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Cost of owning a car

Published on March 18, 2014 by

As I was stumbling through the news this morning, I clicked on the following Wall Street Journal article about the annual cost of owning a vehicle. The info graphic is a great summary of the article.  WSJ Article

SJ-AH188_16LEDE_G_20140314185111

The reason I was interested in the article is my recent dealings with vehicle repairs. Last month I brought our car to the dealer for what I thought would be a simple fix on a small item. By the time I left the dealer I had a list of repairs suggested totaling  $1,400; so much for a small sub-$100 repair.

Rather than get the repairs, I researched the issues and realized I could easily do $600 of the repairs myself for about $120 in parts and a couple hours on the weekend. The rest required tools, skill and time I was not capable of without significant research. Lucky for us, the service shop sent a quarterly newsletter which included a coupon for $200 off $800+ in service. By waiting and being patient we were able to save over $700 which is great since my GI Bill monies are still “being processed” for the new semester.

After reading the information, I went to the AAA site regarding cost to own (link). The numbers should be convincing enough when it comes to buying your next car, see graph below.

The findings of the 2013 ‘Your Driving Costs’ study include (sourced from AAA):

Based on Driving 15,000 miles annually

Small Sedan

Medium Sedan

Large Sedan

Sedan Average

SUV 4WD

Minivan

Cost Per Mile

46.4 cents

61.0 cents

75.0 cents

60.8 cents

77.3 cents

65.3 cents

Cost Per Year

$6,967

$9,151

$11,248

$9,122

$11,599

$9,795

I could not agree more with point number one in the WSJ article, “Don’t buy more than you need.” Do you really need an SUV if a small sedan would suffice? It is costing you roughly $4k a year; yes every year, not the life of the car. This is a critical number for you young-ins during your early years in the military. You really don’t even need a car as a private since everything is walking distance from the barracks and you rarely head off base solo. Unless you already own a car before the military I would just tag along with buddies that have cars and save thousands a year.

Some excuses people may have for owning a larger, a.k.a. more expensive, car:

Safety
For the most part, smaller cars are just as safe as an SUV. This is a common misunderstanding, but technology has come a long way and several small cars are on the top of the safest cars lists. At the end of the day, an accident is an accident and the odds of your vehicle’s size be a factor in your safety is little to none.

Space
Unless you have multiple kids, more than two, or on a weekly basis travel with huge amounts of stuff the space argument is void. It is similar to people convincing themselves they need an extra bedroom for guests when buying a home. The extra room costs thousands more in mortgage, when guests likely only stay 4-10 nights a year. It is cheaper to buy a pull out couch or pay for a hotel room near-by.

Off-road Capability
Sure it is fun to go mudding, but is it a requirement, I doubt it. When it comes to snow, there are small AWD sedans that handle just as good or better than a larger vehicle. Also, outside of places that get real snow this is not a concern. Take DC, we had several “snow closures” this year and rarely were we stuck because of our car. If anything having a normal car forces you to drive safe when the roads are a little icy. Once it is bad conditions for a standard car, you shouldn’t be on the road anyways unless an emergency.

This being the case, there are reasons to own a larger vehicle. I would just say if money is tight, or you are saving for retirement, it may be a good idea to fully evaluate your driving requirements. Maybe you can rent or borrow a truck 3-4 times a year when required.

When buying your next car, think about future costs not just the price tag.

Until next time, Keep on Truckin’…   Watson

 
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School Costs (End of 1st Semester)

Published on February 22, 2014 by

Not too many costs since the last update, since I stayed at home over the holiday break and took a night course at Smith’s DC campus. Below is the updated costs tracker. My primary expense was for a “Smith Experience” course which requires a fee, $1,500, in addition to tuition which is not covered by the GI Bill. I am excited about the course as I will be working with four other MBAs from other universities on a consulting project in China. Hands on courses like this are great for Veterans transitioning and one of the factors I looked at when researching schools.

1st Semester Expenses

Again, the GI Bill is a money saver, my expenses are less than 10% of what the VA is covering for my tuition. Pending anything crazy, my expenses this semester should be much lower as I have a more routine schedule and there are no conferences to attend.

Side Note:

Classes have been awesome. This semester is a blast, I am learning how to properly build a valuation model in my stock analysis course and gaining a better understanding as to why accounting matters. Accounting=sleepytime to me, but for some reason I seem to stay engaged throughout the class. So far not as many cases since my three classes this term are all heavy on financials. Next term I will have a more qualitative course load with global strategy and operations while still keeping a toe in the finance world with financial strategy.

Until next time, Keep on Truckin’…     Watson

 
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Smartphone Mania

Published on December 14, 2013 by

While home over Thanksgiving it was nearly impossible to avoid the Black Thursday/Friday/Monday boom shakalaka deals shoved in our faces via the mass media. One of the many deals going around was for smartphones; mostly if you wanted to sign-up for a 2-year contract.

Lady M and I currently have Verizon due to being grandfathered in to the unlimited data plan. But when I tried to have our free upgrade, which is available in January, moved up a month early I was declined. This annoyed me since Verizon is the most expensive carrier and I have been a customer for over five years. So, off we will go to better places in January to a new provider. My three concerns while looking for a new provider were PRICE, COVERAGE, and CONTRACT.

This is a quick rundown, no links to plans or exact numbers. For data usage all price estimates are for 2GB per user, I have never run over 2GB in the past two years due to wifi availability. If running solo you can cut the costs in half since I am looking for a plan to cover two users. I am looking at a new phone purchase as well, so contract will make a difference in upfront costs.

Verizon and AT&T 

PRICE: Both provide a 15% discount for DoD, but be careful, it is only for the actual plan not the several fees and taxes. Savings is still about 8-10% of total bill depending on city taxes. Average monthly cost: $155

COVERAGE: Best data coverage hands down. This was my reasoning for sticking with Verizon, if you visit military bases in the middle of no where often, the extra $10-25 a month ($120-300 year) is worth it in my opinion.

CONTRACT: While both companies have a pay as you go, it is not a major savings. With a  2-year contract there is a major subsidy in purchasing a new phone. One can buy a high end phone for about $200 that costs $800 otherwise. Does this savings in upfront cost balance out with higher monthly fees? I will calculate later.

T-Mobile and Sprint

PRICE: Same discount for DoD. Just a nudge cheaper than the leaders at $135, but unlimited data from Sprint if it matters.

COVERAGE: If you are in a city the coverage is likely just fine. Even in most military towns, one of these two will provide ample data coverage. The only down side is lack of 4G outside of major cities. I don’t know the difference since my current phone is a 3G only phone.

CONTRACT: T-mobile is a no contract plan, which means phone needs to be paid for upfront or through a monthly payment. This is great if you have a phone already or can buy a phone on sale that is unlocked. Sprint runs both types of plans, but the pricing is almost identical. For the contract, Sprint also subsidizes phone prices.

Boost and Virgin

PRICE: The best deal in my opinion, as less expensive regional providers usually don’t have solid coverage. Boost’s unlimited plan is runs $50 and decreases $5 every 6 months down to $35 a month. For two users over two years it averages out to about $100 month (remember all the fees). Virgin’s plan limits voice to 300 minutes, but you can just call over data with Skype or Google Voice. This is the cheapest plan at $35 month, or $85 for two users including fees. Virgin currently provides a $5 discount to iPhone users selecting auto pay.

COVERAGE: Both providers run on Sprint’s network, so coverage is essentially the same as Sprint for a lower price.

CONTRACT: No contracts, you need to purchase the phone through the provider though which I will explain below. The good news is, devices are discounted, just not at the mass subsidy a 2-year contract provides.

Additional Notes

Contract vs No Contract: Paying $200 vs $600 is a big difference. However, the $200 phone comes with a  contract that is often a more expensive monthly plan. Paying $600 upfront is clearly cheaper over two years if you separate the $400 difference over two years, it is equivalent to adding $17 a month to your contract. Virgin’s plan is still significantly lower if you include the cost of phone.

Switching Carriers: Recently all carriers agreed to unlock customers phones which in theory allows you to move between carriers. However, not all phones are created equal due to the majority of US carriers run on CDMA instead of GSM. Read PCMag’s recent article on the differences, link. The problem is with CDMA switching is more difficult and many CDMA carriers won’t accept outside phones, Virgin being one of them.

Unlocking: This is almost pointless. As I mentioned above, it is difficult, if not impossible to move phones between CDMA carriers. However, for overseas traveling it is great when you can insert your SIM and use the same phone. Hint: There is a reason the iPhone 5S has five different model numbers.

Our Choice

As of now we will be switching over to Virgin Mobile in January. The total savings will depend on which phone, but no matter the phone, just the annual savings will cover the upfront costs.

Current Plan: Verizon family plan (2 users) 700 minutes, 1000 texts, 2GB data
Monthly – $154 ($170 w/o discount)
Annually – $1848 ($2040 w/o discount)

Virgin Mobile – Prepaid 300 min, unlimited text and data (x2) using auto pay for $5 discount (x2)
Monthly – $76 (estimate same taxes as current plan $16)
Annually – $912

Trade-in our current phones – $150 each (x2)
New phone – $550 (x2)
Estimated upfront costs – $800

Total annual savings – $936 
Savings after upfront costs – $136

As you can see Verizon is over twice as expensive for slightly better coverage. Given Virgin’s (Sprint) coverage in the DC area is decent, it would be a waste of money not to switch. I am fairly certain New Year’s sales will help lower the upfront costs making the total savings well worth switching carriers.

Have a great new year and remember there is always a way to save.

Until next time, Keep on Truckin’…    Watson

 
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School Costs (Month 3 Update)

Published on November 7, 2013 by

3 Month ExpensesJust before school started up I went over the costs incurred during the Summer for my MBA program, link to post. Today I want to share the current expenses and what I am tracking in my sweet excel doc, screen shot provided below.

First off, the 9/11 GI Bill is the sweetest update to military benefits ever; the benefits are making up for my lackluster Army paycheck, at least psychologically. Tuition has been fully covered and about a third of school supplies needed so far, a reason everyone using the GI Bill should look to a public university. Yellow Ribbon Program rarely makes up the tuition difference for private university graduate degree programs. When it comes to an MBA, unless you are accepted to Harvard/Wharton/Stanford, save your money, there are several public school MBA programs in the top 16/32.

On to expenses so far…

MBA 3 Month Expenses

What do the categories mean exactly?

Job Hunting

I am including any “networking” events, costs related to informational interviews and job fair expenses. My costs are high due to attending both the Black MBA and Veteran MBA conferences. Veteran conferences for any industry should be mandatory as you transition. While I could have been better prepared going in, I still came out with a couple of first round interviews and contacts at firms.

Education

ONLY $130, I am only tracking mandatory fees and expenses required by the program. Books/cases are under supplies since technically they are suggestions. Also, I want to show the difference the GI Bill made at the end of two years .

Transportation

This is more of a personal interest. Since I live 9 miles from campus (i.e. 35 min commute) and would have sold the car if public transportation was a reasonable option, I want to see how expensive keeping the car is. (Transportation for conferences are included in Job Hunting)

Dining

While I would likely eat out when working, I would rarely by $3 coffee or dinner while working late nights. The only time I track a purchase is if it is outside the normal purchase due to school functions. Luckily, there is almost always an event with food provided at the end of the day.

Events

Basically, school social functions and non-education/job related expenses.

Supplies

Books, case study reports or anything I think is important for my studies. This includes subscriptions to business publications.

$3,652.19 is a pretty good deal so far. This number surprised me as I expected much higher expenses. Key reasons for low numbers are better gas milage with the new car, we fill up two times a month, and “dining” equates to buying deli sandwiches at the cafeteria in the business school.

There will be more major expenses in the coming months due to Smith Experience courses. These are overseas trips requiring a plane ticket to China, India, Brazil, or who knows at this point. Stay tuned, the next expenses update will be at semesters end.

Until next time, Keep on Truckin’…     Watson

 
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