Trade in gas guzzler for more fuel efficient, worth it?

I ran across an interesting calculator over at Edmunds.com. They have come up with what they call the Gas-Guzzler Trade-In Calculator which calculates how long it will take to completely pay off a new more fuel efficient vehicle and actually start saving money. I ran the calculator on my current situation, and I can confidently say I will not be buying a hybrid any time soon:

Vehicles used in my calculation:

Trade-In Vehicle: 2000 Dodge Interpid (fully paid off).
Fuel Efficient Vehicle: 2008 Toyota Prius.

Fuel-Efficient Vehicle Sales Price: $28.176
My Trade-In Value: -$2,188
Cost of Fuel-Efficient Car Minus Trade-In: $25,988
MPG of Fuel-Efficient Vehicle: 47
MPG of My Trade-In: 22
Number of Miles Driven per Month: 800
Price of Gas: $4.30/gallon
Amount Saved On Gas (per month): $83.17
Number of months to break even and begin saving money on gas: 312 (26 years)

In my personal situation, buying a hybrid would not make much financial sense at all. So to see the impact of trading in a true “gas guzzler”, I ran the same calculation on my work vehicle:

Trade-In Vehicle: 1992 Chevy Suburban (fully paid off).
Fuel Efficient Vehicle: 2008 Toyota Prius.

Fuel-Efficient Vehicle Sales Price: $28.176
My Trade-In Value: -$329
Cost of Fuel-Efficient Car Minus Trade-In: $27,847
MPG of Fuel-Efficient Vehicle: 47
MPG of My Trade-In: 13
Number of Miles Driven per Month: 800
Price of Gas: $4.30/gallon
Amount Saved On Gas (per month): $191.42
Number of months to break even and begin saving money on gas: 145 (12 years)

So in the long run, yes you can save money on buying a hybrid. But in the short run, you are better off sticking to your clunker, gas hog, fuel mule, etc. It will be interesting to see what kind of gas mileage they squeeze out of cars in the future. When vehicles hit a 60-80 mpg average, I’ll re-visit this calculator.

Chase Freedom cash back credit card

For some, credit cards can be a financial nightmare. For others, credit cards are a way to earn cash back on day to day purchases. I choose to use cards for the latter. And Chase Freedom is my credit card of choice. Here’s why:

1. No annual fee.
2. 3% cashback on my top 3 spending categories (see below for further explanation).
3. 1% cashback on all other purchases.
4. Redeem cash back with as little as $50 in rewards, or if you accumulate cashback totaling $200, redeem it for $250! (a 20% bonus).

The top 3 spending categories for the month that earn 3% work like this:

Say in June you spent the most on gas, groceries, and movies. You will earn 3% cashback on all gas, grocery store & movie purchases. In July, you spend the most on drugstores, utilities, and department stores. So for the July billing cycle you will earn 3% cashback on all those purchase categories. ALL other purchases for each month will earn 1% cashback.

Other 3% bonus cashback categories include: grocery stores (that are not affiliated with or departments of superstores, warehouse clubs or discount stores), gas & convenience stores, quick service payment/fast food restaurants, telecommunications, cable/satellite TV/Internet Service Providers, video rentals, department stores, dry cleaners, drugstores, movie theatres, local and suburban commuter passenger transportation (including ferries, bridges, tolls, parking garages, taxis/limos), pet supply stores and veterinary services, utilities, beauty shops (salons and spas), or gym/recreation memberships.

Make sense? Great. Here’s the best part…

You can redeem a $50 check when you have accumulated $50 in cashback (the equivalent of approx. $1667 in purchases at 3% cashback). But if you can hold off redeeming your cashback rewards and save up to $200 in cashback (the equivalent of approx. $6670 in purchases at 3% cashback) you can cash in for a $250 check, a 20% bonus! Not too shabby…

Chase Freedom let’s you choose the cashback system I have described above, or you can choose to earn points. Points work the same as the cashback structure (3 points for purchases in the “top 3″ categories, and 1 point for all other purchases). Points can be used towards travel, gift cards, merchandise, and even cashback.

3% on top 3 categories, 1% on everything else, no annual fee. If you use it for gas purchases alone, you can enjoy a $0.13 per gallon discount on $4.50/gallon gas. Who in today’s world doesn’t want to save money on gas?  

This is why I never leave home without it.

Find cheap gas in your area

I ran across a very handy website called Gas Buddy. You can search by either zip code, city or state. The results will list local gas stations with the cheapest gas which is updated daily. So where is the cheapest regular unleaded gas today? The QuikTrip station located in Tulsa, OK @ $3.69/gallon. This sure beats what I paid yesterday here in southern California, $4.65. It’s hard to find cheap gas around here when the cheapest gas in the entire state of California is $4.37.

The average price for regular gas in the U.S. is $4.07. One year ago, the average was $2.97. That’s a 27% increase over the 1 year period. If gas continues to rise at this same rate, be prepared for the average price for regular gas to be around $5.58/gallon in June 2009.

Bill Gates is filthy rich (understatement)

Bill Gates owns over 800 million shares of Microsoft. That is a total value of over $22 billion! This is only a mere 7.5% of the total outstanding shares for the company. Microsoft has over 10 billion outstanding shares, giving them a market capitalization of roughly $300 billion! So what does someone that has accumulated a fortune of this size do with it?

The Gates Foundation, directed by Bill and his wife Melinda, is a worldwide program that “focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty.” It’s main focus in the U.S. is ”to ensure that all people have access to the opportunities they need to succeed in school and life.”

So how much money has the foundation given out / donated? Since it’s inception in 2000: $16.5 billion.

Next year, the foundation will be giving away an additional $3.5 billion.

Here’s an interesting fact: The population of Los Angeles, CA from the year 2000 U.S. Census was 3,694,820. Bill Gates could of taken his $22 billion, given EVERY PERSON in Los Angeles $5,000 dollars, and still had $3,525,900,000 left over. That’s over $3.5 billion extra!

That is why “filthy rich” is an understatement.

The power of compound interest

Also know as “the most powerful force in the universe” (Albert Einstein), compound interest truly is impressive. Simple interest is only calculated on the principal amount, compound interest is calculated on the principal plus any interest that has accrued. What this means is you make interest on the interest. Get a load of these stats:

Start at age 20. Put $100 a month into a retirement account hopefully making an average of 8% annually. Continually make monthly contributions of $100 and don’t touch this money until you retire at, let’s say, age 65. Ending balance: Just over $530,000!

Do the same starting at age 30 and your total will be far less at just over $230,000.

The key to compound interest is to start as early as possible to give your money a maximum amount of time to grow. To give you an even better idea of the real power of compound interest:

If an 18 year old contributes $5,000 a year for 5 years and doesn’t invest another penny, by age 65 that initial $25,000 investment (making 8% annually) will grow to just over $633,000!

To see how much you can save at your age by using the power of compound interest, check out Bankrate’s compound interest calculator.

Prosper.com $25 sign up bonus

Prosper.com has a referral program set to expire June 30, 2008. If you have some extra cash and would like to try out lending, follow this link to make a free $25 when you make your first loan. If you are not familiar with the program, check out my article on Prosper.

Little ways to boost your savings

I am always looking for ways to boost my savings. Here are a few ways I have run across:

1. Do you have change/coins sitting around in a box or jar collecing dust? Put this money into a savings account that pays interest, preferably a high interest savings account. I recently rolled a jar of coins i’ve had collecting for over a year and it ended up being over $60!

2. Pay bills online, and don’t pay them early. Most banks allow you to pay bills online directly through the banks website. This saves $0.42 per stamp (as of today, 6/23/08), plus you don’t have to write a check. So instead of paying a bill 2 weeks before it is due, why not park the money in an online savings account for 1 week, earn a little interest on it, then transfer the money back out to pay the bill a few days before it’s due?

3. Treat savings like another bill. Just like you have a monthly utility bill or credit card bill, write yourself a check (or transfer a set amount to your savings) every paycheck. Even small amounts add up big in the long run. If you transfer $40 a month ($20 from each paycheck if you are paid twice a month) into a savings account, in 10 years you will have saved $4,800! And that’s not including interest.

4. Save all or part of your tax refund. This is a great way to boost your savings. Or better yet, use the IRS Witholding Calculator to make sure you are not having too much or too little income tax taken out of your paycheck. As nice as it is to get a refund come tax time, remember this is YOUR money that you have just loaned to the government all year. Why not adjust your witholdings to have less income tax taken out of your paycheck (if you are entitled to) and park it in an online savings account to earn some interest?