Debt Free

Leg 2 of your personal finance triangle is saving money. One of the best ways to become debt free is to employ a bit of frugality, so this leg of the triangle gets stronger. A great way to save money on things you do everyday is change your perspective a bit when you make spending decisions. All too often when people are deciding how to spend money, especially on smaller purchases, they look at the dollar amount of one item versus another. They're guilty of this when looking at how much the price of something is reduced when it's on sale also.

That's plain wrong! You should pay little attention to how many dollars you save when comparing or pricing a potential purchase. What?? Am I crazy? Perhaps, but with this little tidbit. What you should really be looking at when making purchasing decisions is the percentage you'll save or the percentage difference of one item versus another. Think about it for just a second. I've seen it happen too many times for it to be just an anomaly. Someone considering a purchase will compare two items, say they're $2.00 and $ 2.50. They think “Oh, it's only a 50 cent difference.” While in absolute terms, that's true, the cost difference is only 50 cents, they should really be looking at the decision from a percentage perspective. Then, the picture changes dramatically.

That little 50 cent margin is actually a 25% difference in the price. Although the dollar amount seems trivial, that's only the case when take by itself. If you applied similar logic to many purchases, the aggregate would mean you were spending 25% more money than was necessary. Those little 50 cents all add up. Look at the percentages.

Another fallacy many folks are guilty of comes into play when looking at the cost of driving. The overwhelming majority of drivers only think about the cost of fuel when costing a trip. What about everything else that makes your car go? In addition to fuel, you need tires, regular maintenance, windshield washer fluid and blades, antifreeze (priced that stuff lately?), etc. Those things all cost money too, and are consumed as you drive. In addition, there's depreciation. This is not something only for the small business person to worry about.

The average person should consider the effects of vehicle depreciation as well. Every mile you drive your vehicle is that much closer to the next time you'll need to purchase another. With every mile that passes underneath the Goodyears of your fine ride, it's not only worth less, but you'll be that much closer to sitting in a car dealership somewhere while the salesman runs to check with his manager. When he comes back, you'll be faced with the awful truth that, yes, you do need to plunge yourself another $20,000 deeper in debt. For those of your that have other ways of paying for a vehicle rather than financing, you'll still have to use that money for a vehicle instead of for something really fun, like pizza. Hey, it's 50 cents off!

One other note. Paul Harvey this morning reported this disheartening fact (I'm assuming it's a fact). Illegal immigrants will receive on average, $3.00 in benefits for every dollar they pay in taxes. Hear that, you residents of California, Texas, Florida, New Mexico, Nevada and Arizona? If that's the average, chances are you're getting taken for even more.