifestyle with 14 children, but doesn’t this make you think hard about priorities for your family. I’m sure the Jeub’s are excellent teachers and that the kids could attend college through scholarships. And I do realize, college is not the end all, and be all for everyone. What about braces? So many questions were going through my mind. How do you tell your kids that braces are not in the budget? I know, I know, you just tell them “braces are not in the budget”.

I really enjoyed watching one of the Jeub daughters working with her dad in the family business. What a wonderful lesson that will teach her and allow her to understand what her dad does for the family income. The Jeub’s clearly have a love for children and a strong faith in God that keeps them focused. Watching the beautiful scenery in Colorado made me daydream to move my family out of the Bay Area and into the country. Maybe once I reach my goal of having multiple passive income streams, we could move our family to the country. The Jeub’s clearly include the family on shopping and finances and probably teach invaluable lessons on personal finance through homeschooling. If you have an opportunity, I would recommend you watch the show about the Jeub Family, and challenge the way you think about your family financial goals.

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If you could find a way to pay $1.99 for gas, would you tell others about it? If you knew that you could buy your favorite Starbuck’s drink for half the price, would you get excited? What about finding $50 on the street? Would that put a smile on your face the rest of the day? I love helping friends get creative with finances and find other ways to tackle problems such as gas prices. Many of my friends wish that they had my Toyota Prius, as gas prices here in the Bay Area are touching $4.55 a gallon. They actually don’t need a Prius, they can keep the same car or SUV that they currently own. How? Change the way they look at the cost of an item. Sure gas is $4.55, but the Starbuck’s coffee they drink cost $4.05 or a Pespsi from 7-11 cost $1.50. Get creative and look at debt elimination as a source of passive income. How can it be passive? You will continue to pay yourself each day, week, month, and forever. Each time you make a smart purchase or cut out fat, you will create passive income for your family.

Here’s a quick idea I discussed with a friend this weekend. He told me he can’t live without his cell phone for work and needs to come up with some extra money for gas and food. Well, what about his home phone? Yeah, but that’s only $30-40 a month he says. Well, since he needs gas and food, he should consider canceling the home phone. Also, think of that home phone as a passive investment that would make you $480 a month? If you could live with a cell phone as your primary phone, it would be similar to earning $480 a year in passive income.

Want another. Same friend has cable. I know, we all love it and have to have it. He didn’t think the home phone would save him enough money. His phone, internet, and tv is over $100 a month. What about cable and internet? He could use free internet. What? Come on, those darn banner ads? He doesn’t use the internet 24/7 and could also use his cell phone to check email. Cable? That’s going to be a hard one. He could buy rabbit ears and watch standard tv, or go without it. He needs gas and food for his family, saving or earning $100 extra a month is worth it. That’s $1,200 a year.

So many times, we think of having to earn more money. Sometimes we just need to cut back and think smarter about our expenses. Do we have to have a home phone or cable tv? What about just cutting out premium channels or long distance from your home phone? If you needed to earn another $50-100 a month to pay for gas and food, what would you cut out of your budget? If you wanted to create another passive investment stream for your family, what would you suggest you cut from your expenses? Would you consider these ideas a passive income stream or debt elimination strategy?

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