Yesterday, Frugal Dad asked “Is it easier to lose weight or pay down debt?” One thing that stands out to me his is comment “…if we focus on one plan or the other we seem to have success, but we struggle when trying to work on them concurrently.” This one comment made me think about an article I had to read for class, ” Slow Down, Brave Multitasker, and Don’t Read This in Traffic,” published by the New York Times on March 25, 2007. Though it focuses on dangerous multitasking, one paragraph seems to corroborate Frugal Dad’s observation…

The human brain, with its hundred billion neurons and hundreds of trillions of synaptic connections, is a cognitive powerhouse in many ways. “But a core limitation is an inability to concentrate on two things at once,” said René Marois, a neuroscientist and director of the Human Information Processing Laboratory at Vanderbilt University.

While attaining healthy debt levels (i.e. $0) and attaining a healthy weight are distinct and generally done at different times of the day, they are also both rather abstract concepts requiring concentration on the details of attainment. I would also posit that trying to reduce debt and eat healthy can often times clash, since the healthier alternatives are often times , though not exclusively, more expensive than the not so healthy alternatives. As an example, take a look at your local bread selection, you’ll notice those 100% Whole Grain breads are generally more expensive than the plain old white breads, which I really question, since whole grain flours just need grinding, while white flour goes through grinding; sifting to remove hulls, etc., and bleaching. Now, I said not all healthy alternatives are more expensive, I say this because where I live, fat free milk is cheaper than whole milk. This again is counterintuitive to what you’d expect based on the level of processing, since by nature the only processing whole milk goes through is pastuerization and homogenization, while fat free milk must be filtered and pasteurized.

As for the answer to the question, I think debt reduction is easier. Reducing debt accomplishes one of our basic emotional needs, security. Having that emergency fund and not worrying about covering debts in unforeseen events makes us feel more secure. On the other hand, weight reduction goes against one of our biological needs, “When will I next eat?”

Last night Hu$tler wrote about how he has been hustled in the past in his article, How I Got Hustled. Instead of posting a comment, I decided that I’d share my experiences in being hustled.

Both of my experiences pertain to a single event, the purchase of my current car. I went to a local used car dealership, voted the best in the area, to check out their selection and ended up with an overpriced car with an extended warranty that turned out to be worth less than the paper it was printed on. I will refrain from using the name of the dealership, but here are my stories.

In September 2005, I was looking to replace my 1986 Plymouth Reliant Wagon, since it needed a new exhaust, tires and a few other high cost repairs. The dealership offered me a Taurus sedan with lots of bells and whistles, which tempted me enough that I made $100 deposit to reserve it over the weekend, so I could think about it. I didn’t go unprepared, since I had the foresight to purchase the latest print edition of Kelly Blue Book (KBB). I found the car in the book, looked up it’s retail value and made an offer slightly above the book value, to which the management effectively laughed in my face and offered a higher price, but still lower than sticker. At this point I made the deposit and left. By Monday morning, I had decided that I didn’t want the car, so I went back to tell them in person. While I was there, they took me to the financing department where I was convinced to buy my current car, a 2002 Dodge Intrepid, for a whopping $12,885.35, including rolling a couple debts that ultimately came back, the warranty and various taxes into it. This car is has a value of about $4,275 for private party in current condition, according to KBB. I’ll admit that part of it is my fault for not taking the time to KBB the car.

Now, roll forward to 2006. In the spring of 2006, I discovered that the A/C had failed during the winter (I checked it immediately upon purchase). When I went to have it fixed, I found out that the warranty company wouldn’t cover it, since it was caused by a leak. Ok, not a huge deal, but definitely annoying. What makes things worse is the stupidity of the company in August of 2006, when I had to have the transmission replaced… They wanted to pay $1,000 for a USED transmission that might have a 30 day warranty, instead of forking over an additional $825, which ended up on a credit card, for a REBUILT transmission that had a 12 month/12,000 mile warranty, meaning they were guaranteed not to have to pay for another transmission for a year.

Yesterday I posted a comment to Help a Reader: Calculating Loan Options over at Free Money Finance. In this comment, I mentioned a spreadsheet I have and that I was going to share it. First, though I have to defend the rate choice I made.

I don’t have a home and have yet to go through the whole loan process for one, so I don’t KNOW what goes into the closing costs. I chose a no closing cost mortgage rate because of my lack of detailed knowledge on the subject. Every portion of a percentage point costs more for the loan, so it’s always best to go for as low a rate as you can get (without risking a rate hike, such as with an ARM).

Now for the spreadsheet. I’ve uploaded it as both Excel and NeoOffice/Open Office spreadsheets, the Excel version should work, but the spreadsheet was created with NeoOffice.

Amortization Spreadsheet in NeoOffice/OpenOffice

Amortization Spreadsheet in Excel

I’ve actually modified these to a slightly easier to use format.  All you really have to do is enter your information in the top left corner and it will do the rest.  You can override the payment by just entering the actual payment in place of the calculated payment or, if a single payment is different, you can just enter it into the payment column for the correct payment.