Milking the Dollar$

I have always loved living downtown.  Being able to walk or bike to the places I need to go is not only convenient, but it’s also cost effective.  However, if I ever had the misfortune of living in the suburbs, I’d definitely look into slugging.

Slugging  (also known as “casual car pooling”)  is a unique and cheap way for individuals to commute into and out of urban areas.  It involves waiting in a “slug line” at a designated point and effectively hitch-hiking downtown.  

One might wonder why anyone would bother to pick up someone they don’t know?  The secret is that the driver and the “slug” actually form a symbiotic relationship.  You see, the individual slugging gets a free ride into the city, while the driver (when he or she picks up enough people) gets to use the carpool lane.  Thus, it’s a win-win situation for everyone.

Below is a link to a video on Youtube about slugging.  As you will see, it’s hosted by Jeff Yeager himself (if that tells you something about it’s cheapness).  Enjoy!

Slugging 101

Photo courtesy of Kristin Smith

Last Friday, the sudden death of pop icon Michael Jackson put news agencies and internet discussion forums into a frenzy.  Worldwide, thousands mourned the loss of the so-called “King of Pop” with saddness and disbelief.   Amid all the media reports of his passing, it was revealed that this globally-recognized entertainer had something in common with millions of his lesser-known fellow Americans.  Like so many of us, Michael Jackson was awash in debt from years of not living within his means. 

Jackson, however, didn’t find himself so far in the hole overnight.  As a recent article in The Economic Times pointed out, despite outearning the rest of us, years of exuberant spending and poor financial decisions prevented the pop superstar from acquiring any wealth.  Not only was he not financially secure, Michael Jackson had a handful of creditors. Rewind 30 years, no one would have never seen this coming.

Road to ruin

A former star of the Jackson 5, Jackson rose to super-stardom with the advent of MTV.  In 1982, his album “Thriller” made him the most popular entertainer of his time and would later go on to become the 2nd greatest selling album ever.  It was later followed by “Bad” which sold another 22 million copies.  In 1991, he went on to sign a $65 million record deal with Sony Records.  During this same time period, he even became the star of Walt Disney’s “Captain EO” which enjoyed a 12-year run.

Although, he was able to generate multiple income streams worth millions of dollars each, Mr. Jackson was also making grave errors which would doom him.  In 1985, he acquired the rights to ATV Music with opened up a major revenue stream; however, instead of saving his money and investing wisely, he used this revenue to finance an unsustainable lifestyle.  A decade later, he would forever lose these rights after a merger with Sony result in them being sold.  With a declining cash  flow and two legal matters regarding child molestation, Jackson soon found himself in a world of hurt.

Instead of making lifestyle changes in light of his evolving financial situation, Jackson put the nail is his coffin by continuing on as usual.  He went on a borrowing spree borrowing all the cash he could to shore up an annual spending deficit of $20-30 million per year.  These debts soon evolved into further lawsuits, and by the time a heart attack took his life at 50 years of age, Jackson had accumulated an estimated $400 million in debt.

Lessons from a superstar

Now don’t go thinking I’m changing this blog into a celebrity gossip column!  I brought up Michael Jackson’s money situation for a reason.  The main one being that his story validates the following financial truths which I believe to be ”chiseled in stone and carried down the mountain.”

1. Income does not equal wealth:  In the 1980’s and 1990’s, Jackson’s earnings equaled $50 million per year.  Given that, he still died hundreds of millions of dollars poorer than any homeless man you would see sleeping on the street.  This is a perfect example of a rule that holds true in many aspects of life: A poor defense negates even the greatest offense.
2. Nobody is immune to debt:  Just as you and I can easily let credit cards and home equity loans get ourselves over our heads, bad investments and “living like a rock star” can quickly lead our idols to financial ruin. I once read that the teaching professions boasts one of the highest per capita rates for millionaires in the country.  No, teachers don’t make a lot; however, as a group a high percentage of them tend to be financially savvy. 
3. Mindless consumption = certain downfall:  Through our desire to accumulate ”stuff” we not only poison the earth, but we also poison our pocketbooks.  True happiness arises from relationships and personal accomplishments.  As they say, some of the poorest people in the world are amongst the happiest. 

Final thoughts

In the end, Michael Jackson taught us a lot about our finances through his untimely death.  Celebrities are just like us and suffer through the same vulnerabilities.  Thus, as I leave you with a few things to ponder:  Do I live within my means?  What are my means?  Do my material possession make me happy?  What really makes me happy?

Thank you taking the time to read this post.  Have a great week!

It appears Fat Wallet member “Spac3d” has discovered a way to cancel your Alltel contract without paying the dreaded early termination fee (ETF).  For those of you who don’t know,  most cell phone companies require you pay an ETF if you want to get out of your contract before it is up.  Most range between $175-$250.  For example, when I was with Alltel, the fee was $200.  Therefore, if you want to get out of your Alltel contract, now is the time!  Just click on the link above to get the original thread.  Good luck!

In case you’ve been living under a rock, you have probably already heard about the so-called “Cash for Clunkers”bill.  For those of you who haven’t, let me be first to inform you that Congress has just passed this $1 billion bill that gives Americans an opportunity to get rid of their gas-guzzlers in place  of more fuel efficient rides.  This indeed can save money in the long run, but not everyone will benefit.   Keep reading to find out if you should take advantage of this offer.

Cash for Clunkers

Since I figure most of you are only vaguely familiar with Cash for Clunkers,  I will break down the key components. Cash for Clunkers runs from July 1st to November 1st of this year.  Basically, buyers who purchase a new car during this time period will be given a voucher for $3500 if they forfeit a vehicle built after 1984 that gets at least 4 mpg less than the new car.  If the fuel efficiency exceeds 10 mpg, the voucher increases to $4500!  However, don’t go rushing out the door to fuel up that old beater that’s been the yard just yet, because potential vehicles must also have been registered for at least 1 year prior to purchase.

What you should consider

Before jumping all over this deal, ask yourself the following questions.  They might change your mind one way or another.

• How much is my clunker worth?  Remember this is a government voucher, not your typical trade-in.  Here, being less valuable actually works in your favor.  For example, if you have a beat up, barely running Ford F250 that is worth only $500, you’ll get credit for $4500 (assuming your getting a +10 mpg replacement) instead of say $250 from the dealer if you were trading-in.  Thus, the more trashed and inefficient your clunker, the sweeter the deal to you!
• Does this vehicle hold any sentimental value to me?  If you have a so-called clunker, chances are it has been with you for awhile.  Like the family dog, for some people that old car becomes a part of the family.  It may be hard to give up, but many people can part with their “baby” knowing it is going to a good home.  However, there are no happy endings for these clunkers, because they will be crushed and recycled. 
• Can I fix up that clunker instead?  Not every old car gets bad gas mileage or is unreliable.  If your clunker has been faithful or can easily brought back into service, it may make more financial sense to actually keep it.  Remember, even if you are getting a $4500 voucher, that new Prius will still set you back $22,000 + tax.  Depending on how much more gas mileage it gives you, it may be cheaper to just keep the ole’ rust bucket.

The $3300 new car

To show you why I believe Cash for Clunkers is worth it’s own post, I decided to find a little research to see how I could use to get a new car for an amazing price.  While cruising the forums at Fat Wallet, I came a across a link to a great deal on an 2009 Nissan Versa.  As you can see, the dealer is running a special on this vehicle for $7800.  Since it is new, I could possibly get it for $3300 + tax if I had a clunker eligible for the $4500 voucher.  Now, that’s what I call an upgrade from the old 86 Suburban!

Final thoughts

I must say I am already a fan of Cash for Clunkers.  Unfortunately though, I don’t have any beaters that would qualify for this offer.  However, if you are lucky enough to own a qualifying hunk of junk and can find a deal like the above-mentioned Nissan, I would recommend giving this serious consideration before it expires. 

Thank you once again for reading and have a great weekend!