Buying a car

Let’s face it – a car is the first big purchase that one usually does all by oneself. The universe of cars is huge and at every step, you ask yourself – Am I making a mistake? This is exactly the situation that I found myself in a few weeks ago. My family and I had decided to buy a new (or maybe a used) car. While it will take a lot of effort to describe exactly how and why we decided what we did, the reason I’m writing this post is to highlight the best things to do and the best things to avoid.

One of the first things you do is to hit the Internet and look for tips on car-buying. Here are the top five tips and my take on each of them:

1. Lease or Buy – Almost every site that I read had the same view – it’s always better to buy than to lease. The only exception is if you are the type that changes card every two to three years – in which case you should consider leasing. However, for almost everyone else, buying is the best option.

My take – Unless you are in the business of impressing your friends with the latest trendy sports car every two years (and have a millionaire father to feed you), stick to the Buy option.

2. Used or New – Again, most websites recommend buying a slightly used car – one that is about two years old and has less than 25000 miles on the odometer. The common word is that new cars depreciate the most in the initial two years, so by buying used, you get the best bang for the lowest buck.

My take – Decide on the car based on several key questions – how much driving experience you (or your spouse has). For example, even if you are a great driver, your girlfriend may be a novice. In such case, stick to a 6 year old used car. How much you have saved – if you are a student still in college, stick to a cheaper car that you can junk after a few years. How long will you keep it – If you’re like me and intend to keep your car for 8 years or more, buy something that’s less than two years old and less than 20000 miles.

3. When to buy – Most websites advocate buying used cars in the November to December time frame because that’s when dealers are desperate to sell the outgoing model and will lavish out discounts.

My take – The above is true only if you are buying the current year’s model new. If buying used, go for the March to May period after winter. If buying new, September to October is best for the current year’s model so that there’s something left on the lot for you and December for the new year’s model so that the euphoria for the new model has died down and prices are more reasonable.

4. Finance – where to get it? – Most websites advocate getting finance from your local bank of better yet, a Credit Union.

My take – Who cares? Go for the lowest total payment you can afford. Do your homework well. Go to all the banks you can as well as all the Credit Unions and get the best deal that you can and get it written on paper. At the dealers showroom, show them the letter and ask them for a match. You’ll be surprised how effective this can be. Keep in mind at all times the total interest you will be paying i.e. monthly payment x number of months minus loan amount. Ensure that the option you choose from has this value as the minimum.

5. Trade In – The tipsters say you should trade in only if you must. Dealers are more interested in selling you a new car rather than giving you a good deal on your old one. You are better off selling it to a private party yourself.

My take – They are right on the mark on this one. Trade in only if you absolutely have to. You are better off detailing your vehicle and then selling it to a private party. use Craigslist and auto sales websites extensively and you will save a pile of money.

Do you have any more car buying tips? Let me know.

I just stumbled across a reference to the Money Aisle website and thought I should share it with all our readers.

The site is an interesting concept and once you’ve registered with them, it allows you to input an initial dollar amount and then choose if you want a high-yield savings account or an online CD to put it in. Once you make that choice and enter the other necessary details such as your zip code, state of residence, your term (for CDs), it will actually post these values to several banks that will compete online and bid for your business. What’s more, the process (the site calls it an auction – which in a sense it is) runs into several rounds (up to 10 in fact) and then provides you with the winner who has offered you the highest possible rate.

The best part of the site is that there’s a trial mode that allows you all of the above, except that it withholds the identity of the winning bank from you until you register.

For example, in trial mode, I put in an amount of $5000 for a CD of term 12 months and entered my state of residence as PA. There were 93 banks competing for my business. The auction began with a rate of 2.60% APY in round and ended with a rate of 4.05% APY with 168 total bids. Since I was in trial mode, I could not see who won the bid, but I liked the concept nevertheless.

Safety features – The site provides a clear notice right on the homepage that confirms that all of the banks it deals with are FDIC insured (which means that your investments up to $100,000 are insured). The service has also received rave reviews from several sites such as the New York Times Business Section, Smart Money among many others.

I haven’t yet tried it, but I’m eager to. I do most of my High Yield saving with ING Direct, so I’m going to try this the next time one of my CD’s is up for maturity.

Have any of you tried out this service? Do you feel strongly about it? Let us know.

It all began when I visited our local grocery store here in Pittsburgh, PA with my four year old daughter (whom I fondly refer to as my four year old monster – but that’s a topic for another day). All I intended to buy was a loaf of Italian bread and some fruit. The list extended partly because my wife kept calling me to tell me about stuff that she’d remembered and partly because I remembered some other things as well.

So what did I end up buying, you ask? Here’s what I emerged with when I stepped out:

1 Italian bread sliced
5 bananas
1 Gallon of Milk (Whole)
1/2 Gallon of Milk (2%)
1/2 Gallon of Apple Cider
1 pound of salad from the Salad Bar
1 package of “Herbs for Fish”
1 bottle of Extra Virgin Olive Oil
1 package of carrots
1 pack of frozen peas
1 pack of Popcorn Chicken
1 pack of Portobello mushrooms (sliced)
1 pound of chicken

Additionally, I also had a personal pizza and a bottle of diet soda at their little kitchen outlet.

Needless to say, I exceeded my planned budget by about 250%. Of the entire list, what items did I really need? That’s easy, just the bread, bananas, peas and the milk.

Have you ever had buyer’s remorse when you returned from the supermarket or the grocery store? I have, on several occasions and I’m working out a strategy to deal with this sort of situation. I’ve got a lot of tips from various blogs on the Net as well. Here are the basic points to follow:

1. Keep a pad or a whiteboard on your freezer where you write down things you need/run out of – as you remember them. For example, when our toothpaste is about to run out, I write down “toothpaste” on it.
2. Set up a shopping schedule – so you don’t shop for groceries when you have “free time” – you shop when you hit your schedule time. For example, we try and shop every week and half (and never on weekends).
3. Shop on weekdays if possible. Shopping on weekdays equals lesser time to shop equals lesser money spent. It also means lesser crowds.
4. Ensure that you shop at the right place for the right items. For example, the local Wal-mart is great for branded, packaged goods such as Yogurt, Toothpaste and lightbulbs while the local grocery is best for veggies and greens.
5. Before you hit the store, grab a cup of coffee from home. That will avoid you hitting the in-store coffee shop. As you hit the store, remember that you are visiting to buy what you need – not what you “want to buy”. You are already armed with your shopping list and you stick to it.
6. As you go through the store, avoid talking to employees or tasting the free samples. Both of these equal more temptation to buy stuff you don’t need.
7. Take a basket, rather than a cart. The constantly increasing weight on your arm will warn you that you are splurging and stop you sooner.
8. At the checkout line, avoid the “easy to grab” stuff near the register – it’s designed to get you to buy stuff that maximizes store profits. If you want gum or soda pop, it should have been on your shopping list anyway.
9. When you pay, use a reward points or cash back card to maximize returns.
10. At the register, always remember to use your store-rewards card if they have one. For example, at our local grocery store, you get 1 cent off on gas each time you spend $5. Use these rewards to your advantage.

Do you have any other tips you would like to share? let me know.

Let’s continue from where we left off in Part One of this article.

So, let’s assume that our friend R has arrived in the USA recently (legally, of course). He holds a sufficiently good educational degree and is working a steady job with a good company. R’s employer provides Medical (and other) insurance and a 401K plan, about which R doesn’t really understand much. He’s just got his Social Security number and bank account and is planning to buy a car. So, everything looks to be in order, doesn’t it? Well, yes and no.

R has everything set up, but not in an organized manner. Let’s take a look at R’s balance sheet:

Incoming (per paycheck)
Salary = $1500
Interest = $0.00 (R opened a checking account)
Total Earnings = $1500.00

Expenses (per paycheck)
1 BR Apartment Rent = $400 (shared with wife)
Commuting = $35 (bus pass)
Cell Phone = $22.5 (2 year contract)
Cable TV = $10 (Basic cable, wasn’t that smart?)
Groceries = $120
Eating out = $20 (R rarely eats out, you see)
Gym Membership = $17 (R is a little overweight)
Savings sent to home country = $300
Books = $20 (R loves to read)
Coffee = $30 (R loves Starbucks)
Total Expenses = $954.50

Therefore, R’s Savings per paycheck = Total Income – Total Expenses = $1500 – $954.50 = $545.50

Now, R is wondering what to do with these savings of about $600. His medium term plans include:

• Buying a car
• Increase the family size – have a baby
• Moving into a bigger apartment
• Investing into the stock market
• Asking parents to visit him in the US

In the longer term, R plans to ask his employer to apply for his Green Card i.e. Permanent Residency application in the US and settle down to pursue the American dream.

What should he do to improve his earnings? Although each person’s situation and approach to it is different, there are some things that R can begin to do right away on his financial front (listed in order of highest priority first):

1. Set up his 401K correctly and maximize it
2. Set up an emergency fund
3. Set up a Roth IRA
4. Set up a Brokerage account

We’ll see each of these in detail in the next post.

Every now and then, sense2cents takes you down memory lane for a bit. This is one of those posts. So, flashback to 1990.

In a brightly lit, air conditioned office a teenage boy is bent over a computer screen watching as a smartly-dressed man types at a computer terminal. The boy watches in amazement as the screen keeps filling and scrolling up. He listens intently as the clackety-clack of the keyboard makes words appear on the screen as if by magic.

Once all the typing is done, the man calls to the boy to pay close attention – he is about to demonstrate what the boy has come to really see – he selects a paragraph of text and uses the “Cut” function to make it vanish. He then scrolls up a couple of paragraphs, selects the “Paste” function and presto – the vanished paragraph magically reappears in the new place. What’s more, the existing text actually moves over to make space for the newly inserted paragraph!

The teenager cannot help but marvel at this miracle of technology. He asks the man to explain to him (yet again) how a paragraph of text can be removed from the place it was once written in and made to appear somewhere else in the document. The man patiently explains that the machine is a computer, not a typewriter and that it is all digitized and hence, intangible.

The man then proceeds to print a copy of the document on a dot-matrix printer and the boy marvels as he sees the neat words appear on the page as the printer continues to buzz and spit out paper. The boy understands precious little of what he has seen and heard in that little incident, but deep within, he knows he had been shown something that he will never, ever, forget. He also realizes that he has found something that he can devote his entire life to studying and make a career of – the science of Computers.

Cut – Back to 2008.

The boy in the above scene was me and the man was my Uncle who worked in the Accounting Department of a large corporation in India. One day I had the good fortune to spend some time with him in the office.

Till then, I had only read about these marvelous things called ‘Computers’ but had never seen one. My uncle showed me how one could edit a document on a program called Word-Star and move paragraphs around and a spreadsheet software called ‘Peacock’ (which apparently was a modified version of Lotus 1-2-3). He also handed me a printout which at that time was an amazing experience.

Sometimes, as I type, I am amazed at the speed at which Word Processing has developed. I started out with the humble Word-Star (as far as I can remember), then migrated to Word-Star for Windows and then to MS-Word. Now, we have almost taken the next step with the Internet – now you can actually type, see and edit almost everything online. You can make a document online and bring it to your computer offline or vice-versa. Proprietary word processors are gradually losing ground to open standards – we are now talking about a standard where you will soon be able to use your own tool – but conform to the data standard automatically. Three Cheers for progress!

Here is a link that describes the evolution of the humble Word Processor. I reproduce the main points here:

1. Word processing evolved from the needs of writers rather than those of mathematicians, only later merging with the computer field. The invention of printing and moveable type at the end of the Middle Ages was the initial step in this automation. But the first major advance from manual writing as far as the individual was concerned was the typewriter.
2. Christopher Latham Sholes, with the assistance of two colleagues, invented the first successful manual typewriter in 1867. It began to be marketed commercially in 1874, rather improbably by a gun manufacturing company, E. Remington and Sons. Typewriters were made popular by the development of portable models, first marketed in the early 1900s.
3. In the 1930s IBM introduced a more refined version, the IBM Electromatic and was soon followed by the M. Shultz Company’s introduction of the automatic typewriter, which made it possible to produce multiple typed copies of form letters identical in appearance to the hand-typed original. This bulky machine was succeeded by a device called the Flexowriter, which used paper tape.
4. In 1961 IBM introduced the Selectric typewriter, and in 1964 the MT/ST (Magnetic Tape/Selectric Typewriter), which combined the features of the Selectric with a magnetic tape drive. This development marked the beginning of word processing as it is known today.
5. The term “Word Processing” was a translation of the German word textverabeitung, coined in the late 1950s by Ulrich Steinhilper, an IBM engineer.
6. In the early 1970s IBM developed the floppy disk and it was soon adopted by the word processing industry.
7. Over the next ten years many new features were introduced such as spelling check and mailing list programs and the feature to allow users to keep working on more than one document at a and time on the same screen.
8. WordStar, put out by Micropro International, emerged as the industry standard in software packages, though others surpassed it in one feature or another. It was then succeeded by Word through the MS-Office suite.

It sounds quite surprising but it’s true – you can really save up to $200 a month by just fine tuning your breakfast meal – notice I said “fine-tuning”, not “skipping”.

If your morning routine is like mine, then you are having two cups of coffee every morning and a bite to eat. For me, the two coffees are at 7:30 am and 10:00 am every weekday when I go to the office. Right next to my office building is the local Starbucks and I should warn you that if they awarded bonus points for frequent customers, I’d be close to 500,000 points by now. The cost of all this extravagance is a cool $7.00 per day – because I really like their cappuccinos and mochas (and partly because I was lazy).

In addition to the coffee, I also like to eat a quick bagel with cream cheese or sometimes a Bagel with egg and cheese – usually the latter – at the local Bagel shoppe. The cost of this is between $2.25 to $3.20 per day. Therefore, my monthly breakfast cost was between $185 to $204 – or about $195 on average. In other words, every morning, I’ve been blowing about $10.00 per day or a cool $200 per month at minimum.

A few months ago, I decided to tighten up a bit (well, a lot actually) and this was one area I looked carefully a optimizing. So here’s what I do now:

1. When I leave the house in the morning at 6:45 am, my wife makes me a coffee and I carry it with me in a sealed coffee cup so that I can keep sipping it on the way to work. Cost of the coffee was $3, but it will last us for at least a month, so with milk and sugar, the daily cost would be about 25 cents at most.
2. Ditto for the breakfast – Bagels and cream cheese come much cheaper when you buy them in bulk and freeze them instead of buying them from the Bagel shop on a daily basis. Cost of a bagel with cream cheese would then be $1.00 while an egg and cheese bagel sandwich would be about $1.30 (estimated).
3. My second coffee of the day, which used to be a White Mocha, has now been changed to a small cup of Arabica from the office cafeteria. Cost of the cup is 94 cents in all.

Thus, with the above measures, my daily breakfast cost is between $2.19 to $2.49 which is a total of about $50 per month. Therefore, my monthly savings are $195 – $50 = $145. If you consider that most months have more than 20 working days or that I regularly use coupons to buy the bagels and cream cheese, then the savings would actually climb to more than $150 per month.

In addition to the above financial benefits, I’ve derived the following other benefits:

1. I’m using lesser cream cheese and cut my white mocha out – so my fat and cholesterol intake has reduced.
2. My homemade coffee is lighter and whiter so I’m basically cutting down on my caffeine intake too
3. I shut down my Starbucks credit card, thus reducing the temptation to drink even more coffee and spend even more money
4. I’m saving the time it takes me to walk down to the store and back, thus letting me work a little bit more and get more done at work.

Though I’ve made a great start, I haven’t really got all the way there yet. There are still some more things I could do to save even more:

1. Carry a little thermos so I can take more coffee from home and cut out that second cup from the office cafeteria (and save more too)
2. Kick the caffeine addiction altogether – good for my body and great for my wallet
3. Replace the Bagel addition with something healthier like cereal – more nutritious too.

Have you seriously considered tuning a meal to save money and eat healthier? Let me have your ideas.

Kids!! What would I not give to be carefree and have boundless energy?

If you’ve caught yourself saying this many times, welcome to the group. Kids are the ones that keep you lively. Just when you think you’ve got them figured out, they do something you’d never thought of (like growing up!)

If you have a kid like mine, you need to find ways to keep your kid/kids occupied, without breaking the bank (or your monthly budget). Here are my top five ideas for keeping your kids occupied and happy, spending high quality time with them, but spending very little money:

1. Visit the local library with kiddo: This is my personal favorite. Going to the library is an outing, it’s a great way for parents and kids to cozy up with a book and best of all – it’s free. If your kid is old enough to read, pick up a book for yourself as well as for them and sit down for a good old reading session. If your kid is not old enough to read yet, read to them from a book. This is a great way to emphasize to them the importance of reading as well as give them a great starting point to being a well-rounded personality.

2. Friends, Relatives & Grandparents: If you are well-acquainted with neighbors or friends that have children of similar age as your child, invite them over for a play session, or take your kids to their place for an outing of fun. Keep the session to about two hours or lesser and emphasize that your kids must be on their best behavior at all times. This is also a great way to teach kids to socialize outside school. If you have parents that live nearby, that’s even better because Grandma and Grandpa love to see their grandchildren (don’t forget to call first, though!!) and their children (face it, how long has it been since you spent time with your parents too?)

3. Chuck-E-Cheese’s: A perfect place to visit post dinner especially on Friday and Saturday nights. Place emphasis on the “post dinner” part though. I frequently use those “buy 25 tokens, get 25 free” coupons and my daughter loves it. The occasional coupon makes Chuck-E a great treat for her. We carry a bottle of water and don’t eat or drink anything in the store but have loads of fun all the same.

4. The Local Grocery Store: I’m serious. If you look closely, you will find that grocery stores are engaged in a competition these days. They are trying out various things to attract and retain customers. Some stores offer 5 cents off on gas when you spend $50 with them, others offer reward points and so on. Our local grocery chain is engaged in a fierce customer-loyalty battle with Walmart. They offer this great free wi-fi cafe and a little kids play area in their leading store. The idea is that you drop your kid off to play, they watch over him/her while you take the grocery cart and shop – and spend a lot of time which equals a lot of money too. What I do is to drop my daughter off, finish off my shopping real quick, grab a cuppa in the cafe and then sit down with a laptop. While I’m having fun blogging, my daughter’s having fun in the play area. While this option is great, I’m not a great fan since I’m not really spending a lot of time with my daughter this way. We do this about once a month, though.

5. The Mall: I know what you’re thinking, how on earth could this be a low-cost option? It’s easy – just visit the mall right after lunch. All you need to do is to take kiddo to the kids-play area in the mall. Grab a coffee along the way and let your child stretch their legs a bit. My daughter loves this very much. Whenever my wife wants to visit the mall, this is what my daughter and I do. We visit the mall right after lunch, I baby-sit my daughter in the mall’s play area for kids and my wife shops. My daughter has met a lot of kids there and it’s nice when she plays make-believe games with them.

Do you have other ideas that allow you to have fun with your kids while spending zero or very little money? Please share them by commenting on this article – I would love to hear back from readers.

I’m sure that all of us have a common goal – we’d all like to be rich (without working too hard for it). Well, it’s easy actually. All you have to do is go through the following steps:

1. Get the house in order
2. Calculate and track expenses
3. Cut down expenses in some areas
4. Divert saved money into savings
5. Repeat

Doesn’t it sound easy? Believe me, like going on a diet, only the first couple of times, its hard – after that it becomes easier. In this post, let’s take a closer look at step #1 – Get the house in order before you do anything else. Here’s what you do:

1. Keep your documents in order
2. Apply for your Social Security Number
3. Open a checking account with your local bank
4. Find a place to stay
5. Set up direct deposit of your salary into your bank account
6. Set up your 401K account with your employer and add your spouse as beneficiary

Get your employment documents in order: This is a crucial step that has cost me dearly which is why I put it first. All you need to do is to set up a system of three binders. Use the first binder to store all your employment related documents and the second to store recurring documents such as pay-stubs and other statements. Finally, in the third binder, store all documents that you brought with you when you first came to the US (such as educational degrees, experience certificates and so on). In the long run, these three binders will serve you handsomely and avoid those “where did I put that document?” situations.

Apply for your Social Security Number: This is also a crucial step without which you won’t be able to do much. An SSN is like your identity in numerical form in the US. You need it to get housing, credit cards, loans etc. Go to the local SSN office immediately and apply for one. If you have arrived in the US recently, you might have a couple of weeks wait before you get your SSN card. Make sure you provide a valid mail address where you can receive it (such as a friend’s) and be sure to get a document from the SSN office indicating that you have applied for an SSN and the number is awaited. Based on your visa type, your spouse may be eligible for an ITIN or an SSN. Check this out at the Social Security Website by searching on those two terms.

Open a checking account with your local bank: This is an easy step. All you need to do is to visit the banks nearest to you and inquire about their checking accounts. You could do this online as well. Look for checking accounts that are free to open and use, have no minimum deposit, have free check printing facilities (if possible), have lots of ATM’s in your area. You can find all this information online. For example in the NY area, Citibank® EZ Checking or Chase Checking are options that give free checking accounts if you direct deposit your salary with them. Similarly, Wells Fargo offers a Basic Checking account for those in the West Coast.

Find a place to stay: This sounds easy, but isn’t. You will need to factor in various parameters such as your spouse’s preferences, the commute time, ease of commuting, the cost and so on. Once you find the right balance, check with the Rental office if they will lease without you having an SSN. Most places will do it if you prove that you have applied for one. Some places will also charge you a higher initial deposit because your SSN is new and you have no established credit history.

Set up direct deposit of your salary into your bank account: This step may need you to check with your payroll department. Some companies allow you to do this online through their intranet site while others need a Void check from your account to initiate this. Either way, the Payroll department should help you out.

Set up your 401K account with your employer and add your spouse as beneficiary: This is something that your HR department will help you with. Again, this is usually done online through an intranet site or through paper forms. This is a crucial step because it determines who gets your retirement funds should something suddenly happen to you.

Once you are through with the above, you have taken the first big step to getting rich – you now have your house in order. In the next post, we’ll take a look at the next step – Calculating and Tracking Expenses with an example.

Please take note that I am not affiliated with Citibank, Chase or Wells Fargo in any way and the above instances were only used as examples.

Citibank® EZ Checking can be reached here
Chase Checking can be reached here
Wells Fargo can be reached here

To be honest, I was never a great blog lover in the first place. The only blogs I had ever come across were ones that were designed for the sole purpose of making quick money by whatever means possible – which equates to posting of some kind of pictorial material with a ton of advertisements embedded within. This sort of blog site actually caused me to have a kind of revulsion to blogs in general.

But things changed when I came across some interesting blogs where it dawned on me that this was really a very powerful means of communication and allowed one to express their thoughts and interact with others. I slowly became a regular visitor to several such interesting blogs (which you will find in the Blog Roll) and used them to understand other people’s perspective and thoughts on so many of those little incidents that keep happening all around us. Personal Finance (PF) blogs were always my favorite.

One of the things that I noted was that most PF blogs always made some basic assumptions about their readers. They usually assumed that the reader was American, born in America, had a home to live in, a garden and so on. So I thought, well, why not write about something from a different perspective – and this site was born.

On sense2cents.com, you will find my thoughts about life and personal finance – but everything from a beginner’s perspective. By “beginner”, I mean someone who is new to America and is starting out from scratch. You will see how challenging it can be when you are in an unknown country without many friends to help you out. There is no safety net: no family and no social security to catch you if you fall.

But this is exactly the kind of challenge that several people (or their ancestors) faced long ago and they taught us how to succeed. So, let’s start this journey and we’ll see how it goes. I welcome your comments, suggestions and ideas and will certainly take them into account.

So, Onward, my friends…