# Cut backs on the way.



## Fraser19 (Aug 23, 2013)

Hey guys,

I have come to the conclusion that the money I am making today could very well be the most important money I ever make. I am 24 so every dollar I make has a lot of time to accumulate interest on it. I want to buy a house within the next year or two and am doing everything to get myself on the right track. Some of the cutbacks I am working on.

I am going to sell my truck that I built over the winter, its a 1996 ford ranger that I put a lot of work into. I am hoping I can get 3000.00 for it. I currently have 2004 BMW 330CI as well and a 2013 Harley Davidson 883 iron. I originally wanted to get a Chevy Eco cruze due to the gas mileage however I think I am going to for for a 1990 something Honda civic. Fully deprecated, was quoted 38 dollars a month for insurance and also gets very good gas mileage. I will be keeping the BMW and Harley however since they are summer vehicle they cost me nothing in the winter.

There are a few I have had my eye on for $500-$850. I may even keep the BMW parked for a year to save on insurance.


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## mcoursd2006 (May 22, 2012)

Are you asking the forum for advice on something here?


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## Fraser19 (Aug 23, 2013)

Yes although I see I didn't really pose it as a question.
Dose this seem like a reasonable idea? Have you guys had nice vehicles and let them sit before in order to save on insurance and gas costs to meet your financial goals?


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## Four Pillars (Apr 5, 2009)

Fraser19 said:


> I will be keeping the BMW and Harley however since they are summer vehicle they cost me nothing in the winter.


They still depreciate over the winter.

It's not for me to tell you how to allocate your resources. You have to decide what your goals are and spend accordingly knowing that spending a dollar in one place means that dollar isn't available for something else.

Offhand it appears that you are putting a lot of cash into various vehicles. Nothing wrong with that, but that money won't be available for house buying or anything else you might want to spend money on.

The fact that you are willing to park BMW for a year to save on insurance could be a sign that the BMW doesn't really fit in your plans.


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## Spudd (Oct 11, 2011)

Why can't you just drive the BMW in the winter, if you plan to keep it? It seems wasteful to keep 2 cars, one for winter and one for summer.


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## the-royal-mail (Dec 11, 2009)

Spudd is right. You're not saving anything when a vehicle has to be purchased, to save money (LOL). Each vehicle has to be insured and plated even minimally and then you'll always have several cars in your driveway, taking up space. Do you have room to park all these vehicles?

Also, you could be in contradiction of city bylaws (one example is "derelict cars" ordinance) if you are planning to leave various vehicles on the street or in your yard for 6 or more months at a time.

Also, it's not good to leave vehicles sitting for months/years at a time. They rot and leak.

This is not a good idea. If saving money is your goal, then you need less vehicles, not more, and stop sinking money into restoring vehicles from the 1990s. Most are intended for scrapping 10-15 years or less after purchase. Planned obsolesense.


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## andrewf (Mar 1, 2010)

Sounds like lots of 'toys'. That's not a problem in itself, as long as you can afford it and it does not interfere with your saving goals.


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## tygrus (Mar 13, 2012)

The economics of vehicles have changed. First, wasting money on a luxury vehicle that needs special repairs and parts is stupid. Secondly, there is no money restoring vehicles. The best economics of a vehicle is to either lease it and keep rolling the lease, or to buy something nearly new and drive the wheels off it for 10 years. The reliability of today's vehicles is astounding. You can easily put a couple hundred thousand miles on most models these days with little repair work.

And whats with the house horniness? You are 24, people used to rent until their early 30s. You don't need a house until you are ready to get married and settle down. Until then, rent, save and enjoy until that day comes.


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## Fraser19 (Aug 23, 2013)

Good points,
First off I am able to keep all of my vehicles at work. The storage insurance on my BMW is 19 dollars a month. Also when I lived in Calgary I used to drive my BMW year round however I moved to Lloydminster a city that is half in Alberta and Half is Sask. The city dose very little for the roads and unfortunate the ruts in the road become somewhat hard/damaging to my car. Now the BMW is not a car that requires parts or work more than any other car around. This probably means nothing to you guys but it is an E46 which is pretty well the last generation that can be worked on by your average person. I did three years of mechanics in high school as well as two semesters of auto body so I never pay to have anyone work on my car.

My truck is extremely un-economical as it gets about 350km to $70. I know I can sell it for at least $3000.00. While I do like the like the idea of buying a new car (eco cruize) I am just not financially capable at this point in time. Nor do I want to take on any debt when I can get an old Honda that is fully deprecated as a new car would deprecate in value extremely hard and fast. Gets good gas mileage, has cheap parts, easy to work on and doesn't really matter if it takes small amounts of damage from the poor road care out here. 

As far as the wanting to buy a house goes. I live in Lloydminster Alberta a major drilling area. The housing out here is cheaper to buy than it is to rent. Although I do live with my girlfriend who owns her place and I pay 340/mo I would rather be building my own equity. It is not a need to buy soon but I would prefer to put myself in the absolute best position to buy a house over the next few years.


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## andrewf (Mar 1, 2010)

I think you're better off with the old civic than the new car (especially doing it for gas mileage--false economy). Not sure if you need to go quite as old as you're looking at. 6-8 years old is enough that most of the depreciation has taken place. The only advantage of going a lot older is that cars were simpler and you could work on them yourself.

Buying a house is not necessarily a bad idea. All real estate is local, and I don't know what the buy/rent economics are in Lloydminster. If you think it does make sense to buy, just ensure you have the financial cushion (enough equity to start and enough cash flow to easily handle changes in interest rate) and job security to handle the added risk.


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## Fraser19 (Aug 23, 2013)

andrewf said:


> I think you're better off with the old civic than the new car (especially doing it for gas mileage--false economy). Not sure if you need to go quite as old as you're looking at. 6-8 years old is enough that most of the depreciation has taken place. The only advantage of going a lot older is that cars were simpler and you could work on them yourself.
> 
> Buying a house is not necessarily a bad idea. All real estate is local, and I don't know what the buy/rent economics are in Lloydminster. If you think it does make sense to buy, just ensure you have the financial cushion (enough equity to start and enough cash flow to easily handle changes in interest rate) and job security to handle the added risk.


Those were my thoughts.
It doesn't need to be an extremely old civic but it needs to be paid for with the money I get from selling my truck after I put $1000.00 of the money from selling my truck into my debt. What I do find attractive about the older civic is that I can work on it myself. I have a very large shop at work that I can do my mechanical work in comfortably and prefer to utilize that instead of paying for someone else to work on my own car.

As far as the house goes I feel that every dollar going to my own mortgage is at least money going towards me owning something and not someone else owning something.

The way I see it at this point is I can sell something, pay money into my debt, get something else that is more economical. To add to this my truck when insured in 120/mo for insurance. I was quoted 40/mo for insurance on a 1990's civic. It seems to make sense to me, although I do recognize that I am not always right about things and that is why it is important for me to bounce my ideas off of others. 
Perhaps also worth noting once a month I do travel to Calgary which is about a 600km drive and that is somewhat of a killer in the truck.


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## andrewf (Mar 1, 2010)

Fraser19 said:


> As far as the house goes I feel that every dollar going to my own mortgage is at least money going towards me owning something and not someone else owning something.


I know that this is deeply ingrained in the Canadian psyche. Think about it this way: either you rent a dwelling or you rent the money to buy the dwelling. Either way you're renting. Do what makes financial sense and works for your lifestyle. If you have a hard time maintaining the discipline to save, a house can be a way of forcing yourself to save. That's not perfect, though. I know people who are nearing retirement and owe much more on their home than they originally paid for it, due to repeated equity withdrawals.


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## the-royal-mail (Dec 11, 2009)

It does sound like you've already decided to do these things. I think tygrus makes a lot of good points also. 

Interesting comments about the road ruts. I had a similar problem with my last car and finally relented and got a small front wheel drive SUV. The idea with this was the higher ground clearance which would allow for improperly cleared winter roads. It worked like a charm. Yes, I am getting poorer gas mileage but the high clearance and ability to carry stuff in the back are indispensable. Since you mentioned winter roads, I do not see how the two smaller/cheaper cars you mentioned will help much since both are just as low to the ground as what you have now.

If I were you I would sell your motorcycle, truck and BMW and get a small front wheel drive SUV on the used market, something about 5 years old. That will be practical and resolve your issues while allowing you to save money and keep your life simpler.


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## Fraser19 (Aug 23, 2013)

the-royal-mail said:


> It does sound like you've already decided to do these things.


Still on the fence but leaning more towards going forward with my plan.



the-royal-mail said:


> I do not see how the two smaller/cheaper cars you mentioned will help much since both are just as low to the ground as what you have now.


When I measured with my friends civic it is about 3 inches higher than my BMW. Also my BMW did get around good it never got stuck it was just the ruts and large buildups of ice hitting my car that felt like my heart was going to explode every time. 



the-royal-mail said:


> If I were you I would sell your motorcycle, truck and BMW and get a small front wheel drive SUV on the used market, something about 5 years old. That will be practical and resolve your issues while allowing you to save money and keep your life simpler.


While I do agree this would be by far the best plan I cant go through with it. #1 reason my motorcycle is my main source of recreation in the summer. #2 the BMW has been in two accidents since I have owned it. They have been repaired but I feel that I would not get anything close to what would let me feel ok with selling it. I also just love it every time I get into it and drive it, it is truly and exhilarating experience


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## My Own Advisor (Sep 24, 2012)

I'm with Andrewf.

I think you're better off with an older, used car, something about 8 years old. If you're handy and you can do the work yourself, even better. I wish I was that handy.

Buying a house is not necessarily a bad idea depending upon your downpayment and carrying costs.


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## m3s (Apr 3, 2010)

Fraser19 said:


> I have come to the conclusion that the money I am making today could very well be the most important money I ever make. I am 24 so every dollar I make has a lot of time to accumulate interest on it.


Very true. Many people don't realize the time value of money so young, and many still just don't have the opportunity to take advantage of it.



andrewf said:


> Think about it this way: either you rent a dwelling or you rent the money to buy the dwelling. Either way you're renting.


That's a really good quote



tygrus said:


> The reliability of today's vehicles is astounding. You can easily put a couple hundred thousand miles on most models these days with little repair work.


This is a bit of a fallacy like the economics of buying a house imo. Car manufacturers have put a lot of effort to make you want to buy a new car at 0% with very little margin. Why? They have also gone great lengths to over complicate the simple wear and tear repairs, so that they have a constant high margin cash flow on simple specialized maintenance and parts (that always wear and tear regardless). I won't make a bunch of statements but there are many good reasons used cars are usually much cheaper to drive than new cars.



Fraser19 said:


> Now the BMW is not a car that requires parts or work more than any other car around. This probably means nothing to you guys but it is an E46 which is pretty well the last generation that can be worked on by your average person. I did three years of mechanics in high school as well as two semesters of auto body so I never pay to have anyone work on my car.


For someone who can do their own repairs, I agree the E46 is the last of an era. That chassis was designed for real drivers rather than brochure shoppers but I'm sure you know this. Unfortunately it was also designed for twisty smooth European roads rather than Lloydminster... I lived in Moose Jaw for awhile with a lowered Honda and the winter was tough. But since you already have it and know how to fix it... I would keep it and drive it. Storage can cause a lot of trouble.. it's a world famous chassis and the resale on them is pretty strong. I have an E46 M3 and looking for a 328Ci or 330Ci for a grocery getter and trailer tower. Anything newer is an atrocity to me so far.

In the big picture, if it saves you from buying a new car that you can't work on as much yourself it will save you money. For the insurance, also consider lowering your coverage to liability only and/or increase the deductible as much as you can (they won't offer you this, you have to ask). I've saved a small fortune over the years by driving old cars I could self-insure and fix myself, especially when I was under 25. I just try not to avoid "at fault accidents" and I'm comfortable with my ability to do so. With the money I've saved, I could easily replace my car. On a new car, you must pay $$$$ full coverage insurance, registration, taxes (maybe not in Alberta though?)

Please crunch all the numbers vs the savings in gas and I might be able to point out some other things you may have overlooked. I really doubt a new car is worth the savings... but it depends how much you drive and insurance etc etc. People convince themselves to buy new things for efficiency but they aren't saving as much on electricity and gas as they think (while filling huge landfills with perfectly good items) Gas is relatively dirt cheap in Alberta (probably less than half as much as Europe) I'm quite interested to see how a new car or SUV could possibly save anyone money...


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## Fraser19 (Aug 23, 2013)

Ive already made decent insurance cutback.
The bike I keep full coverage on during the season.
The BMW I put liability and comprehensive on no collision I can drive safely enough and the reality is if I totaled the car I would still have paid less by now than if I had put full coverage on since the beginning. 
I generally put 40 000 km per year on my truck and BMW combined the bike is in its own category. 
I feel the older civic is best largely due to gas mileage and insurance costs. 

The main reason I would not buy a new car is I am 24 full coverage insurance for me would be over 500/mo for a new/financed car. I used to have a 2008 ford ranger with full coverage in 2008 and I paid 630/mo for insurance. 
Being young costs a lot.

m3s 
I am guessing you understand why I would have a hard time letting go of the 330. Also I was just in moose Jaw last week to visit a friend. Our roads in Lloydminster are worse than in Moose Jaw due to all of the oil filed traffic pounding the road to rubble. That is a big part of why I often think about making the 330 a weekend car.


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## andrewf (Mar 1, 2010)

There's nothing wrong with having toys, as long as they don't get in the way of your goals.


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## m3s (Apr 3, 2010)

Using fuelly.com and gasbuddy.com

330i 10L/100km
Civic 6L/100km

Saving 4L/100km for 40,000kms is 1600 liters. $1.20/L is roughly $2000/year

The 90's Honda's are amazing to work on. You can basically mix and match any engine/tranny/chassis/brakes/suspension etc from the salvage yard for very cheap. My Honda took a real beating out west... the bumper cracked up from the winter driving in frozen truck ruts and all the rocks chipped the up the paint. Any road trip added another chip in the windshield etc

Overall though it was a LOT cheaper than paying for gas and insurance in Ontario. For 40,000kms I would miss the E46 seats though for one example. It's like a house, renting saves money but at some point it's worth the cost. As you said at first though, the small savings will compound with time.


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## Fraser19 (Aug 23, 2013)

m3s said:


> Using fuelly.com and gasbuddy.com
> 
> 330i 10L/100km
> Civic 6L/100km
> ...


Yeah that's how I have been looking at it. Also 20 000km of that would be in the 330 as the seasons change so do the cars. The other benefit of this is keeping some mileage off of the 330.


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## tygrus (Mar 13, 2012)

Do you plan on living in Lloyd for the next 30 years? Have you factored in what $50 oil looks like? Probably not. Run those scenarios before you think of diving into buying a house.


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## Fraser19 (Aug 23, 2013)

tygrus said:


> Do you plan on living in Lloyd for the next 30 years?


At this point I am almost certain I will be here for the next 10-15 years. 



tygrus said:


> Have you factored in what $50 oil looks like? Probably not. Run those scenarios before you think of diving into buying a house.


I am not really sure what you mean by this?
I am not planning on buying a house next week or anything just trying to put my self in the best possible situation to buy one over the next two years.


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## tygrus (Mar 13, 2012)

Fraser19 said:


> I am not really sure what you mean by this?


Exactly my point. You haven't seen a reversal in the oil market cause you haven't worked in it long enough. Go see what happened to the oil prices about once a decade since the 60s. Oil has a good probability of being significantly lower within the next few years. On top of that housing is at its peak of all time. This creates a lot of risk for someone working in O&G and wanting to buy a house. When this last happened in the 1980s, people walked away from their homes.


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## Fraser19 (Aug 23, 2013)

tygrus said:


> Exactly my point. You haven't seen a reversal in the oil market cause you haven't worked in it long enough. Go see what happened to the oil prices about once a decade since the 60s. Oil has a good probability of being significantly lower within the next few years. On top of that housing is at its peak of all time. This creates a lot of risk for someone working in O&G and wanting to buy a house. When this last happened in the 1980s, people walked away from their homes.


I *do not* work in gas and oil it just happens to be the main industry of the city I work in.


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## Plugging Along (Jan 3, 2011)

Even if you don't work n ok and gas, but the city's main industry is that, most people are impacted. It has a trickle effect. The same as when O&G are booming the whole place booms. Why do you think places like Detroit are dense mated with he problem the car manufactures had.


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## Fraser19 (Aug 23, 2013)

Now that I agree is true. I am lucky that regardless of the fluctuation of gas and oil prices my job will not be impacted on a level as if I was in gas and oil. I am not sure why this thread keeps going back to the house that I am not planning on buying for at least the next two years.


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## andrewf (Mar 1, 2010)

A lot of us here spend a lot of time thinking about real estate and risk.


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## Four Pillars (Apr 5, 2009)

Fraser19 said:


> I am not sure why this thread keeps going back to the house that I am not planning on buying for at least the next two years.


Because you mentioned in your first post that "I want to buy a house within the next year or two and am doing everything to get myself on the right track."

Buying a house is a big step for most people and when they get that close, pretty much all their financial moves are geared around the house purchase. Your focus seems to be on car insurance, which quite frankly is small potatoes compared to housing costs.

People are trying to help you here.


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## MoneyGal (Apr 24, 2009)

Fraser19 said:


> Now that I agree is true. I am lucky that regardless of the fluctuation of gas and oil prices *my job* will not be impacted on a level as if I was in gas and oil. I am not sure why this thread keeps going back to the house that I am not planning on buying for at least the next two years.


Heyo, O&G family here, and how. You need to think not about how you will *pay for* the house you buy, but the impact of a drop in O&G on the value of the house you are spending your cash on.


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## Fraser19 (Aug 23, 2013)

MoneyGal said:


> Heyo, O&G family here, and how. You need to think not about how you will *pay for* the house you buy, but the impact of a drop in O&G on the value of the house you are spending your cash on.


I can appreciate this kind of thinking. I have put a lot of thought an effort into this. Reason #1 Lloydminster housing market is horrible too much has an oil money. What I have been looking at is all of the small towns 15-30 minuets away from town where I was watching a nice 1985 house 4 bedrooms 3 bathrooms double garage $214,000. By living in the smaller towns I can get a house that is about 10 years newer for 75-100k less. 
Another thing I have been watching is foreclosure sales. There are some very nice homes that can be purchased from 180-230k within a half hour of the city. A bonus to that is my work is located 11km west of the city anyways so a 20 min drive on the open highway is nothing when I compare it to fighting rush hour in Calgary. By starting with that the depreciation should not be as devastating. Regardless of the drilling the Husky refinery and Husky upgrade will keep on producing no matter what. Providing us with some stability in value.

I had worked the mortgage out to 1100/mo the girlfriend would pay probably 500 per month in rent.
When creating a financial plan with a four bedroom house the plan was also to rent out a single room in the basement. In Lloydminster there is a 10 to 1 renter ratio right now. I would rent out that 1 room for 600/month to a very good renter. At 600/mo there would be a extremely long line up of people begging for that room. If I take my time and interview them well it should go off well. Or i could take the easy way and rent it to a co worker. 

That would enable me to make a good amount in extra payments while continuing to build a nice comfortable safety net.

Costs
mortgage 1100 month
gas/electricity 200 month
Property tax 1300/year
Water not sure right now
1400/month

Income
girlfriend 400
Renter 600
1000/month

Difference 400/month 
I know this is an extremely basic workout but it is far more feasible than supporting all costs on my own income.


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## tygrus (Mar 13, 2012)

$200k for a house in a small town outside of Lloyd is not a bargain. The real value of that house when things settle back will be about 1/3rd of that. On top of that, there will be little resale demand there if you decide to bail one day.

Best advice for you is to rent, save, invest and wait out this cycle in housing which will end withing a few years, then you will be able to vultch a much nicer home.


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## Fraser19 (Aug 23, 2013)

tygrus said:


> Best advice for you is to rent, save, invest and wait out this cycle in housing which will end withing a few years


That has always been the plan.

I have said within the next two years. The reality of that is it may take longer than that to buy a house, that is ok. The entire point of the entire thread is to put myself financially in a good spot to buy in the future. 
First things first I have 26,000.00 to pay off before I do any buying.


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## andrewf (Mar 1, 2010)

I'm doing the same thing: building my personal balance sheet until the conditions are right to buy a place. In the GTA, properties are very expensive from a historical price/rent or price/income ratio, I think the balance of risks is to falling home prices and not steeply rising.


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## underemployedactor (Oct 22, 2011)

It sounds to me like you really want to own a house. You are planning to stay in the area for 10-15 years? No one can predict what the O/g environment and the local housing market will be 15 years in the future. If it is a personal goal and will make you happy then you should do it. Life is greater than the decimal points on a spreadsheet. Buy the house, love your gal and you will be living the good life.
My 2 cents.
best of luck to you.


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