Family Living Focus by ROBIN L KULECK McKean Co. Extension Agent Never finance a car again! Pretty shocking concept, don’t you think? After housing, transportation is the second largest expense a family faces. For many families, financing cars is an accepted means of obtaining transporta tion. Here’s a process that, if carefully followed, can assure you a new car every three years, with no interest payments. In fact, this technique depends on you earning interest! No, there is nothing illegal about this strate gy, but it does require self-disci pline. A new $12,000 car financed at To make ends meet and, better still, to get ahead, you can reduce household expenses and debt, in crease income, or do all three. Here are some ideas to consid er: Housing • Consider refinancing an existing mortgage if savings ex ceed the cost. • Ask your mortgage lender to cancel private mortgage insur ance (PMI) when home equity reaches 20 percent of home value (e.g., $20,000 of equity on a $lOO,OOO home). • Purchase appliances with a CHOP-RITE TWO, L\C. Quality American Workmanship! #5 CLAMP TYPE CHOPPER #lO CLAMP TYPE CHOPPER * Plates available in 3/16" (standard), 1/8", 1/4", 3/8", 1/2”, 3/4" and 1". * V-Belt Pullies available for #lO, #l2, #22 and #32 choppers. FOB MOBS INFORMATION PLEASE CALL * 27 HEALTH OBWBITE: FOUNTAIN JUICER CHOP-RITE TWO, INC. 531 OLD SKIPPACK ROAD HARLEYSVILLE, PA 19433 1-800-683-5858 FAX (915) 256-4363 www.chop-rlte.cofn eight percent for three years has monthly payments of $376 for a total cost of $13,536, 13 percent of which ($1,536) is interest. Once paid for, most families find somewhere else to spend the money normally allocated to car purchases. Instead, continue to pay the $376 monthly payments, not to the finance company, but to yourself. Set up a money mar ket fund where after three years at five percent compounded an nually you will have accumulat ed $14,935, less taxes. This amount, plus the trade-in value of your now six-year-old car should allow you to purchase Painless Ways To Reduce Household Expenses high Energy (EER). Food • Combine coupons with store sales and/or product rebates for additional savings. • Buy in bulk when items are on sale or in season (e.g., pro duce). • Buy store or generic brands if they have the cheapest price. Transportation • Keep a car as long as possi ble to reduce depreciation and fi nancing costs. • Consider buying a late model used car instead of a new one. CHOPPER #32 SCREW DOWN TYPE CHOPPER your next car without financing! By continuing to make month ly payments to your money mar ket account, in another three years you will have enough set aside to trade your three- year old car toward a new one and continue trading every three years throughout your life and never finance a car again! Because your monthly set aside includes the initial interest you were paying plus the interest earning capacity, over time you will be able to modify the type of vehicle you are purchasing. As time passes, if your family grows or your tastes mature, you can afford a larger, more accommo dating car. Even though inflation will cause the cost of vehicles to rise, the compounding of these two interest factors is enough to maintain and even exceed your present buying power. Over time, you could reduce the amount you set aside each month be cause your payment to yourself doesn’t need to include the fi nance charge. The interest earned on the account should • Purchase airline tickets dur ing fare wars and stay over a Sat urday night to get a cheaper fare. Clothing Efficiency Ratio • Shop department store clear ance sales, consignment stores, factory outlets, thrift shops, and/ or flea markets for clothing dis counts. • Buy washable clothing to avoid dry cleaning charges. • Build a wardrobe around just a few dominant colors or neutrals to enhance “mixing and matching.” • Use e-mail in lieu of phone calls to redfice telephone charges. ♦> Made in the U.S.A. SSiil Utilities #1 CLAMPLESS TYPE CHOPPER ❖ Easy to Clean ❖ Made from Cast Iron ❖ Quality Workmanship keep up with taxes and inflation and still maintain your buying power. Maybe a $376 monthly pay ment is too steep for you. Financ ing the same $12,000 for 48 months at eight percent drops your monthly payments to $292. Using the same strategy, financ ing the car for four years and driving it for six, your two years of monthly contributions to your self will yield about $7,354 (less taxes) which, if used with your trade-in value, will greatly re duce the amount you need to fi nance on the second car. Assum ing the amount you finance is just $3,500, your ongoing $292 payments could pay that off in a year. Continuing to save the $292 for the next three years will yield $11,598 (less taxes) plus trade-in value of a now four year-old car should enable you to purchase your third car without financing. From this point on you should be able to trade-in every three years and never fi nance again. If these numbers don’t seem realistic to you, use computer • Sign up for a long-distance telephone savings plan. • Close off unused rooms in the winter to conserve heat. • Insulate your hot water heat er and reduce the temperature to 120 degrees. Financial Management • Switch to credit cards with a low annual percentage rate (APR) if you revolve a balance. • Increase collision and com prehensive deductibles and drop coverage completely on older cars. • Inquire about insurance dis counts (e.g., for buying all prop SAUSAGE STUFFER, LARD & FRUIT PRESS Lancaster Farming, Saturday, August 5, 2000-B5 programs such as Quicken or Mi crosoft Money or Internet-based financial planning calculators to come up with a plan to fit your family transportation and budget needs. The dollar figures used in this example illustrate the con cept of never paying finance charges again. Variables not taken into ac count which impact the final ac tual dollar values include cost of vehicle plus taxes, title, current interest and inflation rates, and your tax bracket. This technique does take com mitment, a change in attitude and behavior. Once you resolve to never pay finance charges again, and commit to making monthly transportation pay ments, the concept of never fi nancing a car again doesn't sound shocking at all. Over your lifetime, the car loan interest you’ve saved and interest earned can add up to tens of thousands of dollars. Changing how you handle trans portation costs gives you one more way to increase your net worth and assure your family a sound financial future. erty insurance from the same company). • Reorder checks and deposit slips from a mail order firm in stead of a bank. • Eliminate “rarely-used” ex penses such as health club dues, call waiting, and premium cable channels. • Trim gambling expenses (e.g., lottery tickets) and expen sive habits (e.g., smoking). • Always inquire about dis counts, especially when traveling and paying cash for items. #3 FOOD CHOPPER STUFFER HORN AVAILABLE IN VARIOUS SIZES Other
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