Buying the Necessities

Shopping for Food

 Involves making comparisons to help decide what to shop for and where to shop.  Only comparison shop as necessary by weighing time and transportation costs.  Advertisements and coupons can help save time and money.

 Club warehouse stores generally offer the lowest prices, but their items are only sold in large quantities.  Club warehouse store : store that carries a limited number of brands and items in large quantities and is less expensive than supermarkets.  Convenience stores carry few items, have highest prices, but are open more hours.  Convenience store : store open 16 to 24 hours a day, carrying a limited selection of relatively higher- priced items.

 Brand names are well known nationally or regionally.  Some supermarkets or wholesale stores have their own brand names known as private labels or store brands.  Generic products have no brand name.

Clothing Choices

 Style  Buying current styles, which tend to change each year, can be expensive because new clothes must be bought annually.  Buying classic styles, which are more basic and do not change as much, will help your clothes last longer, saving money.

 Durability  Durability : ability of an item to last a long time  Service Flow : amount of use a person gets from an item over time and the value a person places on this use  Way to measure durability of a clothing item.  Cost of Care  Factor in the cost of care involved in clothing that must be hand washed or dry cleaned versus machine washable.

 Clothing costs have decreased significantly over time.  70 years ago, a good suit cost about $40 and it took the average consumer 80 hours of work to make enough to buy the suit.  Today, a good suit sells for around $500 but it take the average worker 40 hours to afford the suit.

 Clothing sales generally happen at the end of the season.  Bargain fanatics buy items just because they are on sale.  If you buy an unnecessary item because it’s on sale, you may not be saving money at all.

To Rent or to Buy

 Avoid spending more than you can afford.  You will need the cash down payment and closing costs.  Closing costs : fees involved in arranging for a mortgage or in transferring ownership of property  Be aware of points or fees paid to the lender.  Points : fees paid to a lender and computed as a percentage of a loan

 Many different types of mortgages and financing packages are available.  Mortgages involve down payments and interest.  Mortgages are paid in monthly installments.  Property tax, homeowners insurance, and mortgage insurance are often included.

 Standard Fixed-Rate Mortgage  Interest rate and monthly payments remain the same over the term of the mortgage- usually 15 to 30 years.  Flexible Rate Mortgage  Interest rate and monthly payments float up of down along with interest rates in general.  Rates can increase by no more than a few percentage points over the life of the mortgage.  There is often no limit on the amount of decrease.

 Federal Housing Administration Mortgage  The FHA will insure the entire amount of its mortgages.  This added security makes it possible for borrowers to obtain a larger loan than they would with an uninsured mortgage.

 Graduated Payment Mortgage  Interest rate is usually fixed for the life of the mortgage.  Monthly payments are small at the beginning and increase gradually over the years.  For people who expect their income to increase steadily

 Veterans Administration Mortgage  These loans can be obtained only by qualified veterans or their surviving spouses.  The interest rate is generally lower than for other mortgages.  The VA guarantees a large percentage of the loan.  Loans with now down payment are possible under the VA program.

 Renters usually sign a lease.  Lease : long-term agreement describing the terms under which property is rented  Be aware of the clauses in your lease; read it carefully.  Tenants have a right to use the property for the purpose stated in the lease, and a right to privacy.

 Tenants must pay rent on time, take care of property, and notify landlord if major repairs are needed.  Some tenants must place refundable security deposit in case of damaged property or unpaid rent.  Security deposit : money a renter lets an owner hold in case the rent is not paid or an apartment is damaged.

 Tenants must give written notice if leaving prior to lease’s end, which can result in fees and fines for breaking the lease.  Landlords must provide minimum services and obey building and safety laws.  Rent-control laws limit the amount a landlord can charge in rent.

Buying and Operating a Vehicle

 Registration Fee  Registration fee : licensing fee, usually annual, paid to a state for the right to use a car  Normal Maintenance and Repairs  The amount of normal maintenance- oil and filter changes and minor tune-ups- depends on the amount the car is driven and how carefully the owner maintains the car.  Major repairs are not normally expected and are often expensive.

 Extended Warranty  One way to guard against paying for major repairs is to buy an extended warranty.  New-car warranties generally protect owners for all major repairs except damage caused by improper use.  Depreciation  Depreciation is a decrease in value of the car as it ages.  A car loses value every year even if it not driven.

 Most states require liability insurance be purchased before an automobile can be licensed.  Liability insurance : insurance that pays for bodily injury and property damage  Rates cannot vary too widely because states set limits on the rates that companies can charge within state borders.

 Cost of insurance varies based on age, sex, and driving history.  Young people almost always pay higher rates.  Single males in the age group have the highest accident rate of all drivers and pay the highest rates.  Married women aged have the fewest accidents and the lowest rates.