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August 15, 2008

Save Money on Gas by Improving Fuel Economy

Economy
Greg McGuire asked:


Driving StrategiesThe cheapest and easiest way to improve your fuel economy is to change how you drive your existing car.

Air conditioning. As a general rule, if you are driving under 40 miles per hour (MPH), it is more fuel efficient to turn off the air conditioner and roll down the windows. Above 40 MPH, however, the drag on your car created by the open windows causes you to use more gas, so turning on the air will actually improve your fuel economy.

Acceleration. When accelerating, do so gradually. Stomping the gas pedal at every traffic light or stop sign causes your engine to suck fuel to meet the heavy load you are putting on it. A more gradual approach can significantly improve fuel economy.

Deceleration. Let off the gas well before a stop sign or traffic light and allow yourself to coast to a stop while gently applying the brake. Accelerating all the way to the stop and then slamming on the brakes not only wastes gas, it uses up your brake pads more quickly.

Speed. For every ten miles per hour you decelerate, you can save up to 5 miles per gallon (MPG). So if the speed limit is 65 MPH and you drive 55, you can increase your MPG by 5 miles.

Car MaintenanceIn addition to improving your driving strategies, use the following car maintenance tips to maximize your fuel economy:

Tire inflation. Make sure you keep your tires properly inflated at all times. This not only lengthens the life of the tire, it will help your fuel economy. By and large, the standard inflation for most car tires is 35 pounds per square inch (PSI).  Some mechanics may recommend inflating your tires to 30 PSI to improve riding comfort, which is true, but with gas prices the way they are the best thing to do is maintain proper inflation. Please make sure you check with either your tire dealer or the tire owner’s manual for proper inflation instructions.

Fuel grade. Mountain West states (New Mexico, Colorado, Montana, etc.) offer 85 octane fuel, whereas most other states offer only 87 octane and up. Check your owner’s manual, since some models have a minimum octane requirement. Using a lower octane fuel than what your vehicle has been designed for drastically reduces fuel economy. Also, it does not improve your gas mileage to use a higher octane fuel than the minimum requirement for your car.

Alignment. Most cars need an alignment every three to five years, although your mechanic will recommend you do it more often than that. A simple test of your alignment is to briefly release the steering wheel while cruising at least 55 MPH on a straight stretch of highway. Please make sure there is no oncoming traffic and that it is a calm day! If your car veers immediately to the left or right, have your mechanic check the alignment. Alignment problems affect your fuel economy and wear your tires down more quickly.

Tire rotation and balance. Have your tires rotated every 5,000 miles.  This not only improves their life span but also causes them to wear evenly, meaning improved fuel economy for you since they ride more smoothly. Your tires should be balanced when they are first installed, and in general they should not need another balancing. Regularly check for the wheel weights mounted on the rim of each tire on your vehicle. These will be oblong metal pieces clipped to the rim, one per tire. If you don’t see one on your tire, ask your mechanic to balance the tires when he rotates them. Most tire dealers that sell you your new tires will rotate and balance those tires for free.

Tune ups. Check your owner’s manual for the recommended life span of your vehicle’s spark plugs, plug wires, and coils. In general, spark plugs should be changed every 55,000 – 75,000 miles and plug wires every 100,000 – 120,000 miles. If your engine idles very rough, or cuts out easily, have your mechanic check the coils. Also make sure to change out your vehicle’s air and fuel filters regularly.  All of these parts affect your vehicle’s fuel economy.

Buying A New CarWhen considering purchasing a new car, remember that the miles per gallon estimates posted on new cars are always very optimistic. Those estimates are generated by operating the car in perfect driving conditions, as in 55 MPH on a windless day at sea level on flat ground with the windows rolled up and the air conditioner and radio off. Typically your actual miles per gallon will be two to five gallons less than the estimate.Go smaller! Technology has improved to the point where many smaller vehicles have high safety ratings and perform very well in adverse driving conditions. Remember that if you spend a little more on a smaller car with posi-traction as opposed to a bigger lunk with four-wheel drive, savings will be realized in improved fuel economy down the road. And you don’t have to put the thing in four-wheel drive, it will do so itself!Go hybrid if you can. Some very important factors to remember: hybrid and electric car technology is skyrocketing right now, so the vehicles that come out in five to ten years will show enormous improvements over the ones available today. If you have a lot of disposable income and buy a new car every three to five years anyway, go buy a hybrid today. If you are not that lucky, follow the tips above to maintain your current vehicle and tough it out until the car companies can bring to market all the technology in development right now.
 

July 28, 2008

Your Personal Finance Resolutions for 2008

Personal Finance
Martin Bamford asked:


It’s that time of year again – the time when people up and down the country are making resolutions for the year ahead. With so many people likely to be thinking about sorting out their personal finances in 2008, here are some top personal finance resolutions for you to consider from personal finance author and Chartered Financial Planner Martin Bamford.

Work out your budget

It still amazes me how many people I meet with who simply don’t know how much money they spend each month (and what it goes on!). Working out (and sticking to) a monthly budget is all about spending less than you earn. If you achieve this, month on month, you will be in a better financial position at the end of 2008 than you were at the start.

If you reach every pay day with an overdraft or credit card debt to clear from the previous month you are starting the new month on the back foot. Make it your personal finance resolution for 2008 to never spend as much as you earn each month. If you really want to buy something shiny and new but find yourself reaching for that credit card or store card, stop, think – do you really need it now or would you feel much happier if you bought it in a few months time with cash rather than debt?

Get out of the red

If you have short term debt (credit cards, store cards, overdrafts, etc) you will know that debt is a drag. It’s a drag on your ability to save for future objectives. It’s also an emotional drag on your attitude towards money and personal finances. Make clearing your short-term debt a priority before embarking on strategies to save for short-, medium- and long-term plans.

I still meet people with some very funny attitudes towards debt. There are people who prefer to have savings running alongside debt even when they are often getting charged much higher interest rates on the debt than they will ever receive on the savings. Whilst there is a certain comfort factor in knowing you have some savings behind you, it is counterproductive if your short-term debt is holding you back.

Don’t forget that the interest you get on your savings is taxed (10%, 20% or 40% depending on your income tax rate). When you compare your debt and savings interest rates always look at the net (after tax) interest rate you get on your savings to make a fair comparison.

Make a plan.

This ties in closely with your monthly budgeting exercise. When you are working out what you are going to spend your money on each month ensure you prioritise debt over savings. Stop taking on more short-term debt. Mark a debt-freedom day on your calendar and stick to it. Celebrate your personal debt-freedom day; it’s something to be proud of.

Look to the future

Starting a pension is likely to be a big priority for many people in 2008. We recently saw the biggest shake-up of pension rules in many years but this brought a great deal of retirement planning opportunities with it. It is now generally possible to make much larger pension contributions than under the old pre-April 2006 rules. These large pension contributions will still be able to attract tax relief at your highest rate of income tax.

Once you have made contributions to a pension plan you can choose how the money will be invested. Seek professional advice to ensure that your retirement plans are invested in a way that is in line with your attitude towards investment risk, reward and volatility. You can choose from a wide range of investment options within modern personal pensions so there is no need to take unnecessary risk that you feel uncomfortable with.

Pay less Tax

No-one enjoys paying tax but many of us fail to take the simple steps that enable us to pay less tax. Each and every year we waste an average of L132 per taxpayer because we don’t take some simple planning steps and maximise our tax allowances.

There are some very easy tax-saving strategies you can use in 2008 to pay less tax.

If you are a higher rate taxpayer and your spouse is a non-, lower- or basic-rate taxpayer then consider transferring savings into their name. If you have L20,000 in savings in a joint account where one of you is a higher rate taxpayer and the other is a non-taxpayer (assuming a 5% gross interest rate) you can save L200 a year in income tax by switching from a joint account to a savings account in your spouse’s name.

Make sure you use your Individual Savings Account (ISA) allowances for this tax year and the next tax year. You have until April to maximise contributions into an ISA for the 2007/08 tax year. Every adult in the UK can contribute up to L3,000 into a cash mini-ISA (L3,600 from 6th April 2008) and up to L4,000 into a stocks & shares mini ISA each tax-year, or up to L7,000 into a maxi ISA (L7,200 from 6th April 2008). The returns within your ISA are tax-free (with the exception of the 10% tax credit on UK dividend income which can no longer be reclaimed on UK equity income).

Review your mortgage

Now is a good time to consider reviewing your mortgage. If your mortgage is on your lender’s standard variable rate (SVR) you are likely to be able to make a reasonable monthly saving by switching to a more competitive interest rate or product. There are costs associated with re-mortgaging and it makes sense to seek impartial expert advice. This will also save you the time of trawling the high street to locate the best offers. Because mortgages are a dynamic market the rates available are subject to change on a regular basis and some deals will only be available through an independent adviser.

Sort out your financial affairs

If you don’t have a Will, get one. You can write your own Will but there are some major risks involved with this DIY approach. Getting something wrong when writing your own Will could lead to significant legal fees to sort things out after your death. Find a professional to write your Will from the Society of Trust and Estate Practitioners (www.step.org). If you die without a Will, your estate will be distributed according to laws created in 1925. It is no surprise that these laws probably do not reflect modern thinking on inheritance! Don’t risk dying ‘Intestate’.

Whilst we are on this rather morbid subject you should also think about family protection. Run through a number of scenarios. What would happen to your family financially if you were to die? What would happen if you were to suffer a serious illness? What if you suffered an accident or illness and were unable to work for a long-term? Re-run these scenarios but apply them to your spouse as well. The impact of a house person dying or contracting a serious illness can often be as serious (or more so) than if this happens to the main bread-winner.

Check out your existing arrangements to ensure that they remain competitive. The cost of life assurance has generally fallen in the past five years. There are potential savings to be made here. Again, use an independent expert to review the entire market for you and ensure that the cover you are putting in place is suitable for your circumstances and objectives. At the same time make sure that your life assurance is written in trust. Writing these policies in trust can ensure that the proceeds are paid out quickly, to the right person or people and without liability to tax.

Meet with an Independent Financial Adviser

Make 2008 the year that you carry out a comprehensive review of your personal finances and financial objectives with an impartial professional who has access to the tools and knowledge needed to improve your current and future position. Most IFA’s offer a free initial consultation with no obligation they can identify areas that they can help you with and you can grill them about their qualifications, experiences and charges.

Ask lots of questions to ensure that you have found the right IFA for you. Make sure that they hold the appropriate qualifications to deal with your situation. The entry-level qualification for a financial adviser is the Certificate in Financial Planning (also referred to as the Financial Planning Certificate). This level of qualification is really only suitable if you are only seeking basic financial advice. If the advice you require is more complex then look for an adviser who is a Chartered Financial Planner or Certified Financial Planner certificant. These are more stringent tests of knowledge and competence to provide financial advice.

Also, check that the adviser is truly independent. In June 2005 there were a number of changes to the way that the financial services profession works. An adviser can now choose to be tied, multi-tied, whole of market or independent. A whole of market adviser can offer products from every provider but they do not offer the option to pay for their advice with a fee. An Independent Financial Adviser offers a fee charging option and this can sometimes offer greater impartiality that paying for services through commission. In any case, remember that you as the client are paying for financial advice – either through product charges and commissions or an explicit fee. Ensure that you are getting value for money.

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