PocketCoinage

Automatic transfers can help make your life easier.  They can save you time, build savings slowly, or even pay bills so you do not incur a late fee.  However, if you are not careful, you can potentially find yourself being charged bank fees!

Here are some examples that could lead to over drafting on your bank with automatic transfers:

• Irregular income
• Overspending
• Delayed pay due to a holiday
  • This seems to happen where I work.  If a holiday falls on a Monday, we would not see the money in our account until Friday.  We normally get paid on Thursdays.

Personally, the only automatic transfer I have is right from my paycheck to the 403b.  The only other automatic transfer I would consider is putting money away into savings directly from my paycheck.  This is before I have the chance to spend it!  I would never have an automatic transfer pull from my checking account on a certain day.  I know too many people that have been hit with bank fees from their bank due to automatic transfers.

I perform all my transfers and pay bills manually once I know my check cleared and the funds are available to me.  It takes me about 10 minutes or less every pay period.  This method has probably saved me from countless bank fees over the years.

If you are considering automatic transfers to pay bills or save, be sure you will have enough money on your account when the time comes.  Otherwise you may see some nice bank fees on your next statement.

Have you ever been hit with bank fees due to automatic transfers?

Back in March of 2008, I made the decision to buy a brand new car.  There was nothing wrong with my old car at the time, but I somehow talked myself into wanting this new item.  I made the justification that I wanted to buy a house eventually (I needed the credit history) and that my sister would start driving in September.  Clearly, I needed to get this new car (not really). My 2000 Saturn SL2 had 105,000 miles on it and ran great.

My mind was already made up on what I wanted.  During my trip out to Nashville earlier that year, I rented a 2008 Mitsubishi Galant.  I immediately fell in love with it and had to own one.  It was roomy, economical, and had enough power to get onto the highway without difficulty.  So I went over two auto dealers to see what kind of selection they had.

I had a few ideas in mind when going to the auto dealer:

• Look for last year’s model
  • They usually have specials on left over inventory for the previous year
  • In my case 2009 models were already out, so I was looking for a 2008
• Haggle for the best price
  • Usually with last year’s model, they are willing to sell it for equal to or less than invoice (what they paid for it)
  • Shop around multiple dealers for the same model and year with similar features
• Don’t let them play on my emotions
  • A good sales person knows how to work with people’s emotions
  • If you get fixed on a particular quality, they will try reel you in using that!
• Be willing to sacrifice some features
  • I would have liked a sunroof, but it didn’t make or break the deal
• Shop educated
  • I went online and did my homework about the vehicle
  • This showed them that I had an understanding of the car to limit them pulling any tricks

I went to the first dealer and found a car that I liked.  It had all the features I wanted and they were willing to sell it $1,000 under invoice.  Fair enough, I told the salesman that I would go home and sleep on it.  It was very difficult to walk away from that dealer; they followed me out to the car!  The next day, I went over to another dealer and found a car with very similar features as the other one.  It was missing a few things such as fog lights and traction control, but this wasn’t a deal breaker to me.

Talking with the salesman at the second dealer, they did not offer the same pricing initially.  So I mentioned that the dealer up the road offered me $1,000 under invoice for a similar model.  The salesman talked with his manager and came back with $1,150 under invoice.  Between this offer and the color of the car, I was sold.

Now came the big moment of running credit and financing.  Since this was my first “big” loan, Mitsubishi Motors did not want to offer me a credit line for their current offer of 0% financing.  The dealer was able to find another bank and they offered me 6.69% APR for 5 years; so I went for it.

While paying back this loan, I ran into some interesting situations. The first one was making a principal payment. There were two ways for me to make it:

1. Send it to a different address at the bank.
2. Include it with my normal monthly check and explicitly specify “use remainder as principal payment”.

There were times where “use remainder as principal payment” was checked on the payment stub and they proceeded to apply the remainder of the balance towards next month’s payment (and the month after that)!  I immediately called them to correct the problem.

I also considered paying the auto loan online.  However, there was also no way for me to make a principal payment through their website.  Plus they charged you a “courtsey” fee of $10 to make the payment if you did not have a checking account with them!  Absolute highway robbery.

In the end I wasted $894.83 in interest, but I sacrificed and managed to pay off the loan in less than two years!

What experiences have you had with car dealers and auto loans?

After my most recent posting about Bad v. Good Debt, I got all fired up about paying off my student loans as quickly as possible.  I mean, I only wasted $1,520.48 in interest alone!  Before this posting, I really did not run the numbers to realize how much money I was losing.  I told myself there had to be a way I can reduce the payoff time to less than two years.  Currently, I am on target to pay off the loan in about four years.  However, four years is not going to cut it with my vision for the future.  I needed to put the numbers down on paper and see the results.

So last night I sat down to work on an updated budget spreadsheet that worked with my varying paycheck.  I found out that by slightly modifying where each dollar goes (house fund, emergency fund, etc.), I am able to boost my school payment from $440 to $700 every month.

How did I increase my monthly payment by $260?  I was able to:

• Judge my base take home pay and budget based on that
• Slightly cut back on how much money each item receives
• Cut back on a few unnecessary items (wants)
• Use the extra money in my pay exclusively for debt reduction

This alone should bring it down to around 24 months.  However, I’m going to take this a step further in an attempt to knock it out sooner.  Since I save bi-weekly, this creates an extra “payment” every year.  For example, I put away money for the mortgage every pay period.  By the end of the year, I will have an extra payment to use for pure principal.  For a short period of time, I’m going to be using this extra mortgage payment to knock out my student loan debt.  I’m also going to allocate some money from my tax return to reduce this debt.  By going this route, I am on target to pay off my student loans by December 2012 (15 months).  Who knows, if I come across some money, it may be less than 15 months!  Unfortunately, once all is said and done, I will end up losing another $800 in interest.