Rule of 19
As my wife and I have started to research for our next car purchase, I was introduced to the Rule of 19 by the local car salesman…
I asked “Rule of 19?” I am only aware of the Rule of 72. The car salesman provided the a quick definition being a general rule of thumb of how much your monthly car payment would be for the total amount financed. The car salesman quickly calculated that for every $1,000 that I financed, I would pay $19 per month.
Aware of the car buying process and following the advice of many experts, I wanted to negotiate one thing at a time: #1. Total Car purchase price, #2. Financing (lease vs buy, interest rate), and #3. Trade-in value. Intrigued on what assumptions this rule of 19 depends on, I decided to re-create the math. Basically, the Rule of 19 is really the rule of $19.33 assuming a 60 month car loan term at a 6% interest rate. So if I wanted to finance $20,000 for my car loan, I would estimate a $386.60 monthly payment or 20 x 19.33
If you are interested in which number you should be using to assist in your car buying purchase, I have attached an excel sheet for options from 36 to 72 months with interest rates ranging from 0% to 8%.
This is the first of many analysis that I will complete in our search for the next family car. Please consider subscribing to stay current with the latest from Finance Puzzle.
Savings with everyday purchases
There is always an opportunity to save in your everyday purchases, and I continue to try and capture all of the extra dollars that I can. As I went to the movies with my wife to see Vicky Chrsitina Barcelona, we made a quick pit stop at the local convenience store to pickup some candy and drinks.
Summary of Transactions:
- Paid $5.49 for two bags of candy and two bottles of water.
- In the cinema, each bag of candy is $4.00 and bottled water runs about $3.00 which would have totalled $14.00.
This 5-minute stop on the way to the theater helped me avoid $8.51 in additional expense, a small step to continue to enjoy the big screen without paying a fortune. Unfortunately this teather didn’t offer any student discounts for tickets. I would also recommend the Woody Allen film, worth the price of the tickets. The funny thing is that I don’t see myself as being extremely frugal to save a dime, I like to view myself as a planner. With the appropriate planning and discipline it is easy to save in everyday purchases.
I will be depositing this $8.51 of avoided expense into my savings account as I continue to work towards my goals. To keep up with the latest from Finance Puzzle, please consider subscribing to my feed.
PopTopRanks Stats Update on Personal Finance Blogs
In a previous post on July 13th, I introduce you to the PopTopRanks website and an initial look at some statistics for the blogs in the Personal Finance category, Finance Puzzle being on of them. From that time, my blog has achieved a subscriber increase of 76% (25 to 44). With my recent successes, I wanted to see which other sites have experienced the same increase from my July 13th posting. Please note, these amounts are from August 30th, 2008 compared to July 13th, 2008.
Top 5 Personal Finance Blogs as a % increase:
#1. Blogging Down Debt: 450% increase, 2 to 11
#2. Beating Broke: 325% increase, 4 to 17
#3. Living Frugally: 325% increase, 4 to 17
#4. Ditch my Debt: 244% increase, 9 to 31
#5. Pennyjobs.com: 225% increase, 12 to 39
Bottom 5 Blogs as a % of subscribers
#1. Rich Credit Debt Loan: (73)% decrease, 26 to 7
#2. My Financial Journey: (8)% decrease, 286 to 263
#3. Mommy Gets PAID: (5)% decrease, 458 to 434
#4. Money and Values: (4)% decrease, 457 to 437
#5. Fabulous Financials: (3)% decrease, 1084 to 1057
Top 5 Personal Finance Blogs as a # of subscribers increase:
#1. WiseBread: 2775 increase, 11175 to 13950
#2. fivecentnickel.com: 1173 increase, 6386 to 7558
#3. Frugal Dad: 1123 increase, 1961 to 3084
#4. My Money Blog: 851 increase, 14,094 to 14945
#5. beingfrugal.net: 677 increase, 2840 to 3517
Great job everyone, personal finance blogs are attracting more subscribers than loosing them, a direct sign of providing valuable information to the community via the web.
Please consider subscribing if you enjoyed this article and would like to help me acheive my goals with this blog. If you would like a copy of the full list of rankings, please leave a comment or contact me and I will pass it along.
ING CD Rollover perk
If you are a regular reader of my blog, you will know that one of my first goals with Finance Puzzle is to create a CD ladder with the savings/earnings from this blog. I have been using ING as the bank to hold my accounts when I started this projects, mainly due to a $25 signup bonus that was too good to pass up. I have enjoyed the simplicity of their website and the superior customer service.
Since I signed up for the first rung in my CD ladder in Feb 2008, it had just recently matured in the month of August. I was always planning on rolling over these CD’s, utilizing this CD ladder as an emergency fund. To add yet another benefit of being an ING customer, I received an extra 10 basis pts (0.10%) on my new CD rate. An extra bonus that I was never counting on….
I know it is small, but you have to admit ING has a pretty good thing going so far…
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Author Disclosure: At the time of posting I do not own a position in any companies mentioned.
Trading Idea: Equity Collar on Bank of America (BAC)
As the US financial crisis continues without an end in sight, there are opportunities for protection if you are long holder of certain financial stocks. With so many equity option strategies available, it is up to each individual investor to utilize which strategy to employ. To illustrate my point, I will be entering into a Equity Collar strategy with Bank of America (BAC), benchmarking this strategy against a buy and hold strategy with the same BAC stock.
Equity collars are utilized by investors who are looking to minimize the downside risk of a trade, foregoing upside potential in return for downside protection. As defined by CBOE, an equity collar “consists of the simultaneous purchase of a put option, and the writing of a call option. Both options are out-of-the-money, and usually have the same expiration date.”
Looking at the 6-month chart of BAC with the current volitality, this equity is a perfect candidate to execute an equity collar strategy for my paper-trade portfolio:
Here are the trade details:
Buy 100 shares of BAC @ $29.04/share
Sell 100 shares of Nov 08 30 Call Option @ 2.95/share
Buy 100 shares of Nov 08 27.50 Put Option @ 3.12/share
Net Amount per share is $29.21/share, not including transaction costs.
As mentioned earlier, I will benchmark this paper-trade against a buy and hold stategy to evauluate the effectiveness of this trade. This trade stratey can be used for any equity, specifically any financial stock in this current environment.
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Author Disclosure: At the time of posting, I am neither long nor short LEH. This trade is a “paper” trade and is being used for educational purposes.
Tax-Free Weekend Savings
This past weekend was tax-free shopping weekend in Massachusetts and did I take advantage of it by planning for these two days about a month ago. If you are not familiar with this state-wide initiative, the state government granted shoppers a 2-day tax free weekend for purchases up to $2,500.
I was able to save about $21.50 by avoiding the traditional 5% state sales tax in connection with a $30 coupon savings. Last year, we purchased our couch during this same weekend, saving hundreds.
I will be adding this $51.50 into my net worth account. If you are aware of any other opportunities to save money on everyday purchase please feel free to comment.
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Simple Investing Blog Carnival
My Lehman Covered Call post was just recently included in the Simply Investing Carnival hosted by SlackerWealth. This carnival is a great collection of simply investing blog posts from across the web. I would like to thank SlackerWealth Investor for hosting.
