Making New Holes in a Swiss Cheese Budget

So Jaime and I have basically resigned to getting a brand new car. We don’t want one– we don’t. But, we can’t stand to buy a used car. Either we’ll overpay at a dealership for a car of questionable past (they haggle 8 hrs a day, I haggle 8 hrs a decade,– who has the advantage there…?), or we’ll get a fair price on a private party sale for a car of a questionable past.

We just can’t do it. We can’t sink $10,000 into a used car that has no warranty, no maintenance records, and no provable accident history. With our luck, any used car we buy will need brakes ($300), tires ($300), radiator/transmission fluid replacement (Uhh, $200?), a timing belt (who gets those replaced? People who have had them break, that’s who) (Uhh, $400?), sparkplugs/general tune-up ($125), fuel filter ($10), air filter ($20), and likely tons of other wear items that I’m forgetting, but also require regular replacement.

Add those expenses up: In a best-case situation on a used car with around 75,000 miles on it, we’ll have to pay another $1,355 to own the car over the course of the first year. And that doesn’t include costs for any repairs (our luck = broken car + $1,000 to fix it). And it also doesn’t include the fact that, over the life of a car, gas mileage slips. A car that gets 30mpg today might only get 28mpg when it’s 5 years old.

The numbers just don’t add up for us. We need a dependable, fuel-efficient car that isn’t going to cost an arm and a leg to own. We have no choice– we have to buy a new car.

So anyway, before I tell you all about the car we intend upon buying (a post for a different day), I want to get to the real issue of this post: hidden budget drains. I’m talking about items that you buy because you’ve always bought them, but you’ve never really added up the cost.

Here’s my example. I drink Coke. I know, it’s terrible for me. It’s not even that good, really– it tastes fake. But that’s neither here nor there.

So I drink Coke, about two 12-packs a week. At $4 for a twelve pack, I spend about $416 per year on Coke. Yes, $416 a year on Coke. Insane. That works out to 2.8 cents per ounce, rounded up.

In an effort to scrounge up the budget room to buy a brand new car, I am going to try to commit to stop drinking coke. In it’s place, I will drink iced tea– mint flavored and home-brewed, my favorite.

Here’s the price breakdown:

Ingredient Cost Gallons Made Cost Per Gallon
Mint Teabags (20) $3.00 5 gallons $0.60
Regular Teabags (100) $3.00 25 gallons $0.12
Sugar (4lb)(9 Cups) $3.00 18 gallons $0.17
Water (1 gallon) $0.10 1 Gallon $0.10
Total Cost Per Gallon $0.99

Note that I estimated the cost of the items. I believe the mint tea is usually about $2.79, the regular tea is about $2.49, the sugar is about $2.49, and I have no idea how much the city charges us so I took a guess on the cost of the water.

When I do the math on that, I find that the cost of the tea is $0.008/ounce. Yes, eight-tenths of a cent per ounce.

Compare that to coke. $0.028 per oz vs $0.008. Coke is about 3.5 times more expensive than iced tea.

Add that up over a year:

14,976 oz Coke: $416.00
14,976 oz Tea: $119.81

That means that over the course of a year, I would spend $296.19 less on beverages, or a reduction in beverage cost of 71.2%

So, with the down payment we’re looking at on this car, our monthly payment will be around $200 for 4 years. If I simply switch from soda to tea, over the life of our loan, we would save $1184.76. Divided by our monthly payment and we end up paying the car off about six months earlier.

Of course, that doesn’t factor in for loan interest (we’d pay less interest if we paid the loan off six months earlier, thereby saving even more money). It also doesn’t figure in the tax on the beverages, and obviously the more expensive the beverages, the more tax is paid. So we’ll save even more money there.

Crazy, isn’t it? All I have to do is switch from soda to tea and a 48 month loan becomes a 42 month loan. Plus, I end up with a better-tasting, less-unhealthy beverage.

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