UpMoney

For People with Money

How to Buy a Used Tesla

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This Tesla P85 originally cost over $100,000. It's available used for $59,000.

This Tesla P85 originally cost over $100,000. It’s available used for $59,000.

Take a test drive of a Tesla and you’ll think it wise to short the oil companies. It’s an incredible driving experience that doesn’t require a drop of gas.

The downside is that the car of the future is expensive. It’s easy to top $100,000 for a Tesla after adding features.

The good news is that used Teslas are starting to come on the market, often at discounts of 30% or more off the original price.

This is a first-hand guide to buying a used Tesla.

Do you really need a used one?

Before we drive into a tutorial on used Teslas, ask yourself this: Can you afford a new one instead?

Believe it or not, you can get a brand new Tesla for just $62,500 after the $7,500 government rebate.

That’s for the basic 70 kWh battery with no options. Even without options, this might be a better choice for some people than buying an older, used Tesla. The new cars come with upgraded hardware and small fixes that are superior to Teslas that are even a year or two old.

A basic Tesla is still likely better than any car you’ve driven, but Tesla sells basically everything as a feature. The $70,000 entry model car doesn’t even come with leather seats! [Read more…] about How to Buy a Used Tesla

Don’t make these 2 mistakes when calculating your Personal Burn Rate

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burnrate
If you’ve ever worked in a startup or overheard a conversation at a Silicon Valley coffee shop, you are probably familiar with the term burn rate.

Burn rate refers to how much money a startup is “burning” through each month. The burn rate lets you calculate how much time the startup has before it must turn a profit or raise more money.

For example, if a startup has $1 million in the bank and a $100,000 monthly burn rate, it has ten months to survive. It needs to make something happen before ten months is up or it will run out of money.

People have a burn rate, too. Hopefully you make more than you spend. In the startup analogy, you’re profitable. You have more cash coming in than going out, so you aren’t heading to zero in your bank account.

But what if something happened? What if you lost your job? Your business failed? You get sick? Or what if you just want the flexibility to take time off and not let money dictate your career decisions? Or you want to start a company and won’t get paid for a while?

If your income suddenly dropped, how much time would you have before you ran out of money? That’s the idea behind a Personal Burn Rate.

You need to avoid these 2 mistakes

It might be easy to figure out your personal burn rate, especially if you track your spending in Quicken or Mint. But there are two mistakes a lot of people make when calculating their number.

1. Only looking at the last month or two of expenses as a baseline. There are a number of expenses that are incurred just once or twice a year, such as vacations, furniture and insurance. You also probably spend more money around holidays such as Christmas. You should look at your past twelve months’ of spending and average it to get your monthly number. This will help you capture your seasonal and uncommon expenses. Once you get this twelve month number, just divide by twelve to get your Personal Burn Rate.

2. Dismissing a particular expense as a one-time event. “I went on an expensive vacation last year, so I shouldn’t count that in my regular spending” or “The car needed a new transmission, but that won’t happen every year.”

You shouldn’t ignore these because there’s always something.

Maybe it’s not a transmission this year, but it’s a car accident. Maybe you don’t go on an expensive vacation but have to do a house repair. Perhaps you have an unexpected medical expense.

Hopefully, looking at a year of expenses softens the impact of some of these “one time” expenses. The point is that there are always one-off expenses, even if in a different category of spending. You should include them in your overall spending calculations.

Although calculating your Personal Burn Rate is the goal, it’s handy to separate your average monthly expenses into categories. This is important as you look at ways to trim your burn rate.

I’ll discuss categories in a future post.

Make high interest loans with peer-to-peer lending

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Please read this important update about my actual results with LendingClub.

It’s hard to get decent returns on cash these days. Banks are paying you virtually no interest on your savings, and then turning around and lending it to others at a substantial markup.

What if you could remove the bank from the equation and lend money directly to people looking to borrow?

That’s the idea behind peer-to-peer lending, which is now often called marketplace lending.

I became fascinated with this business model nearly a decade ago when Prosper.com launched. The service was kind of like an eBay for loans. People would post their story and why they wanted to borrow money, and lenders could fund their loans.

Unfortunately, Texas residents like me weren’t able to fund loans on these marketplaces back then due to state regulations. Earlier this year Lending Club, a publicly traded competitor, opened its doors to Texas residents looking to make loans. I decided to take the plunge…but the model has changed a lot from the early years. [Read more…] about Make high interest loans with peer-to-peer lending

10 12-month CDs paying 1.0% or better

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percent-smallThe past several years have been dismal for savers. Many banks are paying just $1 of interest per year per $1,000 deposited.

Is it worth shopping around for higher rates? It depends a lot on how much you have socked away in savings, and how little interest your bank is paying. I searched the web to find 10 banks offering 12-month CD rates of 1.0% or better as of 10/19/15:

ELoan – 1.30% with a $5,000 minimum deposit.

CIT Bank – 1.30% with a minimum $1,000 deposit. The bank also has a high yield savings account paying 1.05%.

Synchrony Bank – 1.25% APY with a balance of $2,000 or more. The bank also offers a high yield savings account paying 1.05%.

Sallie Mae – 1.25% with a $2,500 minimum. This is the student loan group.

BankDirect – 1.21% on a $10,000 minimum deposit. BankDirect is a division of Texas Capital Bank.

Discover – 1.15%. They don’t just offer credit cards!

Ally Bank – 1.05% APY. If you think rates are going to go up sooner or you might need to pull your cash, Ally also has a No Penalty 11 month CD with a 0.87% APY.

Nationwide – 1.05%. Bumps to 1.10% with $100,000 or more.

FirstIB – 1.0% with a $1,000 minimum.

GE Capital Bank – 1.0%.

Now that I’ve done the homework for you, does it make sense to lock your money up for a year at these rates? I think it depends on the delta between the CD rate and your savings rate. At such low rates, you literally need to consider your time when it comes to opening a CD. Is it worth spending an hour opening an account, and a bit of extra time to handle the taxes, that will earn you an extra $200 a year before tax?

That’s your call.

Happy Money: How to get more enjoyment from spending

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happy-moneyIt’s natural to think that the more money you make, the more you can spend, and thus the happier you will be. But as you make more and spend more, you quickly discover a disconnect in this logic.

Happy Money is a recently-updated book (Elizabeth Dunn, Michael Norton) about the science of spending and how to make yourself happier when you spend. The principles are simple, yet we often overlook them. I’ll refer back to these principles frequently on this site, so here they are:

1. Buy Experiences. The best way to look at this is to consider the opposite first. Odds are, when you bought your current car, you were pretty stoked about it. You drove it just to drive it, to experience it. After a couple years you got less satisfaction out of it and looked at it as more of a mode of transportation.

Compare that to some experiences you’ve had, whether they were vacations or evenings out with friends. Do you have a memory or two that you remember often?

This is why you should buy experiences. Experiences give you joy well after you’ve bought them (if they even cost money). Physical goods eventually don’t give you happiness. You end up upgrading, enjoying it for a period of time again, and then continuing the cycle.

I hadn’t really thought about this before reading Happy Money. I used to think spending money on experiences was throwing away money since you had nothing to show for it when you were done, as opposed to buying a physical item.

2. Make it a Treat. Simply: if you get something too often, you take it for granted.

Remember the first time you flew first class and thought it was awesome? After your tenth time, you probably appreciated it less. You start nitpicking the first class experience and the food.

Perhaps a couple flights in economy will make you appreciate first class again.

3. Buy Time. Spend money on things that save you time, so that you can do things you enjoy with your time. One great and reasonably-priced timesaver: a Roomba vacuum.

4. Pay now, consume later. Since this site is geared to people with savings, I’m going to assume you aren’t sitting on a mountain of credit card debt. But the principle of paying now and consuming later is still relevant.

The key is to separate the payment process from the use of any major purchase, be it a vacation or a car. Buy your flights a couple months in advance. Consider paying in advance for a vacation rental. When it comes to to enjoy it, you won’t have to think about the cost.

Growing up, I was told to delay the payment process as long as possible to earn interest on the float. That’s not very relevant when bank accounts are paying less than 1% interest!

5. Invest in Others. In other words, help someone out. Donate time or money.

It is amazing how good it feels to help someone out. I’d argue that spending time helping someone feels much better than writing a check, which is a topic for another day.