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A word of advice: Don't obsess over your credit score. Sure, it's important, but ultimately it's a number for lenders, not for you. A less-than-perfect credit score isn't the end of the world. If you struggle with compulsive spending, it's far better to cancel your accounts and take the hit to your credit score than to risk getting buried deeper in debt. The bottom line: Be smart with money and your score will be fine.

Final Thoughts on Credit

The credit card industry earns billions of dollars every year because they've made it easy for folks to spend more than they should and because people don't understand the rules of the game. Remember: Your credit card company is not your friend; they're hoping you screw up—that's how they make their money! In fact, the industry's term for somebody who pays bills on time is "deadbeat." (Nice, huh?)

But millions of people have found that if they play by the rules, credit cards make their lives a little easier. Your cards will never make you rich, but used wisely they can free you to focus on the things that matter most in your life, and earn you a few rewards in the process.

Here are the things to take away from this chapter: Use your credit card as a tool, not a toy; keep tabs on your credit report; and don't obsess over your credit score. And remember: If using credit cards gives you a negative cash flow (The Power of Positive Cash Flow), they're hurting you, not helping you.

Chapter 9. Sweating the Big Stuff

"Count the dollars, not the pennies."

—Elizabeth Warren

While it's important to save money on everyday stuff (see Chapter 5), it's even more important to save on big purchases. By making smart choices on big-ticket items, you can save thousands of dollars in one blow.

In the next few chapters, you'll learn how to save on big stuff like insurance, housing, and transportation. This chapter gets you started by looking at money-saving tactics for buying a new or used car and booking vacations.

Counting the Dollars

In Chapter 1, you learned that to be happy, you should focus on the most important things in your life before you worry about the little stuff (see the box on Living a Rich Life). Turns out the same is true of your finances.

In All Your Worth, Elizabeth Warren and Amelia Tyagi write, "Savvy money managers don't spend a lot of time looking for ways to save a few pennies. They charge right ahead to the big-ticket items, looking to make high-impact changes in the shortest period of time. They don't sweat the small stuff."

As I mentioned in Chapter 5, by making a few small changes to my daily habits, I reduced my spending—and boosted my cash flow—by almost $200 a month. But as powerful as frugality can be, it's saving on the big stuff that'll really improve your cash flow.

You want to make sure you don't negate your daily scrimping and saving by making silly choices on big things that'll burden you for years. It's great that you fuel up at the cheapest gas station in town, say—but if you're driving a $63,000 Hummer H2 that gets 10 miles to the gallon, that small economy doesn't make much of a difference.

Obviously, you only get a few chances in life to save big on stuff like a home or a car. Because you so rarely make financial decisions involving tens (or hundreds) of thousands of dollars, it's extra important to be smart when these choices come along. The next chapter looks at ways to save money on housing. In this chapter, we'll focus on other big-ticket items like cars and travel.

Tip

To learn ways to save money on furniture and appliances, head to this book's Missing CD page at www.missingmanuals.com.

Buying a Car

First things first: A car is not an investment. In fact, it may be one of the dumbest purchases you'll ever make. Many financial experts say this, but almost nobody listens because Americans love their cars.

The average new car loses 20% of its value in the first year you own it, 15% in the second year, 13% in the third year, and 12% in the fourth. So