Saving Freak

It turns out that some people feel pleasure when they spend money.  This really does not come as a surprise since many people use shopping as therapy when they are feeling down.  What is interesting is that Carnegie Melon and the University of Pennsylvania have done studies to prove that people are actually have physiological responses to spending money.  Some actually feel pain when they spend money (this would be me).  While others, like my brother black sheep, feel pleasure from spending money.  The real key is understanding who you are and the short comings that come with being a tightwad or a spendthrift.

People who experience pain at spending will sometimes deprive themselves in order to save a buck.  We need to sometimes open up the wallet a little more and live a little.  I have been working on this myself.  For example I now refuse to stay in 2 star or less hotels.  This means I have to do some work to find a great deal but this is better than the inconvenience of junky hotel rooms.

For those who enjoy spending you have to ask yourself the question, “Do I really need this item or am I just spending to spend?”  This is a hard question to ask but it will leave you felling better about your decisions in the long run.

The average car loan in America is now 70 months.  That right 70!! What are we doing to ourselves?  I cannot even look at the math involved in this.  Here is my experience with car loans.  I purchased a vehicle in 2004 and took out a loan for 75% of the value (25% down).  It took me 19 months to pay that vehicle off.  I NEVER want to go back to making car payments.  It sucks the life out of your budget.  $389 per month is the average car payment in the US.  Not having that hanging over you is like getting a $6000 per year raise (before taxes).  You see our problem isn’t that we do not have enough money.  It is that we spend our money in very poor ways.  Cars go down in value 99.9% of the time.  So when you are done paying off that vehicle it is worth as little as one fifth of what you paid for it (if you bought a Dodge even less).  So instead of going out and buying that shiny new vehicle why not deal with the clunker a little longer and save up your money for a nice used vehicle (that vehicle I puchased above only had 28,000 miles on it).  This way you do not take the big cut in value and get a great vehicle.  There is only one way to keep the house from winning in the game of car loans, and that is to not play.

We as a society have become contractually stupid.  We sign contracts all the time and do not understand what they mean.  Why do we do this?  Part of it is lack of concentration.  Businessweek reports that only 1 in 8 Americans can read long, dense text and comprehend it.  This means that only 12.5% of the population ever understands the contracts they are signing.  This is how we get into messes like the credit bubble where people took out these ridiculous loans.  Most reports I am seeing are not for people who bought a reasonably priced home for their income but for people who make $30k per year taking out loans for $300K houses (as an example).  No one can afford a house that is ten times what they make in a year.  That is just contractual stupidity.  If you cannot understand the contract please ask someone to help you understand it (this should not be the sales person).  Whether it is cell phones, electric bill, car loan, or home mortgage read the contract.  You never know what some lawyer has slipped into the contract that you may not like.