Archive for the 'Value' Category

Below Your Means Basics

This month we will be presenting a series of Below Your Means (BYM) Basics articles to help those of you who are new to living below your means, and serve as a refresher for those of us who have (or strive to) live the BYM way.

When you live below your means, you shed a huge source of pressure and strain in your life.  Spending beyond your means, in other words – going into debt – means you are trading your future to get something now.  You are agreeing that in the future you will be willing and able to have a certain amount of money.  But none of us can predict the future.  There are lots of ways people get into trouble with debt.  Accidents and health problems lead to massive medical bills and lost wages.  Your ability to earn can be impacted by layoffs, swings in the economy, your own health, and the health of your loved ones.  Those common tragedies are only one reason to worry about spending more than you have.  In fact, bankruptcy laws are in place to protect people specifically from those kinds of ‘unexpected’ crises.

Money CastleThere is a much more insidious price to pay for living beyond your means.  Doing so assumes that you know now what you will want and need in the future.  In reality, most of us aren’t entirely sure what we want and need today, much less the kinds of opportunities and challenges we’ll face tomorrow.  When you take on debt and fail to save, you narrow the possibilities of what the future could hold.  Want to move to a new town?  You’ll need a job with an income sufficient to pay for your debt, and you’ll need to sell your house before you can buy a new one.  Tired of your car?  You can’t sell it because you owe more money on it than it’s worth.  Have a great opportunity to travel to a place you’ve always wanted to visit?  You can’t take the time off, and you don’t have the money saved up to go.  Hate your job, or worse, discover that your career is unsatisfying?  You’re stuck because your monthly payments are too high to switch to something new.

Saving, on the flip side, acknowledges not only that you need to be prepared for the problems of the future, but that you want to have resources at your disposal to seize the opportunities that come your way.  Want to move to a new town?  Sell the stuff you don’t need, get a few leads on some work if you need them, and get going.  Tired of your car?  Sell it and get something else (or go without).  Have a great opportunity to travel?  Plan a leave of absence and head out!  Hate your job, or worse, your career?  Feel free to get started on the next chapter in your life.

In short, money is a tool that you can use to achieve happiness.  It certainly isn’t the only tool, but it’s an important one.  Using it wisely requires that you know yourself and what makes you happy, and you understand that as you grow and change, your wants and needs will grow and change.  While our site isn’t designed to help you live a deliberate, centered life, there are a few resources we recommend to do so.  Franklin Covey’s The 7 Habits of Highly Effective People, while centered a bit too much on an upper-middle class suburban existence, has a great process to follow to think through what is important to you and how to get there.  And David Allen’s Getting Things Done: The Art of Stress-Free Productivity is such a great way to organize your life that he has spawned what Wired magazine referred to as a cult of hyper-efficiency.  Covey’s book especially can take you to additional resources on how to live a successful, meaningful life, but honestly — whatever helps you discover more about yourself, and how to make good choices, go for it.

This month we’ll explore:

  • The Basics of Tracking Your Spending and Building a Budget: This is the single step with which your journey starts.  Sure, you can cut down on your spending, even significantly, without knowing where your spending is going.  But finance is, at it’s most basic, an exercise in math.  If you bring in more money than you spend, you’re living below your means.  If you don’t, you’re not.  Tracking your spending isn’t everything when it comes to living below your means, but it’s hard to be successful without it unless you institute an all-cash system.  Fortunately, there is a whole industry building computer software to help make it simple, and some of it is free.
  • The Basics of Debt and Savings: Debt means giving up opportunities in the future for a lifestyle today.  It is a very dangerous gamble.  You will also see how to use debt as means to manage your cash flow and take risks to increase your wealth.  If you have consumer debt now, you’ll need to first and foremost – stop digging the hole deeper!  Next, you’ll need to pay that debt off as soon as possible and free your future from the tyranny of your past decisions.  Savings, on the other hand, gives you freedom.  It means you have protection from the unexpected and resources that you can use to seize opportunities.
  • The Basics of Spending Wisely: Tips and tricks for spending the least amount possible on things that aren’t critical for happiness and health.
  • The Basics of Living Richly: Spend your money on things that bring you true satisfaction and happiness.  Spending as little as possible for everything else.  Knowing the difference isn’t always easy, and we focus on tools and techniques to help you get there.  To start, realize that most millionaires are ordinary people who live modestly.  And, as this study shows, money doesn’t necessarily bring happiness beyond a certain income.
  • The Basics of the Investing Smartly: Keep tabs on the economy and investing opportunities.  While we aren’t a strict investing site, nor are we financial advisers, we do report on happenings in the economy so you can make educated decisions about where to put your hard-earned savings.  We also believe that, like personal debt, government debt is very risky and the government’s inflationary and spending policies are significant risks to personal well-being and to our country’s future.
  • Common Pitfalls: Identify common pitfalls on your way to financial independence, and share the stories of people who share your commitment to living well by living below their means.

 

Thumbnail Photo: Blocks 1 by Crissy Alright

Story Photo: Frits Ahlefeldt-Laurvig

Southwest Airlines fares not the lowest anymore

 

The Wall Street Journal has an interesting article on the dramatic increase in Southwest Airlines airfares over the last 5 years.  The big headline statistic is:

Southwest’s average ticket price has jumped 39% in the past five years, while the average ticket price for domestic trips for the industry was up 10%, according to the Department of Transportation.

In a spot check of 24 markets for travel over the Fourth of July weekend, Southwest had the lowest prices in only 11.

Southwest Airlines Boeing 737That’s a big increase.  Percentages can be confusing though and since Southwest’s fares started out much lower, there are still many routes where Southwest is the cheapest option.  This is most likely true if you live near a Southwest hub airport like BWI, LAS, MDW, PHX or HOU.   Southwest Airlines made headlines in the past for its aggressive use of fuel hedges.  When fuel and oil prices skyrocketed, Southwest enjoyed must lower price fuel than other airlines.  They used this advantage to expand their business as the “low fare leader”.  Unfortunately, hedge contracts don’t last for ever and the article points out that many of those advantages are now gone:

The end of the fuel hedges made the biggest change in pricing, however. For many years Southwest’s fuel costs were significantly lower than rival airlines because Chief Executive Gary Kelly decided when prices were low before the U.S. invasion of Iraq to pre-purchase fuel and buy hedges against higher prices.

I, personally, have never flown Southwest.  This is mainly due to the fact they don’t serve Seattle anywhere near as well as Alaska Airlines does and that they do not offer First Class seating.  When I used to be a very frequent traveler, the ability to get free upgrades to First Class was enough to steer me clear of the airline.  Their frequent flyer program is also pretty limited and only gets you flights and rewards on Southwest, as someone that likes to save my miles for big international flights, this is a non-starter.

If getting the lowest fare is your priority, and you have always assumed Southwest had the best rate, shopping around a little bit may now make more sense.  Of course, be sure to compare apples-to-apples, the articles points out:

One major reason Southwest prices can seem higher than competitors, he noted, is because Southwest doesn’t charge fees to check baggage or penalties to change tickets. Check one bag for $25 each way and a Southwest ticket that is $50 higher than another airline may, in fact, cost the same.

More information is available at the source.

Can’t Call Southwest a Discount Airline These Days | The Wall Street Journal

Vonage raises rates of lowest tier offering by 20%

Vonage Raises some rates in 2011Vonage is raising rates for its most basic plan from $9.99 a month to $11.99 a month (plus taxes).  I have been an on-again-off-again, user of Vonage for almost 7 years.  For those that are not familiar with Vonage; Vonage is a voice-over-IP (VOIP) provider of home Internet-based telephone service.  Because I do not need “unlimited” calling minutes, Vonage has always seemed the best option.  They provide acceptable service at a decent price.  Even comparing their unlimited plans, Vonage typically offers a price that is significantly better than Comcast or other providers bundled home phone pricing.

Unfortunately, today I got the following notice that Vonage was going to raise prices on my plan:

Modifications to your Vonage calling plan will appear on the first billing statement posted to your account on or after July 5, 2011.  Our plan will continue to provide a great value for home phone service, including an increase in monthly outbound minutes to 300 from 200. Your account will reflect this change at $11.99/mo plus taxes and fees.

In addition to 50% more minutes for calls in the U.S., Canada and Puerto Rico, your plan still provides the benefits you’ve come to expect:

  • Unlimited incoming phone calls AND Vonage-to-Vonage calls.
  • The same great low international rates on calls around the world.

The change is effective July 5th, 2011 and reflects a $2 increase per month or about an 20% increase from the $9.99 I was paying.  Additionally, since taxes and some fees are percentage based as well, I expect this change to cost me about $2.25 more per month when taxes and fees are included.  This means this rate increase will increase my home phone costs by about $27 a year.

With this price change, I plan on re-evaluating whether Vonage is still the best deal or not for me.  One option, I might consider is Ooma – their model is that you pay a flat fee up front and then get “unlimited access for life” (plus taxes).  For now, I need to do some research.  I will report back later with my findings.

Winds of change – Is College Worth It?

While reading the Economic Populist, I saw this article that referenced this research from the Pew Research Center.  The very detailed report is the result of two survey’s, one of potential students and the other of college presidents.  The results are very interesting indeed.  What I found to be most interesting was that according to the survey:

A majority of Americans (57%) say the higher education system in the United States fails to provide students with good value for the money they and their families spend.

I found this surprising and would have expected the number to have been less than 50% – given the run up in student loan debt.  Of course, consumer survey’s are notorious plagued by customers saying one thing, but acting different.  This is known as the attitude-behavior gap (or value-action gap), which you can read more about here.

 

 

 

 

 

 

 

 

 

 

 

The full report is available here.  You can also read our other posts on the topic of an education bubble here:

NIA – Video on the Education Bubble

The National Inflation Association has released a very interesting video on the topic of the Education Bubble. The video is available on YouTube and we provide our summary and thoughts below.

The NIA definitely knows how to put together a solid video.  They produced others in the past that are also worth checking outHowever, it is important to take videos like this with a grain of salt. This video doesn’t totally cross the line, but definitely suffers from the same kind of one-sidedness that makes Michael Moore films so infuriating.  The truth of the matter is that nothing is ever as black-and-white or as straightforward as potentially biased documentary-makers portray.  Regardless, the video makes several good points and is worth a watch.

Here is a quick summary of what we found interesting:

  • Student loan debt now stands at $830 Billion in the US
  • The average amount of student loan debt of US students is $24,000 – but there are many students with hundreds of thousands of dollars
  • Colleges spend on average $14B a year in construction and campus expansion, and tens to hundreds of millions on sports teams, staff, etc. – Little of which actually adds to the value of the education.
  • Going to college no longer makes you “special” – of the 2009 graduating high school class, 70.1% enrolled in college.
  • Since, 1992, the US BLS reports that 60% of all college graduates have gotten unskilled jobs, or other jobs that do not require or benefit from a college degree.
  • The video provides a very interesting breakdown of the true cost of a college education which includes:
    • Tuition
    • Supplies and books
    • Lost income
    • Interest on debt
  • Regarding total cost: Their example for a 6 years of school, suggests an average total cost of $460k:
    • 6 years at the average of $27,293 per year, increasing at the rate of 5.15% a year
    • $61,914 in interest on the loan debt
    • Lost income for 6 years at an average salary of $35,400 a year.
  • Law schools use misleading statistics like – 90% of our graduates find employment within one year.  While true, this statistic includes those that got jobs at Walmart and in other non-legal professions.

Where the video gets a little silly:

  • Suggests that a high school student with $30k saved up for college would be better off using it all to buy physical silver than go to college — because the value of that silver will be enough to buy a median priced house in 4 years.
  • Suggests the mainstream media (MSM) is colluding with colleges to spread myths and hoaxes that benefit colleges.
  • One of the people interviewed suggests we may not have running water or other basic services within 4 years.
  • On more than one occasion alludes to or suggests investing a reckless amount of money in  physical metals like silver and gold.

Regardless of where you stand on hyper-inflation and end of the world concerns, we would caution everyone about going crazy buying physical metal.  Personally, I have done a lot of reading on the topic and think it is prudent to own at least some physical metal and by some I would suggest between 2% and 5% of your total net worth.  Commodity prices can be very volatile (as we have seen in recent weeks with the price of silver going from 30 to 50 and back to 30 again). This means that if your net worth is $150k you should consider owning approximately $4,500 in precious metals.  Consider using dollar cost averaging to dampen the effects of price swings.   In this example, I would not buy 3oz of gold tomorrow, instead I would buy one today, one in 6 months and one this time next year.

Two services that I have personally used and recommend include: American Precious Metal Exchange and Bullion Vault.

Disclosure: We are affiliates of both APMEX and BullionVault.com.

Is a purchase worth it? The Below Your Means Value Formula can help you decide.

Is something worth it, do the math.

Part of the lifestyle of living below your means involves thinking about your finances a little differently.  A key example of this is concept, that I often look at my personal finances like I a business would look at their finances.  That way, we can use common business techniques to figure out where to spend money, where to spend less, and where to invest.  This actually can apply to lots of everyday things and once you get used to thinking this way, it becomes second nature.

One great concept to learn and use is that of amortization.  Wikipedia defines it as:

Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period.”

Put simply, you can use amortization to help you decide if something is “worth it” or not by looking at the cost and value over time.  This little bit of frugal math can be put into a formula that looks something like this:

A simple forumula to help out figure out if something is worth it or not

Using the formula is pretty simple.  Let me give you a few examples of this in action.  In each example, we will take the total cost per period of time and divide it by the number of times it is used / enjoyed or the “units of use”.   The result is the “total cost per unit of enjoyment or use”.  With that you can make a judgement call as to whether or not it is worth it to you.

Calculating the total cost of a purchase is an important skill.  You have to factor in all the costs of repairs, cleaning, insurance, licensing, etc to full understand what you will be out-of-pocket over the period of time you plan on using the item in question.  In our formula, c is the total cost over time.

Understanding the unit of use also requires a bit of thought.  You need to factor in how much time you’ll get value out of a purchase.  If it’s something that you know you’ll use almost every day, you can simply use the expected lifetime of the purchase for u.  If it is something that you will use for a fixed time, then hours may be a better way to compare.  We’ll explore this in the examples as well.

The value of v is subjective by nature.  If you are well-centered and know what is important to you, then you’ll be able to make the value determination successfully once you know the cost per use.

Here are a few examples:

  • Monthly gym membership at a fancy gym: $85 per month (c in our equation above)
    • If you go to the gym once a week, you use the gym roughly 4 times a month (u above)
    • $85 / 4 = $21.25, so the cost per visit is $21.25
    • Compare this to using day passes as opposed to a monthly membership.  If you only use the gym 4 times a month, it is probably better to buy 4 day passes for $15, as the cost per visit drops from $21.25 to $15.00.
  • Nice new propane BBQ Grill: $800 (excluding fuel)
    • If you use it 50 times a year (about once per week) and you expect it to last 5 years, that is 250 uses
    • $800 / 250 = $3.20, so the cost per use is $3.20
    • Relative to eating out, an extra $3.20 a meal isn’t that bad of a deal to get fresh grilled food.
    • If you use it 4 times per year in the summer, you are looking at a cost per use of $40.  ($800 for the grill / (4 uses x 5 years) = $800 / 20 lifetime uses = $40 per use).  At that rate, it may be better to go out.
  • Buying, storing, licensing, insure, maintaining a decent 21″ power boat over 5 years (excluding fuel): $75,000
    • If you use the boat 10 times a year and it is used for 5 years, that is 50 uses.
    • $75,000 / 50 = $1,500, so the cost per use is $1500
    • The going rate to rent a similar boat is about $300 a day,  so if you rented the boat 50 times it would cost you $15,000 over 5 years.
  • Buying, licensing, insure, maintaining a new sedan over 5 years (excluding fuel) : $50,000
    • If you drive the car 20,000 miles a year for 5 years, that is 100,000 miles driven.
    • $50,000 / 100,000 = $0.50
    • The cost per mile is $0.50, or put another way $10,000 a year.

Using this method you can see how changing variables, such as the initial price you pay for something, the number of times you use it and how long you keep it for use can drastically change the “cost per unit of enjoyment or use”.

For example, if you keep your car mentioned above for 7 years instead of 5 years and assume an extra $10,000 in insurance, repairs, etc.  the equation changes to:

  • $60,000 / 140,000 = $0.43 a mile or a 16% reduction in your cost per mile.

The same is true for uses or number of times enjoyed.  Taking the gym membership example above.  If you go to the gym 3 times a week, or approximately 12 times a month.  The cost per time drops to $7.08 or less than 1/2 the cost of a day pass, definitely a better deal for something you will use often.

Especially for entertainment purposes, we look at hours of use to determine cost.  For example:

  • Taking the kids to the movies vs. buying a DVD vs. buying a video game 
    • Movie at the Theater
      • Matinee Tickets for 1 adult and 2 kids: $25
      • Concessions: $10
      • Total Cost (excluding gas to/from theater): $35
      • Hours of Use (2 kids x 2 hours): 4 hours
      • Cost per Kid-Hour:  $8.75
    • DVD Purchase
      • Blu-Ray/DVD Combo Pack: $25
      • Home Snacks: $0.50
      • Total Cost: $25.50
      • Hours of Use: 44
        • Initial (2 kids x 2 hours): 4 kid-hours
        • 10 Repeat Viewings (4 kid-hours x 10): 40 hours
      • Cost per Kid-Hour:  $0.64
    • Video Game
      • Discount video game:  $35
      • Hours of Use (2 kids x 40 hours to complete / get bored with game): 80 hours
      • Cost per Kid-Hour:  $0.44

If we adjust the price paid for something you can see how that affects the equation.  Take the gym example.  Instead of going to a fancy club you evaluate going to a basic gym that still meets your needs.  The equation might look something like this:

  • Monthly Gym Membership at a basic gym: $30
    • If you go to the gym three times a week, you use the gym roughly 12 times a month.
    • $30 / 12 = $2.50
    • The cost per visit is $2.50 (vs. the fancy gym, which was $7.08/month for the same amount of use).

You can choose to make these formulas as comprehensive as you want, in order to get a more accurate per-use cost and make a more educated value determination.  In the entertainment example above, we could have assumed that 1/2 of the DVD re-watches would have included additional at home snacks, and added $2.50 (0.50 per viewing of snacks * 5 viewings) to the total cost.  Or estimated the cost of gas to get the gang to and from the movie.

Amortization it is a valuable tool to help you understand the total cost and value you are getting out of a potential purchase.  Put it in your toolkit to make reasonable and value-minded decisions, and continue enjoying living Below Your Means.

The ultimate guide to stretching your dollar when renting a car

The following are the 18 best tips and tricks for renting a car that 3 savvy business travelers, with 100’s of car rentals under their collective belts, could come up with.  These tips are targeted at people who want to maximize the dollars they spend on a rental car.

At BYM we don’t recommend being a cheapskate for the sole reason of hoarding pennies, but we do believe in only spending money if it is genuinely worth it to you.  Many of these tips help you have an equivalent experience for the same price, and help you limit expenses that sound reasonable at the time, but don’t really add much to your happiness in the long run.  Vacations and travel are a typical place where you can overspend if you don’t have your priorities straight in your head.  You’re on vacation and you’re worth it, so spend the money, right!  Wrong.  You deserve to have a great time and come home to your intact emergency fund and paid-off credit cards (or, if you’re new to living below your means, come home to your hard-earned progress on those two fronts intact.

Getting the most bang for your buck while traveling is a great way to let you see more places and spend more of your hard-earned money on fun stuff when you get there!   Renting a car when on vacation can be a real convenience and — depending on how much you need to get around — it could actually cost less than using other forms of transit.

Like many industries, the rental car industry makes the majority of its money through the obfuscation of its pricing structure, add-on services and fees.  Not only do prices vary widely from company to company, but the exact same car from the exact same company, for the exact same dates and location can have a drastically different price depending on what deal you get.

So know what’s important to you, have fun, and consider these ideas to help you get the best value for your dollar on your rental car:

 

DECIDING ON THE RENTAL

 

#1 – Decide if you really will use the car

Before renting a car, make sure it makes sense.  For example, most would say renting a car in a taxi and subway friendly like Manhattan is crazy, as even the locals don’t own cars.  Doing so will cost you not only the price of the rental, but as much as $50 a night in parking fees.  Even with pricy taxi fares, it may actually be cheaper and easier to not rent a car.    At a theme park vacation many hotels provide free or discount transportation between the hotel and the park, as well as other area attractions and major airports.  Think about what you are going to be doing on the trip, and how much you will use the car compared to other sources of transit.  Be sure to check your hotel parking rates, especially in a city.  And don’t forget to consider the cost of gas.

 

#2 – Make a reservation, but make it really early or very last minute

Reserving a car in advanced, especially when done via a website prevents all the hard-sell hassle of the rental counter.  It also can help you get the car you want and the best possible deal.

Like many industries that have time-sensitive inventory, the rate of a rental car changes over time based on availability.  If you show up the day you need the rental, you may end up paying the full retail rate — or in hotel terms the “rack rate” — which will definitely cost you.   Worse, you could be forced to rent much more car than you need, because it is the only vehicle available.  Booking ahead of time will help guarantee both that there is going to be the car you want / need waiting for you, and that you take maximum advantage of discounts, etc.We researched intermediate / mid-size car rental rates for every major US rental company at 4 major US airports.  This was done via each company’s website and no corporate or coupon codes were applied.  We researched rates at 14, 30, 45, 90, 180 and 240 days out from the reservation time.  The results were very interesting:

As you can see, “last minute” or in our case 0 to 30 day reservations rates were by far the best.  This was followed by a mountain of price increases that peaks around 90 days out.  The conclusion of our research is that you should book no more than 30 days from your arrival date or at least 240 days in advanced to get the average best price.

Quick Tip: Many companies let you cancel your reservation for no charge.  If this is the case, consider booking early, but then shopping around for last minute deals as your travel date arrives.  You may be able to cancel and re-reserve the same car for less money.

 

#3 – Consider paying up front

One of the advantages of living below your means and actually having savings is that you can pay for things up front.  Car rental companies (and hotels) provide discounts for doing so.  The discount ranges from 5 to 20% and is definitely something to consider.  Our research has shown that on a short notice rental, Budget has offered up to 60% off for using their “Pay Now Rate”.

Quick Tip: Be sure to read the fine print, sometimes when you prepay there are fees associated with modifying or canceling your reservation.

 

#4 – Reserve the smallest car you need

Why rent more than you need?  Most cars seat the same number of people and larger cars sometimes only offer marginally more room for comfort.  As a rule, I rent the smallest car I need… this stretches my dollar in multiple ways.  First the rental price is less, the lower rental price means the taxes and fees are less as well.  Smaller cars tend to get better gas mileage, so you spend less at the pump.  You also always have a chance of being upgraded for free, so you may end up with a larger car than you book anyway.  But see Tip #12 for thoughts on the cost of those ‘free’ upgrades.

 

#5 – Shop Around(Duh!)

This one is obvious, but it needs to be mentioned.  Shop around not only between different rental companies, but also different online rental sites, and rental aggregator sites like Expedia, Kayak, Priceline and others vs. the car rental sites themselves.  A recent check on Expedia.com shows a basic 4 day rental from Regan Nation Airport Renting an ‘economy car’ can range from $240 to $358 depending on the company you go with.  In our example the most expensive choice was Hertz, however when we checked Hertz.com, we found the exact same car, the exact same dates, for $282, or $76 less than the Expedia.com price.

Again, price is not everything – sometimes loyalty has its own rewards such as frequent flyer miles, points, upgrades, free rentals, etc.  To maximize this, consider picking two programs to join and stay between the two of them.  If the difference in price is minor, try to focus your rentals with one over the other to maximize the frequent rental perks.  I personally belong to Hertz Gold and Avis Preferred and will simply shop between the two of them to get the best deal.  When the difference in rental is $10 or less, I usually go with Avis to stay in their First tier.While not always true, especially when corporate or coupons are taken in consideration, our research shows that Hertz and National are the almost always the most expensive option, while Dollar, Thrifty and Enterprise are almost always the lowest.  Avis, Budget and Alamo rid the middle.

The follow chart shows single-day, mid-size rental car rate averages for 4 major US airports at 14, 30, 90, 180 and 240 day reservations.  We compared prices for all major US carriers: Avis, Hertz, Budget, Dollar, Thrifty, Enterprise, Alamo and National.

Quick Tip: Save yourself some time and don’t bother comparing between Dollar and Thrifty, our research shows there prices are almost 99% identical for all locations and dates that we sampled.

 

#6 – Be mindful of hidden fees and fine print

In addition to the usual fees and options like insurance (See Tip #8) and frequent flyer mileage program fees (See Tip #14) there are numerous other fees you need to look out for.  Here is a short list, but there are others:

  1. Under 25 Renter – Some companies charge extra if you are under the age of 25. Note: Some insurance companies allow you get around this through especial agreements with particular rental car companies.
  • Per Mile – Some companies or rental options require you to pay for miles instead of offering the standard unlimited option.
    1. Smoker Cleaning Fee – If you smoke in a non-smoking car, you may get charged $250 or more in cleaning fees.
    1. Alternate Driver Fee – Sometimes only the renter is allowed to drive, other times it is anyone in the party.  This varies based on state law and individual rental car company policies

 

#7 – Avoid fancy vehicles

Remember, this is a rental. Aspirational rentals are an even bigger waste of money than aspirational purchases. Unless the highlight of your trip is the car you drive, avoid renting fancy vehicles.  Hummers, Corvettes, Camaros and convertibles are nice to look at, but will cost you 2 to 15 times as much as a “lesser” vehicle.  Is it really worth it?   The $200 to $500 bucks you don’t spend on your rental can be put to something that will be much more memorable to you then an overpriced ride.

As an example, consider a two day Las Vegas rental for Friday through Sunday, where you could pay $51 for a generic compact car, or $319 for a Cadillac CTS.  That’s a $268 difference for two days of “luxury”.  If having a larger car is important to you, why not rent a Buick for $78?  And what are you in your rental car anyway?  You should be at the pool, or taking the money you didn’t spend on the car and booking a helicopter tour of the Grand Canyon, or even gambling if that is your thing.

Living Richly Caveat: If having the sweet ride is a key part of the experience for you, then go for it.  But, how do you know if it really is key?  Like everything it helps if you are well centered in what is important to you.  But ask – does it fit in your overall vacation budget?  Is there something you’d rather do either on the trip or with the extra money?  Odds are that if you asked yourself “if I could spend this $250 on anything, what would I buy?” you’ll find the answer, and it won’t be ‘rent a Corvette’.

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