Does money often feel like it’s in short supply? Is “the latte factor” to blame? You know, that $5 fair trade double-shot skinny soy vanilla mocha espresso daily habit of yours? Yeah, that’s probably not helping. But the bigger factor is likely that hunk of metal on wheels that gets you to and from the coffee shop each day.

According to AAA, you could easily be spending over $9,000 per year on your car. And that’s if you’re driving a mid-size sedan such as a Toyota Camry or Ford Fusion. The auto club’s annual “Your Driving Costs” study says an SUV will cost you closer to $12,000 annually.

According to a MarketWatch article about the study, those costs include depreciation, gas, maintenance, insurance, finance charges, fees, and more. They don’t include car washes, parking, or parking tickets. For those intent on totaling all the costs, they also don’t include the cost of your time spent in traffic (although it seems unfair to blame that one on your car) or the portion of your mortgage devoted to your garage.

How can you drive car costs down? MarketWatch suggested four steps:

Don’t buy more than you need. Driving a small car will cost you about $2,000 less per year than driving a medium size care.

Don’t buy new. The single biggest line item on AAA’s spreadsheet is depreciation. Buy a vehicle that’s one or two years old and much of that pain will already have been borne by the first owner.

Read the manual. While it’s important to keep up with the maintenance of your vehicle, it’s also important not to over­-maintain it. See how often the oil really needs to be changed by reading that little book in your glove compartment.

Ask about insurance costs. A low sticker price doesn’t always translate into low insurance costs. Call your agent before you buy.

We have other suggestions in our article Nine Keys to Buying a Car Without Busting Your Budget.

How have you saved on the high cost of cars?

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

A recent article by money manager and investing writer Barry Ritholtz caught my eye because it was uncommonly clear headed about the media and the markets. In What’s Your Stock Market Story?, he made a point we have belabored for years:

Whenever we see any sort of disruption in markets an explanation usually follows. The headlines will explain that “Markets are going up/down because of this good/bad thing.” News anchors will solemnly intone why the volatility is significant and what it means for one thing or another.

None of these casual explanations can withstand close examination. They are often things that have existed for months or years, and so can’t account for what happened yesterday.

I’m not sure why the media’s cluelessness is difficult for so many investors to grasp. I’ve been knee-deep in investing for 44 years, and it only took the first few months to recognize that the media, when reporting on market activity, was always scrambling for an explanation as to why things happened as they did. And they always came up with an “answer”—because that’s what they’re paid to do. On Day Two, the “answer” may occasionally be the exact opposite of what they said on Day One. No wonder newcomers find investing so perplexing.

There’s an essential dishonesty in reporting their guesswork with such apparent conviction and confidence. But no matter. They’ve managed to take a fool’s errand and turn it into an entire industry.

Of course, all of these narratives serve a singular purpose: They give the appearance of meaning and rationality to actions that are meaningless and irrational. The daily action in the markets is a form of noisy, random, Brownian motion. If you are looking for a clear reason as to why stocks did what they did, then you are in the wrong line of business.

Exactly. And that’s why I spend zero time reading the news for the whys and wherefores of what’s driving the market action. I don’t care so much about the causes as I do the effects—the changes in fund prices (which translate into momentum scores). The media reports, generally speaking, are theories; the fund prices are facts. So we lean on strategies that reflect the facts on the ground, strategies such as Upgrading and DAA.

Back to Ritholtz:

Markets move up and down for no apparent reason. We have spilled plenty of ink and generated billions of pixels explaining why people want and need reasons to explain these movements. The human love of narrative is a dangerous cognitive failing that constantly leads investors astray.

So, to avoid being led astray, ignore the “narrative” of media reporting in your decision-making. You shouldn’t care why a fund or sector is rising/falling, only about the result, that is, the impact on its performance momentum.

Ritholtz’s article generated a few critical responses (“That column generated more e-mail than anything I’ve written…”) and so he followed it with a rebuttal, explaining why, in his view, the commonly offered explanations for the recent selloff aren’t particularly persuasive because they’ve been known for sometime and, after all, the market was setting new highs only two weeks ago. His conclusion is right on.

Count on humans to try desperately to make some sense of this, looking for patterns that fit preconceptions, and clinging desperately to a comforting narrative.

I prefer the cold, hard truth of reality: We haven’t the slightest idea what drove the daily action yesterday any more than we have the slightest clue as to what’s going to drive it tomorrow.

If you have the constitution to get used to this truth, you will become a better investor.

If you’re ready to start taking a fact-based approach to your investing, sign up for a web membership to Sound Mind Investing. At just $9.95 per month and with the freedom to cancel any time, it’s an extremely low-risk/high-reward investment in your financial future.

Austin Pryor

By Austin Pryor

Austin Pryor has three decades of experience advising investors, and is the founder of the Sound Mind Investing newsletter and website. Austin lives in Louisville, Kentucky, with Susie, his wife of 46 years. Two of his sons, Andrew and Matthew, work with him at Sound Mind Investing. A third son, Tre, is a RealtorŪ in the area.

This week’s picks for the best in personal finance from around the web—a day early this week as we encourage you to focus on more important things on Good Friday. Happy Easter!

The 5 biggest estate-planning blunders (CNBC). See if you’re making any of these mistakes.

Three reasons the economy has some spring in its step (Fortune CNN). Reasons for optimism in the midst of the volatility.

Tips to managing spending in retirement (NY Times). Meeting the challenge of connecting a pool of money many people can’t fully understand to a time period they can’t quantify.

Screaming from the rooftops: when insurance won’t cover repairs (Main Street). With new restrictions being added, check your policy to make sure you know what’s covered.

Where does the money go? (Forbes). Having just tallied your tax bill for 2013, now you can have a look at what you got for your money.

And from the blogosphere…

On the road to riches and diamond rings (The Reformed Broker). Managing the pain associated with stock market gains.

Bear market excuses (Bloomberg View). The continued search for a stock market narrative.

Clements & Zweig: Greatest financial challenges (WealthTrack). Two of the best financial journalists tackle some of the most important financial questions.

Vanguard managed payout funds and safe withdrawal rate strategy (My Money Blog). A closer look at a mutual fund that acts like an annuity.

Investors trying to beat the system invariably are disappointed (The Sketch Guy – a NY Times blog). Why it’s best to look at stocks and bonds for what they really are.

We’d love to hear your responses to any of the above. To weigh in, just meet us in the comments section.

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

For the past 20 years, a research firm called Dalbar has been comparing mutual fund investors’ actual returns with the returns of the stock market. And for all of those 20 years, it has found that investors underperform the market. The key question is, “Why?”

According to Dalbar, it’s largely because investors are their own worst enemies. Instead of staying in the market, they move in and out, selling when declines become too steep to stomach any longer, and getting back in only after the market has already made up considerable ground.

The gap between the market and the typical fund investor used to be much greater. When Dalbar conducted its first study, it found a gap of over 10.5 percentage points between the market’s average annual return over the most recent 20-year period and that generated by the average fund investor’s portfolio. In its most recent study, that gap narrowed to just a little over 4 percentage points, an improvement it credits to “investor experience and education.”

Still, the company says such improvement has stalled in recent years, and it no longer believes education can bridge the gap: “It is now past the time for the investment community and its regulators to understand that the principle of educating uninterested investors about the complexities of investing is unproductive” (emphasis mine).

It went on to recommend a four-part approach “to relieve the decision making burden that has been put on investors.” Specifically,

  1. Replacing investor’s unrealistic expectations with, you guessed it, realistic expectations;
  2. “Controlling investor exposure to risk;”
  3. Monitoring investor risk tolerances; and
  4. Replacing the “mindless warning” that ‘past performance does not guarantee future results’ with probability-based market forecasts

All of which sounds a lot like education to me!

The Dalbar study has its share of critics. Harry Sit, for one, who blogs at The Finance Buff, believes the Dalbar study overstates the behavior gap. Some of the performance gap, he argues, can be explained by how the market performed during the period studied.

My two biggest take-aways from all this are:

First, whether the gap between the market’s performance and that generated by the average investor’s portfolio is 4 points or 10, and whether all of that gap or only a portion of it can be attributed to investor behavior, we investors are, in fact, often our own worst enemies. The more we decide on a trustworthy strategy that’s appropriate for our age and risk tolerance, and stay with it, the better off we will be.

Second, I couldn’t help but be disturbed by the phrase “uninterested investors.” Investing for future needs—whether funding our later years or helping our kids pay for college—is too important for people to decide they’re not interested in the topic. The solution won’t be found in making decisions for people or forced wealth redistribution. Long-term, it’ll be found largely in providing age-appropriate, engaging, practical financial teaching starting as early as age two and continuing through college, and in fostering a culture of personal responsibility.

What are your thoughts on this?

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

A little something different for the start of this holy week. The following Easter meditation appears in this month’s Sound Mind Investing newsletter. For those who are not subscribers, we thought you’d be interested in reading it as well. From our families to yours, many blessings to you especially during this important week.

The awesome beauty of nature. The innocence of childhood. The security of a world at peace. The exuberance of romantic love. The joy of living life freely and fully.

All of these are noble themes. Great literature, art, and music have all been inspired by them. They capture our emotions and imaginations. They challenge our values and influence our priorities. They reflect universal longings of the human spirit. But, although uplifting, they fall short of the noblest and greatest theme of all.

A grander theme runs through all of human history, from the instant of creation to this very moment. This theme explains why we’re here, why things happen as they do, where the world is headed, and why the world, as we know it, must eventually end. It underlies everything that is, and is the reason for everything that is not. It is the incomparable glory of our God, surely the greatest theme in all the universe!

Jesus Christ was God’s glory incarnate. His life was the glory of God on display.

“The Word became flesh and made his dwelling among us. We have seen his glory, the glory of the One and Only, who came from the Father, full of grace and truth” (John 1:14).

Jesus was “man as God intended.” This is what it means to say that Christ led a perfect life—He lived a life of total dependence, moment by moment, upon the Father. He was never the source of His own self-sufficiency. That is why God’s glory and radiance were uniquely reflected through Him.

“I tell you the truth, the Son can do nothing by himself; he can do only what he sees his Father doing, because whatever the Father does the Son also does… By myself I can do nothing; I judge only as I hear, and my judgment is just, for I seek not to please myself but him who sent me…. When you have lifted up the Son of Man, then you will know that I am the one I claim to be and that I do nothing on my own but speak just what the Father has taught me. The one who sent me is with me; he has not left me alone, for I always do what pleases him” (Various verses from the Gospel According to John).

On His own, Jesus said He could do nothing. On our own, Jesus said we can do nothing. If we will rely upon and obey Christ in the same way He relied upon and obeyed the Father, then He will be to us what His Father was to Him—an infinite source of wisdom and strength.

“I am the vine; you are the branches. If a man remains in me and I in him, he will bear much fruit; apart from me you can do nothing… If you remain in me and my words remain in you, ask whatever you wish, and it will be given you. This is to my Father’s glory, that you bear much fruit, showing yourselves to be my disciples” (John 15:5-8).

We draw strength from Jesus through His spirit who lives within us. Isn’t it astonishing that although we have no glory of our own, we can have the very glory of God living within us? It is only through His life-giving power in the believer that we are able to begin living a life pleasing to Him.

“If you love me, you will obey what I command. And I will ask the Father, and he will give you another Counselor to be with you forever—the Spirit of truth. The world cannot accept him, because it neither sees him nor knows him. But you know him, for he lives with you and will be in you….Whoever has my commands and obeys them, he is the one who loves me. He who loves me will be loved by my Father, and I too will love him and show myself to him” (John 14:15-17, 21).

The Christian life isn’t a religion; it’s a relationship. Living with Him, and getting to know Him more and more, is the essence of the Christian life. The more we know Him, the more we love Him. The more we love Him, the more we want to surrender to Him. And the more we surrender to Him, the more we become like Him. That is the nature of Christian maturity.

“Now the Lord is the Spirit, and where the Spirit of the Lord is, there is freedom. And we, who with unveiled faces all reflect the Lord’s glory, are being transformed into his likeness with ever-increasing glory, which comes from the Lord, who is the Spirit” (2 Corinthians 3:17-18).

Austin Pryor

By Austin Pryor

Austin Pryor has three decades of experience advising investors, and is the founder of the Sound Mind Investing newsletter and website. Austin lives in Louisville, Kentucky, with Susie, his wife of 46 years. Two of his sons, Andrew and Matthew, work with him at Sound Mind Investing. A third son, Tre, is a RealtorŪ in the area.