Cost analysis

Hybrids are a lot more expensive than full gas powered cars. For most of the hybrids I’ve looked at, they are so much more expensive that it’ll take you 4-5 years to make up the difference in gas savings. Also, remember that during resale, you don’t get the full premium back, so the more you spend the more you lose in depreciation. Electric cars will initially come at a premium as well, but the on-going costs are far less than a hybrid. Maintenance will be a fraction of a hybrid, but yes you still need to get new tires and brakes. They get the equivalent of hundreds of miles per gallon, and cost a few cents per mile to drive. The electric car wins big-time when it comes to overall cost. So electric is the way to go right? Well, not quite. Not now at least.

Not Ready for Showtime

Besides pure numbers, there are other issues with electric cars that prevents them from being the new standard at the moment. For one, most electric cars are slow, maxing out at around 30-40 mph. Go at that speed around where I live and you’ll be the horn blowee every time you go out. Apparently that isn’t stopping this Houston doctor. That tiny car looks great to drive around private property like a corporate park or an airport, but I wouldn’t drive that thing on the streets. That brings up the subject of safety. Its just too dangerous driving something that size without doors. There is only one company that I can think of who offers a truly complete electric car, and that is the tesla roadster, made by a company founded by Elon Musk, who also co-founded paypal. Their roadster offers ferrari-like performance with the attributes that any self-respecting environmentalist will appreciate. While this particular car is in a high price range category, the company has said that they will be releasing a full line of economical cars very soon. GM and ford watch out.

What to Buy?

Once Tesla starts whooping the other car brands, everyone will be releasing full electric models. The electric car is the future, but I wouldn’t get one right now because they are slow, unsafe and still rather expensive upfront. I wouldn’t consider a hybrid either. Thats like buying the very best cell phone just before colored screen versions came out. Remember those days? I remember spending a few hundred bucks on a shiny motorola V60, then everyone had colored screens and mine was stone age material. If I had to choose a new car right now, it would be a gas sipping, low maintenance, reliable 4 cylinder. Then a few years later when Tesla rolls out their full line, I’d likely buy on of those, or any other full electric car on the market. And no, I wouldn’t miss driving to the gas station to fill up.

Numbers Don’t Lie

I estimated that by simply moving, the difference in total wealth accumulation over the course of our lifetime would be in the millions easily. Don’t take my word for it, other sources have been writing on the topic of costs of living as well. Maybe its the slow economy, but recently I’ve noticed many articles are now being written about cities with low costs of living. Yahoo Finance had an article about the best cities for your job. For just about every position they have listed, Houston is in the top 3 and places like San Francisco and New York at the bottom 3. The salary figures took into account cost of living, which make true salaries of high priced cities like SF and NYC much lower than places with lower costs of living. For example they state that for a financial analyst in Houston, the true salary adjusted for cost of living would be $72,000. In San Francisco the salary is higher, at $77,500 but after a cost of living adjustment it is a mere $45,300. Here is another article about the best wealth building cities for you to consider.

More Than Numbers

Initially, our decision to move was all numbers. We looked at saving money and keeping more of our income. Although there are places that are even cheaper than the Houston area, we stuck with this city for other reasons. By moving to Sugar Land, TX, we’re not only decreasing our costs of living, but we are increasing our standard of living at the same time. The city is simply beautiful with it’s gorgeous architecture, clean sidewalks and storybook-like charm. I’ve yet to see a best buy or home depot with gorgeous landscaping and full brick facade like I saw in Texas. What also intrigued us about Sugar Land is the immense cultural diversity, low crime rate, great schools and community spirit. I realized that I will now be saving money while enjoying a more comfortable lifestyle and that is something to consider on top of dollars and cents. I was living in a 650 sqft 1 bedroom condo that was purchased at almost double what the new house was purchased for. The new house is, lets just say, much larger and located in a pristine golf course community.

I’m Not Crazy

The funniest reaction I’ve gotten about this move was from my next door neighbor. I saw him back at my childhood home where my parents still live and struck up a conversation about moving. I will never forget how he looked me straight in the eyes and told me, “your nuts.” I know it sounds crazy to hear from someone or read about picking up your life and going to a place where you have no friends or family. Its crazy to leave the streets that you’re familiar with and journey into the unknown. But trust me, friends can be made, streets can be learned and once family members realize how well you’re doing, many will follow. Towards the end of our conversation, my neighbor told me that I was right and that there is no future for my generation in San Francisco. If you currently live in a high priced city, give this a serious thought. Take a look at CNN’s best places to live. Thats how we stumbled upon Sugar Land after initially setting our eyes directly on Houston itself. Sugar Land was ranked number 3 in 2006 and is right outside of Houston. Who knows, maybe we’ll be neighbors one day.

Financial matters have a reputation for being complicated. Ill-deserved or not, financial success requires that we consistently make the right choices. Unless you’re content to settle for water cooler advice or willing to do the research, you’ll need to know how to find reliable financial advice.

Many people rely on media gatekeepers and financial “advisors” for help. But the media specializes in selling advertising and many financial advisors are simply salesmen, not investing experts.

And while most of us think we’re savvy enough to avoid promises of high returns with little risk, fast paths to wealth, and strategies for beating the market, the line between scam and savvy investing is often blurred.

Here’s three tips for finding a reliable financial advisor.

First, avoid everyone who promotes a strategy for beating the stock market. Millions are spent every year feeding this myth because hundreds of millions are made off the people who fall for it.

Even if a winning strategy did exist, it wouldn’t work for long. Once someone exploited it, others would be quick to imitate.

Second, decide how you want to compensate your financial advisor. Some advisors charge a percentage of your invested assets, others charge a flat fee. Stay away from any “advisors” who are not willing to disclose their compensation.

Many of these financial advisors put their interests first—pushing expensive, poor performing mutual funds for the large commission. In return, investors get to look forward to low returns as the investment company pockets excessive fees year after year.

Third, make sure your financial advisor crafts asset allocation plans built around low-cost index mutual funds.

Smart investors use index funds for their lower expenses and higher returns. The superior returns are achieved by approximating the stock market’s return rather than attempting to beat it.

Approximating the market’s return might not sound like much of an accomplishment, but every year more than 70% of mutual funds fail to do just that. This percentage only rises when two or more years are considered.

Although making the right financial decisions can be complicated, these three tips will help you avoid the majority of financial salesmen out there. And if you enjoy following the financial media, keep watching. Just remember that most of it is entertainment, not a resource for outsmarting other investors.

Aaron Stroud shares reliable, easily followed steps to build wealth at On Financial Success. Subscribe to his feed to follow along or ask a question to direct the conversation.

But overall, I’m seeing a trend towards sensitivity and complacency even in personal finance. And that’s not the place for it. Sure, you can create a comfortable lifestyle on the income you earn as a cubicle dweller. But you’ll never get rich that way. I’m not even talking about yacht or golden bathtub rich, either. I’m taking about a comfortable retirement, college funds for your kids and that flat panel TV screen you’ve been lusting over for the last year.

To get even that far, you have to be aggressive. You have to make sure you get a raise or start a business or come up with the cash to invest. Heck, occasionally you have to be flat out mean: a bank may make a mistake, and without you telling the teller or manager that you’re ready to move your account, you may not get that mistake fixed. The same holds true in hundreds of situations that occur every day: a person willing to go to bat for herself is going to get a problem solved long before a person relying on her positive thoughts.

It’s up to you if you want to build up the assets you’ll need to live comfortably — let alone try to make it to the private jet level of wealth. Sitting around waiting for someone to be kind enough to hand you the keys to a jet just won’t work. Instead, you have to get out there and push. You need to work hard to get that far, and you may even need to go to some extremes: practice frugality, work extra hours, strike out on your own.

I think it’s time to exercise some aggression in pursuing our goals. I’m making my wealth-building strategy more aggressive: I’m pinching pennies hard enough that Abe Lincoln screams. I’m looking for better investments for my money — I’m learning as much as I can about investment so that I don’t have to rely on an adviser, who may have different goals for my money that I do. Heck, I’m even contemplating holding a garage sale — not all wealth-building strategies have to be extreme. Where can you get aggressive? Where can you push a little harder and save a bit more money?

But as nice as these gadgets are and despite the fact that it’s almost a justifiable business expense, I’m planning to hold out at least until August to make a decision on what I want. I’ve been doing my research and picking the brains of a few people who know a thing or two about cell phones. And all my research tells me to wait.

In the past, I’ve put off purchases for a variety of reasons:

• Waiting until I can afford to plunk down cash and avoid interest.
• Waiting until an expected price drop kicks in.
• Waiting until I can talk an employer into buying it for me.
• Waiting until I’ve heard feedback about new features and new bugs.

But this decision is only in part about money. I do want to save up a little more cash before I decide on a new phone/camera/everything else each of these things do. But, I also want my choice of technology. Just about every phone company and every network has some big plans for this summer. There are rumors of a 3G iPhone being rolled out. T-mobile swears that they’re bringing out a 3G network. I want to wait until I have the full range of choices before me — and hopefully a little information about the experiences other people have had with these new options, as well.

Sometimes the decision to hold off on a major purchase isn’t just about saving money. Sometimes, it’s about planning for the future: your needs, your options and your wishes. And, even then, you can save money: figuring out the features you’ll need in a year can make sure that you pick up a phone (or other gadget) that lasts long beyond your original needs.

1. Cooking. You have to eat, no matter what — so why not enjoy the process of getting food on the table? And if you’ve been eating out or eating prepared foods (like Hot Pockets or Hamburger Helper), you may even be able to save a significant chunk of change.
2. Hiking. Taking a hike in your local national park isn’t going to cost you much. If you’re the outdoorsy type — even if you normally go in for something more extreme — a hike may be a nice way to relax. Hiking doesn’t require the sort of equipment camping, backpacking, rock climbing, etc. require, either.
3. Writing. Do you have an interest in telling stories? All it takes is a pen and a pad of paper and you can spend an enjoyable afternoon crafting a short story, a poem or a chapter.
4. Genealogy. Researching your family tree can offer you an opportunity to pursue a hobby that lets you easily involve your family. And, if you need a distraction for your great aunt at those family reunions, asking about family members you don’t remember can provide you with an easy conversation.
5. Bird-watching. Beyond an initial investment in a pair of binoculars, bird-watching is free. It’s a hobby that you can indulge in on vacation or at home. I’ve even known birdwatchers who enjoy just sitting down on their back porch and seeing what they can spot.
6. DIY. Doing just about anything yourself — from creating your own clothes to homebrew electronics — can be an enjoyable hobby. You may need to purchase some special tools, but, in the long run, you can often save some money. Personally, I love the unique clothing I can make myself.
7. Gardening. You’d be amazed at the amount of plants you can get for free: you can grow plants from seeds you find in melons and other food, many neighbors are happy to transplant overgrowing plants and some people just flat out give away plants

Beyond these suggestions, there are hundreds of options. Hobbies are important because very few of us want to work all day or sit around watching television all the time. The key, though, is finding a hobby that we not only enjoy, but that won’t eat up money that could go to other uses.

Yes, an energy efficient washer and dryer set can run a few hundred dollars more (based on glancing at price tags at my local big box store). However, according to the Energy Star website (run by the EPA), an energy efficient washer can save you an average of $550 over the life of a washer.

If you own your home, and are planning to purchase new appliances, you may already be thinking about whether you want to select energy efficient appliances. If you live in an apartment or other rental, bringing energy efficient appliances into your home may be much harder. Landlords who provide such appliances as washers or dryers tend to replace old appliances with whatever they want — that is to say, not necessarily what you want.

But, as long as you have to pay for your utilities, having energy efficient appliances is in your best interest. You just have to convince your landlord it’s also in his or her best interest. My current washer and dryer seems to be nearing the end of its run — I’m not entirely sure which of the two of us is older — and I’ve started putting together my list of arguments:

• I’ll be less likely to complain about the rent hike that they’re planning.
• There will be less chance of water damage because I hung up clothes to dry, rather than run an expensive dryer.
• The landlord gets to pocket a government rebate for changing residential appliances over to more efficient models. How much of a rebate the landlord can expect varies by state.

Honestly, I’m not really expecting my landlord to come through on this one. I’m fairly sure that the company managing my apartment complex has a storage closet full of washers and dryers of the same variety as the set in my apartment. They’ll probably just try to get me to hold out until whenever they’re ready to buy new appliances for the whole complex. But that won’t stop me from asking — and, hopefully, getting my fellow tenants to ask as well.

I think the savings that come from using energy efficient appliances are worth the effort to get them. It’s more than a feeling that I should do my part for the environment; it’s the fact that that energy prices are going to continue to rise for quite a while, I think, and every cent I don’t have to put into paying my electricity bill is a penny I’ll be glad to have.

There are a number of causes for rising costs. For one thing, the cost of transporting food has essentially skyrocketed, following the rise of gas prices. Gas prices are still going up, too. Americans have a long way to go before our gas prices are actually comparable with most countries (we’re currently sitting at less than half of what drivers in the U.K. pay), and it’s more than reasonable to expect gas prices to keep rising. Food prices will climb with them.

But there’s another reason inflating food prices: the use of corn. Of the corn crop grown in 2008-09, 31 percent will be used to produce ethanol, rather than food. This rising rate doesn’t just force the cost of corn for our table upwards — it also inflates the cost of beef, milk, chicken, eggs… anything that comes from an animal fed on corn, which is most of them these days. It also, by the way, drives up the cost of several types of plastic, which are also corn products.

That environment-saving ethanol everyone’s so fond of? Yep, it’s a leading cause in the cost of getting dinner on the table. And since the trend is reflected in the cost of food staples from every part of the grocery stor, there’s not much we can do about it. Cooking from scratch can only take a certain amount off of our food bill — we all are facing an ongoing trend that will impact us no matter what store we shop at or which coupons we clip.

Raising my own chickens is starting to look pretty good. It’s just about the only way I’ve been able to think of to avoid the rising cost of eggs. I’m not sure if I can talk my landlord in to it, though. I’m doing my best to plan ahead, but my wallet’s going to take the same beating as yours. I’ve cut down on eating out and buying prepared food. I even bake my own bread — at $4 a loaf, it’s a clear savings even if I do have to spend a little time in the kitchen.

How are you protecting your budget against the rise in food costs?

It’s definitely tempting. I could use a couple of free plane tickets, and who couldn’t use a little extra cash back. I’ll admit that I’ve started looking at my options. I’m not entirely sold on the plan, though. I still have a few concerns (and if you have counter-arguments, I’d love to hear them).

One of my biggest concerns is setting up automatic payments off of a credit card, which seems like one of the best ways to take advantage of rewards points. It seems like adding more steps to paying my bills is just begging for me to trip up somewhere. Some mistakes are easily fixed, but I don’t want to put myself in the position where handling a problem costs more than my rewards points are worth.

I’m also worried about spending for the sake of rewards points. I’ve been out with several people who pick up the tab or purchase some item that they don’t need, justifying it with the statement: “It doesn’t matter — I’m getting points on my card!” I don’t think that earning points should outweigh saving money, but many of these rewards plans are set up to tempt people to do just that. I know that credit card companies want us to use our cards, so that they can make money, but I’m trying to be frugal and build savings — not pick up new toys to accrue rewards points.

Lastly, I’ve been struggling to put an actual value on rewards points. Is the time and effort to build up points actually worth the reward in the end? Could I be spending the time to sign up for a card, call about disputes and play musical chairs with my bill paying system to be earning money, rather than spending it? There are few credit card companies that don’t have at least a few hassles for their customers, after all.

I don’t think my concerns are enough to hold me back if I found the “right” rewards card, but I haven’t found one that tips me over the edge quite yet.

It’s no trick to make a lot of money, if all you want to do is make a lot of money.

It’s true: if I were willing to focus all of my attention on making money — ignoring family, friends, hobbies, etc. — I have no doubts that I already would have my first million. I’m also certain that I’d be beyond miserable. While some people seem to enjoy that sort of lifestyle, I enjoy spending time with people and relaxing.

I won’t discount the ability to buy happiness — not needing to worry about money is one of the fastest ways to happiness I can think of, but I don’t feel the need to accumulate great piles of it. If I can meet my financial goals and live comfortably, why should I devote my life to earning more than that?

I want a nice home, a comfortable lifestyle and the ability to pay for the things that make life enjoyable, like travel. My goals are very clear, and I know the sort of income I need to reach to make sure I can afford them. Beyond my goals, though, I’m not very ambitious.

The secret to building a fortune is to spend all your time at it. You won’t have a balanced life — but some people don’t really seem to care about that sort of thing.

The secret to building a comfortable lifestyle is similar: work at it, but you can afford to relax far more often. It’s truly a matter of how much time you want to devote to the accumulation of wealth. Some people manage to devote only a few hours a week, some need a full 40 hours at the office. To determine where on the spectrum you want to be, decide how much money you need to meet your goals and break it down to the weekly income you need. Want to spend less time on generating an income, but still get the same return? Up the amount you can make in an hour. Become more efficient or get a raise.

What are your goals, and how far will you go to meet them? Do you only want to make money? Or do you want time to spend on the other things you consider important?