The Zen Dollar

I’ve been thinking a lot recently about how to put my money to the best use. I haven’t really come to a conclusion yet, so I figured I’d hash it all out in writing and maybe something would come to me. Think of this as my actual thought process, a stream of consciousness type post if you will.

Let me first off outline my current financial obligations to adequately frame the scenario with my particular situation.

I have significant debt (~$21k @ 7%), in the form of student loans.

Second off I need to find an alternate vehicle. My auto right now is on its last legs and I would really rather not drop any more money into fixing a vehicle that I have no interest in keeping, especially since it is in pretty rough condition already.

Third, I need to continue to invest money into various places. — Unfortunately, this is going to require quite a bit of leg work since I lost my list of funds I wanted to invest in. I had already done all the research and picked a portfolio that I felt comfortable adding money into. It was balanced to my liking given my contributions that I already make to my 401k and RothIRA. This is going to take me quite a bit of time and prognostication to do because I am completely anal about researching a product before I purchase it.

I suppose up to this point it seems pretty straight forward. Some of you are probably thinking where is the problem, make you payments on your loans, start putting money away for a new vehicle and get to crackin’ on your investment strategy, boy! I guess I just need to make sure that the money is allocated in a way that is going to make it work the hardest for me and that each decision is carefully thought out an calculated to make sure it meets the needs of my lifestyle.

I’ll go into more detail on the decision to purchase a new vehicle first. I drive a pretty ragged ‘96 Ford Contour currently that is probably going to need significant and continued work down the road. The air-conditioning doesn’t work because of a hole in the line. I live in Florida and I commute upwards of 45 minutes to and from work on some days when the traffic is bad. This is a big problem for me. The starter is also making a quick screeching/zipper noise which means it might need to also be replaced in the near future. Not to mention the massive rusting of the underside of the vehicle.

One thought is to keep the car as backup transportation and buy a high MPG motorcycle. This will serve its purpose and also save me money in two ways. First, I can pick up a reliable, newish, low mileage,motorcycle for about $3,000 on average. Pretty cheap. Second, a bike will run me around 65+MPG. More than double what I get now. This would save me considerable money in the long run because of my daily commute.

Let’s break this down into the numbers. I’ll use some estimates since I don’t have any raw data to support this….yet..

MSN Auto tells me my ‘96 Contour gets me about 25mpg. (This is probably a high estimate considering most of the time I am sitting in traffic doing stop and go driving). My commute everyday is just over 25 miles a day. How convenient. This means I’m burning around a gallon of gas a day just during my commute. At $2.75/gallon that is costing me $13.75 a week of work or $715 a year. That is assuming I don’t drive my car anywhere except to and from work.

Now If I got 65MPG I would only use about 38.5% of a single gallon. That isn’t even two gallons a week! At $2.75/gallon that would cost me $5.28 a week or $275 a year. That is a savings of $440 a year just on driving to and from work.

The other option is to buy a used car that gets about 30-35 mpg and is fairly reliable, costing me somewhere in the neighborhood of $5,000. The upside to this is that I could sell my Contour, probably for no more than $800.

I suppose the first thing to do is to see how difficult it is to become a licensed motorcycle operator.

I left off in my last post with a simple question that is at the heart of my passion for personal finance.

“How much time have you dedicated to your financial independence today?”

Lets break this question down. What does financial independence mean to you? And more specifically, what are your financial wants and needs? A stream of things come to mind. For some people it just means being really rich, others want to provide a comfortable living and eventual retirement down the road, or to put their kids through college.

So I set out today to put in writing what my personal financial wants are and what financial independence means to me. I instantly came to the realization that the former leads to the latter. That my only financial want was to be financially independent. Here is what I wrote down.

“Being financially independent means:

1. Reclaiming my time; because my time is far more valuable than any dollar amount.

2. Accruing enough wealth to use my time pursue my interests, whether business or personal, as I see fit, for no other reason than that they are of interest to me and not be hampered by my financial means to do so.

3. Escape from the rat race, quitting my 8-5 and retiring from the “working stiffs” as soon as possible.”

These three things are at the core of my wants. They are the driving force behind my interest(borderline obsession) with personal finance and extremely early retirement.

Sit down with a pen and pad and be prepared to do some serious thinking about what is really important to you at the end of the day. (Hint: it probably isn’t as materialistic as you think)