Next to a house, a car is probably most people’s largest purchase and spending category.  That makes it one of the best opportunities to save money.  I think the best way to save money on a car, besides not having one at all, is to drive a hoopty.

There are several advantages to having a hoopty.  The first is you won’t lose much to depreciation.  New cars often depreciate 20-40% in the first couple years.  A hoopty won’t depreciate much because it is already so cheap.  I plan to drive my hoopty until it only has salvage value so I’m not worried about depreciation at all.

Another advantage is that I was able to buy my car with cash.  This allowed me to avoid paying interest on a loan.  Also, since I didn’t have a loan I was able to get liability insurance only.  This is a significant savings over comprehensive insurance.  My liability insurance runs just $20 a month and that is for more than the state required minimum coverage.

Still another advantage is I don’t have to worry about the appearance of my car.  This car has picked up various door dings and other minor dents and scrapes.  Since this car is a hoopty they don’t bother me at all.  If I had a new car these would have upset me and possibly required expensive repair.  Also besides washing the car to remove road salt there isn’t really any point in washing and detailing the car which reduces that expense.

Some hooptys also have the advantage of being green.  My car gets 29-30 mpg doing pizza delivery.  That is better than most new cars.  It is estimated that production of a car contributes 10-20% of its total lifetime CO2 emissions.  By keeping the car on the road longer that percentage is reduced.

Many people think that all of these advantages are wiped out by the need for repairs.  The need and cost of repairs can be reduced by by buying a car known for reliability.  Knowing an honest, good, and inexpensive mechanic is also extremely helpful.  My car has needed several repairs but has always started for me.  Even if you buy a new car there is a chance of being stuck with a lemon.  With a new car you have a warranty but that lasts for a limited time.  If you trade your car in every time the warranty is about to expire you drive up your cost of ownership even more.

Even with the added cost of repair the cost of my hoopty compares very favorably to a new car.  I paid $1750 for my car and have driven it over 80,000 miles.  I estimate that I have paid about $1000 in repairs on the car not including standard maintenance.  If my math is correct this comes to 3.4 cents per mile.  If you buy a new car for $20,000 you’ll have to drive it hundreds of thousand of miles without any added repair expense to come close to that figure.

I know that hooptys aren’t for everybody but if you can put aside your vanity this is one of the best ways to reduce your expenses.

I’ve discussed this before in my post Saving on Minimum Wage which was included in The Great Money Challenge‘s post More on How to Live on Minimum Wage.  This post features several posts about minimum wage.  I highly recommend reading How to Get Wealthy on Minimum Wage  by Early Retirement Extreme.  I just started reading Early Retirement Extreme last week and it is one of my favorite blogs.  Through what some would consider extreme frugality he has managed to become financially independent in just five years.

You should also check out Multi-Millionaire Made on $11/hr Job at Consumerism Commentary.  This is more than minimum wage but still a very modest salary for becoming a millionaire.  All these posts show how frugality can help you get ahead while making a small income.  Of course if you’re making a modest wage you should also look into ways to increase your income.

I rarely drink wine myself but since many PF bloggers do I thought I would share the results of a couple of studies I recently read about.

In the first study wine tasters were served the same wine in a fancy bottle and an ordinary bottle.  The wine in the fancier bottle was rated much higher.   He also conducted a test where experts asked their impressions of a red and a white wine.  The red wine was actually the same as the white wine but tinted with food coloring.  None of the experts noticed it was a white wine.

In the other wine study volunteers were asked to rate their enjoyment of five wines.  Two sets of wine were identical but labeled differently.  The $5 and $45 wines were both the $5 actual price wine.  The $10 and $90 wines were both the $90 actual price wine. The fifth wine was identified by its actual $35 price.  The $90 wine was the favorite and the $5 was the least favorite.

Two weeks later they were asked to rate the wines without the price information.  They rated the $5 wine better than the $90 wine.  This shows how price can affect how people perceive wine and other things.

I guess the lesson from the studies is put your cheap wine in a fancy bottle and put an expensive price tag on it and you will enjoy it more.

Someone on a Yahoo group I belong to recently asked if it was possible to live on $1000 a month.  Since millions of people in the U.S. do live on this amount or less it is definitely possible.  Below is a sample budget of how I would live on $1000 a month.  I won’t be working during the months of February, March or April and plan to keep my expenses at $1000 a month or less for that time period.

The rent, health insurance, car insurance, and phone are all actual, fixed monthly totals.  The utilities amount is less than what I’m paying right now but it is well above what I’ll be paying in the summer.  My food expense isn’t fixed but it is usually right around $100.  The savings for irregular expenses covers car registration, maintenance, and any other predictable but irregular expenses. I purchase my health insurance through eHealthInsurance(Update: I now get my health insurance through Healthcare.gov) which has lots of relatively low cost plans available. My entertainment budget of $100 could easily be cut but I’ve been spending more than that lately.  The amount budgeted for gasoline is also probably too high since it should come down significantly now that I’m not working.  I threw in $30 for miscellaneous to cover any little expenses not covered by the previous categories.  This is a realistic budget for me and should be achievable for most people that live in an area with similar housing expenses.  You can look at my expenses for last April to compare how my actual expenses match up with this budget.

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