This video post is by staff writer Adam Baker. Baker previously featured a post on his own blog entitled, 67 Ways NOT to Sell a Car.
Courtney and I apply a fun name to any expense in our lives that we should’ve planned for in our budget, but didn’t. We call them Budget Busters. Even with persistent effort, we find it impossible to account for every irregular expense. As I note in this week’s video, we make an important distinction between a true emergency (random events we cannot foresee) and irregular expenses that we should have known were coming.
We have two primary categories where Budget Busters tend to run rampant: transportation and home ownership. I’ve broken these two categories into two separate posts and this week, in part one, I’ll be focusing on transportation.
Almost everyone is used to planning for gas, oil, and auto insurance, as these are routine costs associated with operating any vehicle. However, it’s much rarer to account for all the miscellaneous expenses that can come up, such as accidents, tires, repairs, tickets, parking, registration, plates, fares, tolls, and so on.
In this video, I discuss the concept of Budget Busters and provide examples of many of the expenses that have popped up to ignite havoc in our own budget.
The contents of the video include:
- My definition of a Budget Buster [0:21]
- Your car breaking down should not be a surprise [1:13]
- Planning for repairs and replacing tires [2:10]
- Other car-related Budget Busters (accidents, tickets, plates, etc.) [2:50]
- The big problem: multiple Budget Busters in the same month [4:15]
Many of these irregular expenses are small enough that we can ignore planning for them. After all, most of us can squeeze a parking pass, a toll road, or a car wash into our budgets without noticing. The real issue comes when we miss work because our car breaks down a few days after we receive a speeding ticket on our way to pay for our new plates. When Budget Busters team up to attack at once, things can get rough.
The key is to do our best to brainstorm these irregular expenses and add padding to our emergency funds, our savings accounts, and our budgets to help cushion the inevitable blow. We’ve alleviated a lot of worry by adding 20% to your transportation budget!
What transportation expenses have popped up recently to surprise you?
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A friend had his 12-year-old paid-for babied-with-regular-service car totaled in an accident.
He now owns a new hybrid. So, new car.
I ended up buying 2 new tires for about $300 — within expectations of maintenance.
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For me, planning for transportation budget busters means not being dependent on the car. Last time a car we owned died, we went about 3 months talking about/looking for a new (used) car – because we both bike to work, and live on a bus line, the wait wasn’t an issue and nobody missed work.
Recent surprise cost: last winter when the streets were about 2 feet narrower than usual, I managed to break the cover of the passenger side mirror on something.
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Can we get transcriptions of videos? The information is good but have to get through video formats is not very helpful.
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I break car costs into four bins:
Gas, Insurance, Fixed Costs, Variable Costs
Gas [$/mth] is
(miles/year * $/gal) / (12 * MPG).
Insurance is billed monthly.
Fixed Costs are license, insurance, state inspection.
Variable Costs are Oil, Tires, “Maintenance”
Fixed Costs are directly related to time, while Variable Costs are directly related to mileage. For example, you need an oil change ($50) every 5000 miles? That’s $0.01 per mile. Four tires ($600) every 50,000 miles? That’s $0.012 per mile.
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From my annual budget I know that I spend on average $750/year on repairs and maintenance (including car washes and tire replacement, etc). Yes, it’s a lot. So I simply include a budget line item for repairs. I generally start the year assuming that I will spend $750 and put that amount in the budget line. If, as the year goes on, I find that the total is more, I have to find money elsewhere, and the years where its less, I can use the surplus elsewhere.
I am currently in the beginning of a two-month car-free trial. I am seeing how hard it would be to sell the car and use zipcar, public transportation and my feet. Since I drive less than twice a month right now, I am hoping to save some real money getting rid of the car.
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I have a car and a motorcycle and my budget for the “budget busters” is much like Suzanne’s. When I started budgeting a few years ago, my estimate was $120/month for maintenance for the two vehicles. That seemed to be a bit light, so I’ve now increased it to $150/month. Recently, I’ve had a pretty good cushion build up in my maintenance envelope, so I am currently deciding on a cap for it. Over the years this fund has covered new tires, all manufacturer recommended routine maintenance, the necessary repairs when my transmission fluid starting leaking, car washes, and a new clutch cable on the bike. This is kind of my “catch all” category when it comes to the vehicles.
Gas is a separate line item and it has been adjusted about 3 times in the last 4 years (when I started budgeting) based on fluctuating gas prices. It has been adjusted it both up and down as necessary. Right now this line item consistently has some money left over each month, so gas prices can go up somewhat before I’ll need to adjust it again.
I’ve got two line items for registration – one for the car and one for the bike. I save money every month based on the previous year’s registration cost. This tends to go down a little bit each year as my vehicles age.
Insurance is another line item paid each month. It is a fixed cost. My insurance is all through the same company, so this item also covers disability and condo owner’s insurances.
Things like tolls and parking are few and far between. In fact, I can’t recall the last time I had to pay either. However, these things would likely come out of the same envelope represented the reason for the trip which incurred the parking or tolls. So the most likely scenarios I’m seeing are things like vacation or parking at medical offices. In those cases, I would pay for the tolls and/or parking from my vacation and medical envelopes, respectively. If I moved to a place where tolls or parking were a more regular expense, I would rework my budget to include tolls and parking line items.
Tickets would come out of my personal savings (which is typically for vacations, large one off expenses like a new computer, and a new to me car). However, my last ticket was ~8 years ago for speeding. Thus, I am one of like 2 people in California who actually drives the speed limit.
Accidents would come out of the vehicle maintenance fund, my personal savings, or my emergency fund. In my mind, the very definition of an accident makes it an unforseeable event. The closest thing to an accident I’ve had in recent years is having my car window broken out and a work laptop stolen. The window replacement was paid for out of my car maintenance envelope in that case.
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Not a fan of the video format.
Car expenses suck. I miss the days of not having one.
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Depreciation on your car is the real budget buster. If you haven’t been budgeting and saving a few hundred $ per month for your next car, you’re going to be in for a big surprise when your car is finally past the point of repair. So you take out a loan, and you’re back in debt again.
Budget for depreciation!
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I agree with David, I much prefer to read articles rather than listen to them, especially when the video is in this format where it’s all just voice anyway, and could easily be transcribed without losing any information (which isn’t the case for, say, a sports video).
Regardless of the post format, I did this with my car fairly recently. I hadn’t really considered the cost of replacing the tires, but it turns out a set costs about $1000, and lasts about 45k miles. Also, the regular oil changes are cheap but the 20k mile scheduled maintenance is about $500, which you might not be expecting when you see it. Luckily I had the money to cover these expenses, but they do sort of pop up out of the blue.
Much worse than this though — last week I got a letter from the IRS claiming I miscalculated my 2008 and I owed them $9,100. I immediately hired an account and it turns out my miscalculation was much smaller — they actually owe me $9. That was definitely a big surprise, though.
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Yikes, Tyler K.! Good save!
Re: car maintenance. If you drive your car for any length of time, you’ll have maintenance. Could I urge everyone here, as being a fairly planning-minded community, to set up a car maintenance records folder with a log? And put the log in the car anytime it’s going for service?
My DH recently replaced the tires on his car. He was in for something completely different. The tires had not lasted much more than half the warranted amount of time/mileage. But he didn’t have a maintenance log; so when the dealer said whoops, these are worn out, and he saw that they kind of were, he went ahead with the new tires.
At least half the cost should have been rebated. Without the records you’re screwed.
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@ chacha1:
Yes, I keep all receipts w/dates just for that reason.
My budget buster was in 10/09 and I am sure I have mentioned it more than several times…but it was when I hit a huge buck on a dark, rainy night and my 8 y/o, paid-for, treated-like-a-baby minivan was totaled. OUCH!!!! We were only $800 away from being out of debt (except mortgage).
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I have frequently said that the better you plan for things, the fewer emergencies you have. We went years without tapping into our emergency fund by planning ahead and doing the zero based budgeting the Dave Ramsey recommends. This past year being the first year the kids were in school threw me for a loop though and there were so many random expenses that I had no idea to plan for that my budget did not go well and we did use the EF for a few big things that came up. This year should be better.
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I pay around $2500/yr to service and maintain my Corvette. It’s a tad high, but it purrs like a kitten on steroids.
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Since these videos are an experiment, I’d like to add my opinion. I’m not a fan. I come to the blog to read thoughtful and well-produced posts. The videos seem unpolished, and I don’t want to have to sit through them. I prefer to get the information at my own pace (I”m a fast reader).
Also, if I WAS interested in watching videos here, I would want to watch J.D., not someone else. I associate J.D.’s voice with this blog, so if we’re hearing an actual voice via video (on a semi-regular basis), it should be his!
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How’s this one: Hubby has a company SUV, hubby quits job, car goes back to company. I willingly give said hubby my SUV and he is happy for, oh, say 2 months. Then hubby thinks he has to have the same kind of monster SUV he had with company. So we have to go buy an unplanned vehicle.
And to make matters worse, company SUV came with a gas card. New (well used) SUV does not. blah, blah, blah….
I never saw this one coming so all the planning in the world would not save me now.
Oh well, at least hubby has finally stopped complaining. (at such a high cost though)
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I wrecked my 1996 Corolla this spring in a three-car accident. I had liability coverage only, which took care of the the car ahead of me. The insurance company that covered the car behind me paid me $224.05 (value of car minus the by a matter of seconds pre-existing damage to the front end) and seems to be disinclined to pay me anything for medical care until I declare myself cured, so two doctor visits, one with x-rays, and several weeks of physical therapy have been out of pocket. I’ve managed so far, with a little help from my parents, but it’s been tough. I am now budgeting for my next car so I don’t get caught out again, and I have comprehensive coverage on the current one because right now I really can’t afford to self-insure. And I’m trying to drive really carefully and always take the drawbar out of the hitch when I’m not using it.
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I’m so glad to live in a large city with adequate public transit! I don’t use my 8 year old car for daily commuting, but I do use it for errands and to visit family and friends, mostly on week nights and weekends. (Chicago transit is not so great at non-rush times!) Note that the car is 8 years old, though, so it’s gotten to the point that maintenance costs go beyond the lower cost issues like oil changes, air filter replacements, and tire rotations.
My budget buster time came at the end of last summer and early fall. Within one month I had the following problems/expenses pop up with the car:
* a $100 red light violation ticket (caught on camera so no way to contest; I must have been sleep driving in the middle of a Sunday afternoon!!!)
* a tow, because my battery just up and died, leading to…
* battery replacement
* brake job, including some part replacements
* air bag sensor replacement
* routine oil change
I has to spend about $1,800 to get my car back to running safely again, and it was quite a shocker to accommodate in a very short period of time. Luckily, I could cover it by just economizing in other areas for a while.
BUT, I figured that since the car had been completely paid off for 3 years, I would have spent at least that much (if not more) in car payments, so I really wasn’t “behind.”
Just last month I had to replace all 4 tires and spent nearly $500 doing so. That was a “sort of planned” expense, as I knew I would have to do so before the winter this year. When I discovered one of the tires completely flat one morning, I just bit the bullet and replaced the tires a few months early.
Meanwhile, I do have a designated account at FNBO for “major house expenses/car savings.” I agree with Ian that you should also save for a replacement car. If I had a Zipcar or iGo anywhere near me, I’m sure I could get along just fine without owning a car. But, since I don’t have those resources available I have a savings account to buy a reliable used car when this one gets too expensive to maintain. Currently I have $8,000 in that account, and am shooting to have at least $10,000 within the next 2 years. This is in addition to my emergency fund, BTW.
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I know how much my car payment is, so in my car expenses budget category, I take that amount and round up. The difference has usually been enough to cover small expenses like parking, tolls, registration, etc., but I recently had to buy a new tire when I got a flat that couldn’t be patched. That put me over budget for the month. Maybe next year I will budget a little more for car expenses. On the other hand, I budgeted for gas based on prices in 2008, so I have been under budget for gas all year.
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This may make more sense to database administrators… but the way you store and retrieve information can be optimized depending if you’ll be doing more storing, or more retrieving.
In the case of blogs, it is very fast for the blogger to create a video, but very slow for each and every reader to take it in. On the other hand, it takes much more time for a blog to be carefully written and edited, but each reader can gobble up the information quickly, or at least at their own pace.
I don’t have the patience for video, so I skip it. My opinion is that you should optimize your blogs for the readers’ sake, not the blogger!
On topic, I looked back over previous years and tallied up my car related expenses, calculated the monthly amount, rounded up a little, and set up an automatic transfer. I actually added in several non-automobile related expenses like quarterly trash and sewer. They sit together in an “irregular expenses” account that is just accessible enough to get money out from time to time, but hopefully not for “unexpected splurges!”
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We tackled this a few years ago and put money in a savings account each pay check for the regular irregulars including: heating oil, car expenses, house repairs, real estate taxes & misc.
I figure a $1000 each year per car for repairs, taxes, inspections and registration. Our cars are older 7,9 years.
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I am going to agree with Tyler and say the required maintenance at 20 or 30k miles that is required by the manufacturer threw me for a loop the first time. I have kept up with the recommendations from the manufacturer even after my warranty has expired (though at a trusted independent mechanic, not the dealership). The 500 dollars every 18 months has been a bit steep but I keep my cars for 10 years so I find it well worth it.
One trick I have for saving for unexpected car expenses is to continue to make care payments to myself even after I have paid of the current one. Once you have finished your 4 or 5 year car note you should be expected to have at least one year of maintenance free driving. Having the money moved to my ‘Car’ savings account gives me a cushion to pull from. Yes this does shoot me in the foot later when I cannot pay for the next car in cash, but I have never truly paid for a new car in cash since the cost of cars goes up over time. My 2001 Honda Civic cost a heck of a lot more than my 1990 Civic. My next Civic in 2012 or so should cost me darn near 19000 dollars, who would have thought that years ago?
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Hey guys,
Wanted to thank everyone (on this post and the last one) for all the feedback on the video posts. I love video, both creating and watching it on other sites. I find it engaging in a way that skimming articles is not for me!
That said, I understand the huge benefits of a written article and there’s no reason I shouldn’t have had these videos transcribed! If we decide to do any more in the future, this would be an obvious included benefit.
For some content producers, videos may be easier/quicker to create, but for others they’d take much longer than simply writing out the material. I’m somewhere in the middle, both taking around the same time, but videos flow better as I relate to them more!
I’m glad to be able to try out some of these and sincerely appreciate the criticisms and feedback!
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#14: “… my Corvette … purrs like a kitten on steroids.”
I am trying to imagine a kitten on steroids. Not a pretty sight. And a ‘roid rage purr probably sounds like a manic screech / chalk on blackboard – not what I would want my car to sound like.
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I don’t like videos and rarely watch them. I’d rather read the information.
As for car budget busters ours have been repairs. I think we’ve fixed the air conditioning in both of our cars annually for about the past 4 years. I drive all day for work and we live in Phoenix so neither the car nor the air conditioning are optional (I tried to tough it out and go without AC one year and I made myself ill).
We are looking at replacing a ’96 Escort with 103K miles on it very soon since it is now breaking more and more often. but we’re trying to save up as much as possible before buying used (just finished paying off our other car and was hoping not to have another car loan).
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I’m sure this was an interesting video, but I can’t watch it, because my computer can’t “do” flash (64-bit linux). I have no objection to videos where the video/audio is needed to convey information (and will sometimes mark them in my email box for watching when I’m at a video-friendly computer), but I wouldn’t bother with this. I can read faster than I can comprehend speech, so it’s also a waste of time to watch a video when a transcript would be more efficient. Not to mention the accessibility issues – I wouldn’t be surprised if you have at least some deaf readers, for whom this will be completely inaccessible.
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I would love to be able to take public transportation or bike to work but neither is really possible in my city. In theory, I probably could bike, but since there are not showers at work, the 8 mile bike ride doesn’t seem to work – I want to spare my co-workers.
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Adam,
I really like your posts & videos, and I hope you keep doing them, they’re very informative.
I’d just like to make a comment on your video composition, these would be a bit more pleasant to the eye if you just moved your camera down slightly so your eyes aligned with the top 1/3 of the frame. See here for more about the “Rule of thirds”
http://www.silverlight.co.uk/tutorials/compose_expose/thirds.html
Thanks!
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Fixed brakes on two cars, 6 months later, husband’s tire blows out on the road (no road hazard protection), a couple weeks later, husband’s car starts making grinding noises and the calipers (just replaced 6 months ago) have failed and caused the brakes to wear out again.
Moral of the story: don’t go to Meineke, always keep enough reserves in your “budget” for multiple emergencies, road hazard protection for expensive tires is worth it (I’ve used mine twice in the life of the tires, and husband would have been able to use it twice so far, if he has bought it the first time).
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Very timely post for me. My car recently broke down and they fixed the torque converter (i think that is what they called it:)) That cost me $360. Then it broke down three more times before they realized that I needed a new transmission (apparently a common problem with Mazda Tributes), which cost $2600 (after my 10% off coupon I had) plus $150 for a rental car. I charged it but paid my credit card off completely. It was painful to have to take money out of savings to cover but I am glad I was able to just pay it off and have it behind me. I have been wanting to go back to the original mechanic for a price adjustment since he didn’t catch the problem with the transmission, which resulted in me having to keep my car at the shop longer.
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We try to budget for Budget Busters by padding our Home and Auto account a bunch every month. Our most recent “surprise” was in April when my thermostat housing busted and cost $325 to fix. Now, I need new tires and am simply putting it off while I look for discounts…
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I have a targeted savings account for auto expenses. I put $85/paycheck into that account and all car-related expenses come out of it, including insurance, maintenance, car washes, AAA membership…everything but gas. The account has been steadily growing for years with this method and have been able to pay deductibles after 2 car accidents, a bout of vandalism and one fairly big maintenance issue with cash.
If/when the car ever needs to be replaced, the growing account balance will act as at least a down payment.
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Also, I don’t dig the video format either. I can’t get the content of the article from work. 5 minutes is longer than I’d typically spend reading a blog post, and much longer than one like this that I’m only mildly interested in. Also we can’t just skim to get the main points to decide if it’s worth my time.
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[broken record]
Not a fan of the video format either. I tend to skip over articles (not only here but on other blogs I read) that have the majority of the content in a video. If feasible, I think the transcript idea would be an excellent compromise. Those that enjoy the videos can still watch them and the rest of us can read the information (and maybe go back and watch the video later).
[/broken record]
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Ugh, I am a recent graduate, and I had my budget busted last month after an accident. I looked over to the other side of the road long enough to think “what are all those cops doing?” and wham! First accident in 10 years. I had only liability coverage on my 2002 toyota, and caused $1650 in damage. Also, I received a ticket for the accident. Instead of paying the small fine and receiving points on my license, I went to municipal court and had the charge reduced to a no-point violation with a higher fine. In NJ, one will go to extreme lengths to avoid an insurance increase. All told, in one month I spent $2050 ish to repair the truck and pay the fine.
Thankfully, I had my financial awakening along with my first real job after graduation. After reading a few books and GRS, I finished paying off $7000 in credit card debt three months before the accident. The only other debts I have are student loans, so I converted the amount I was paying toward credit debt to building my emergency fund. Oddly enough, I had almost exactly enough to cover this “emergency,” without touching my (very) small savings. Because I had been living cheaply, aggressively paying off my debts, and planning for the unexpected, I was able to weather the storm. As much as it pains me to think about what my savings could look like had this not happened, I still feel lucky that no one was hurt and I didn’t need go back into debt. Costly reminder to keep my eyes on the road!
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I also have transportation funds, one for saving for a new car and one for everything else (gas, insurance, maintenance, repairs). When the latter starts getting too big or small, I re-evaluate how much I am saving. I change how much I am saving to how much I should have been saving, and I move funds around so that if I should have been saving less, one of my other savings categories gets a lift and if I should have been saving more, I pull some from my other categories.
I really like the idea of always contributing monthly no matter how much I have. This way if something goes wrong, I don’t suddenly have to start contributing again to a savings category that was previously capped. That would make me feel poor. My current system helps me feel rich. And if that monthly siphon is too high to let me feel rich, that is good information, too!
Like Michele, sometimes things like tolls and parking come out of different categories like vacation or fun.
As for the actual question, unexpected transportation expenses lately:
* Car overheated; mechanic replaced the radiator.
* Car ran hot (didn’t overheat) and started doing the hesitation waltz; mechanic found blown head gasket and warped head.
Okay, that means it’s time to find a new shop. My current highly recommended one is probably just worshipped because they sometimes say that your problem doesn’t really need fixing. Honesty is great, but it’s not enough. I also need competence. I’m thinking that when I brought the car in the first time, either I didn’t need a new radiator, I needed more than just a new radiator, or the head was already warped and they didn’t notice.
And it’s time for a new (to me) car. That big repair is just not that worth it for a car I don’t like much. I don’t need a car to get to work, but I really don’t like being without a car, what with all the begging and dependence (riding around in other people’s polluting gas guzzlers). I should be the type of person to just ride a bike and make do, but I’m just not. And that’s going to cost me big time.
I don’t have enough money in my car-buying fund (even with the extra $300 from selling my car) (and even adding some of the excess repair money) to buy the kind of car I want to buy next. Every time I buy a car, the cost is double what it was the last time, and this time I want a slightly better one. (In 1993, I paid $1650 for a ten-year-old car. In 2003, I paid $3000 for a twelve-year-old car. This year I want a seven-year-old car, and that’s going to cost me more than the $5,000 I have.)
Other note: I do like the video format even though I haven’t actually watched either of these videos yet. I like thinking that there might be more information out there that I can check out, but it’s no big deal if I don’t get to it. There’s lots of information in the comments!
I will agree with the others though that video is best when it’s of the picture-is-worth-a-thousand-words variety—showing you things much more efficiently than they can be explained—rather than just a filmed podcast. So Adam, feel free to get creative! Though video is more relevant for some topics than others, but I want you to focus on topics that motivate you.
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I kind of wish man vs debt would update more often.
Um, re: car expenses. I take them out of short-term savings which is our catch-all emergency fund. “Unusual” expenses are usually 1-2K/month pretty regular (mostly business travel that will be reimbursed). If we had a TON of unexpected expenses I would probably sell stock. That did happen once (unexpected moving expenses, slow reimbursements etc.) and the stock didn’t get me a check fast enough (back in the old days before everything was electronic) so I wrote a 0% check from a credit card company and paid it off before it tripped to the higher rate. We took out a car loan once for an earlier-than-expected emergency car purchase.
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My licence plate renewal was about $275, Yikes! I upped my insurance deductible to $1000, at a time when I had zero savings, which forced me to start saving. Thankfully I only had to transfer some money. I am grateful I have changed my ways. I have my dad to thank for the repetition of his mantra- pay your bills off every month.
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Also going to mention that I would like video transcripts. I’m not usually in a place I can turn up the sound (or put on headphones) when I check this blog.
Thanks!
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I have to say the thought of tolls as a unusual expense floored me. I wish! Tolls are constant here, and always going up. We usually spend about $170 per month on them, UGH!
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baker & jd: I want to try posting this again…I just want to say that I like the video posts, they give me a nice break from reading.
The last couple of years I have learned to plan ahead for these car emergencies. I just paid $207 for new car tires this past week. I also had to get new plates because I moved to Nebraska and still haven’t gotten that, so that was another $150 with registration, title, inspection thrown in.
Yea when you think about it, a car is a money pit, I mean I love driving a car and in Nebraska you need a car to get around but I don’t think it matters what you own because all cars even used ones are money pits.
Its like that Tom Hanks movie The Money Pit, except his money pit was a house. Anyway, cool post. =)
P.S. Even if you don’t think you’ll keep the video format, I’m glad you gave it a chance.
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I enjoy the site, but I don’t have time to watch videos. I prefer being able to scan or read a post, as it is a much better use of my time. Unfortunately, I am unable to watch any of these video posts, and so I miss out on the information they present.
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