The CFA points to this gap between rich and poor auto insurance customers’ premiums as a major reason why an estimated one-quarter to one-third of all households in this economic category cannot afford auto insurance and therefore don’t carry it, driving illegally. The high costs lead to what the study termed “disparate impacts.” After all, not all cities have the infrastructure for public transportation that can meet the needs of all citizens. Those who can’t afford car insurance and therefore don’t buy a car might be missing out on opportunities – regular employment and other chances to increase their income – that those with more money can easily take advantage of.

The CFA study was co-authored by Stephen Brobeck and J. Robert Hunter, who are slated to bring their findings to a meeting of state insurance commissions next weekend, urging them to address coverage discrepancies. Brobeck and Hunter suggest that one solution to the problem would be for insurers to offer lower premiums to those who have a clean driving history and a record of safety, regardless of income. Brobeck, the executive director of the CFA, cites the fact that, in some areas, responsible low-income drivers are being required to spend upwards of one thousand dollars a year for liability insurance that is no more coverage than what is offered to rich subscribers, and is unfairly priced to boot.

Per the study and the Bureau of Labor Statistics, low-income car owning households pay more than seven hundred dollars in annual premiums and moderate-income families typically pay more than one thousand dollars. There is often no such thing as comparison shopping for lower rates in these families. Much like the deserts of mortgage lenders in low-income urban communities, there may simply be no access to insurance offices for these people who most need it. Take, for instance, Washington DC. Of eighty insurance offices in the district, only three are located in the neighborhoods with the lowest incomes. Over half, on the other hand, are located in high-income areas.

The study indicts insurers with being “well aware that upper-income families are much more likely to own two or three expensive cars, with comprehensive coverages, than are LMI [low-to-middle income] households, who often purchase just minimum liability coverage on an old car.” The study uses an example to illustrate discrimination in insurance policy offerings: a single male from the city of Compton, California (a low-income area), aged under thirty years, who has been licensed for between six to eight years and drives between seventy-six hundred and ten thousand miles per year with just one traffic ticket and one at-fault accident, would be charged between $1,628 and $2,353 for basic liability coverage and between $5,670 and $7,500 for standard coverage including collision and comprehensive. This is per data gleaned from the California Department of Insurance. On the other hand, in at least several states including Arizona, Texas, and Arkansas, and probably in more, some major insurers charge individual consumers lower premiums for standard liability coverage than for minimum liability coverage. It appears that these insurers are discriminating against purchasers of the minimum coverage, who are disproportionately LMI car owners.

Insurers cannot prove that the ZIP code in which drivers live constitutes any particular risk to justify higher insurance prices, or that there is any correlation between geographical location and more accidents or claims. Still, they clearly discriminate against consumers not only on the basis of where they live, but on the basis of occupation, education, and credit rating as well.

If you want to get out of your upside down position with your car loan, you have a few options. Could you refinance your auto loan? Could you possibly sell the car to recoup the upside down amount (which may be an option if your negative burden is not that high)? If the answer to both of these is “no,” then you need to consider how you came to be upside down on your loan in the first place.

The major way that cars lose value is when their owners pay too much for them in the first place. Cars depreciate like crazy, and especially within the first three years that you own one. If you buy a car and make only a low down payment – or no down payment at all – then you take on a loan for almost the whole purchase price of the car. From the moment you drive the car off the lot, however, you have a lot less in value on the car. If you buy a twenty thousand dollar car, for instance, and put only a thousand dollars down, you are underwater as soon as the back tires roll off the lot. The car is worth only sixteen thousand dollars as a used car in great condition, which is technically what you are now driving.

Not overpaying is the first step in avoiding negative equity. Unfortunately, it’s all too easy to overpay when you buy a new car if you don’t do your research. Once you have overpaid, there is little to be done about it. Your overpayment doesn’t make your car worth any more on the fair market, either – if you paid twenty-four thousand dollars for the twenty thousand dollar car listed above, you are not only more severely upside down, but you have an even more major problem. You can’t always blame yourself, though. Some people are not at all dumb or lazy, but get taken advantage of by an unscrupulous car dealer.

One mistake that you CAN avoid when buying a new car is adding too many fancy extra options to your car. You will run up the sticker price of your car, but probably do very little to up the value. Fancy rims, deluxe tow packages, and doodads like heated seats are a great way to end up even more upside down even faster. Another pitfall is when you are upside down on one car loan and roll the negative equity into your next car loan when you decide to trade in. Dealers may not even tell you that they are rolling the old debt into your new one, but your loan will be that much higher.

You can fall easily into these traps when buying a new or used room, unless you are clever enough to be very careful and protect your equity. Let me tell you something: it is close to impossible to avoid being upside down at one point in your auto loan. Many people aren’t even aware when it’s happening to them; it is so much a granted when dealing with financed vehicles. It may not even be a problem at first – it’s if and when you can no longer afford the loan that negative equity really rears its ugly head.

If you are upside down on your car loan, you may not need to immediately give the problem your attention. It’s not like this is great news – especially if you are upside down because of overpayment – but if you are able to pay your bill on time each month and got a fair deal on your loan, then it’s likely that the expense of your loan and the value of your car will even out within five years or so. A temporary imbalance is a yellow light, not a full-scale emergency… that is, of course, assuming that you don’t lose your job, have your hours cut, or otherwise become in some way unable to make your car payment in full.

How, then, can you get out of an upside down car loan? The answer, of course, is something you know already – you need to somehow pay down the excess debt. This may mean that you need to make some sacrifices or work harder. I assure you, however, that your effort is well justified. If you take strides towards paying down your debt, it is indeed possible to escape a loan that you could otherwise not afford. Your first step, if you can do it, is to attempt to move the excessive car debt to a credit line. There are many people who disagree with using credit cards any more than necessary, but a credit card isn’t anchored to your ride to and from work. If you can’t afford a five hundred dollar monthly payment on your car but have open credit on a card, moving your debt to a move manageable rate on a credit line may buy you time and save you cash. Of course, the key to success in this case is to move your money without buying more trouble. Don’t move auto debt to a credit line unless you know for a fact that you can commit to making lower payments on a credit line. The best card in this scenario is one with a low introductory APR, on which you can pay down as much of the debt as possible before the introductory period ends. You could also consider peer-to-peer lending courtesy of a network like Prosper or Lending Club. Another option is a local credit union, which may be able to provide a personal loan at a rate worth considering.

Another idea to consider when faced with the concept of negative equity? Raising some cash to pay off your excess debt. One way to do this is to sell some stuff. Here’s where the sacrifice comes in. You could dispose of big items like extra furniture or jewelry – especially with the price of gold these days – or you could get eBay-savvy and sell several smaller items to raise money as needed. Don’t exclude the idea of unloading the car itself, even though this won’t cover your whole overage. Getting rid of seventy-five hundred bucks of a ten thousand dollar loan, for instance, does make the balance a lot more manageable. Your car is only going to continue to lose value, keep in mind. If your inability to pay for your car has come to an extreme level, you should consider everything possible to keep yourself financially afloat.

Another way to get extra money, of course, is by getting a part-time job. If you need more income, this is in fact the time-honored way to get more cash. Keep in mind that this need not be a permanent situation, just a temporary set-up until you’ve dealt with the negative equity on your car loan. This situation might even be the push you need to start your own small business or find ways to make extra cash on the side – and if you keep a part-time job for the long term, you will always have that much more income!

Avoiding the problem of negative debt in the first place is the key to keeping yourself out of trouble. To this end, you need to make better choices from the get-go. Cars are always going to depreciate rapidly. As long as they have engines inside them, they’re going to drop like a rock in price. Car dealers know it, and they almost always make more money when you finance. When you’re ready for your next car, keep a few tips in mind so you can avoid being upside down on a car loan ever again. First of all, don’t finance a car purchase if you don’t have to. Don’t take out a loan if you can help it – buy a sturdy used car for which you can pay cash. It will likely mean that you need to settle for an older car. Still, it’s worth it to not be a slave to a car payment. We all dream of being able to pay cash for a new car, but know that it may not be possible. It will always be smarter to buy what you can afford. After all, wealthy people don’t take our car loans. These folks know the value of paying cash for your auto and driving them until they wear out. it your goal to stop the cycle of going from one car payment to another. If you break that cycle, you’ll be one step closer to achieving independent wealth. What a concept – getting ahead instead of just getting by!

When you shop for a car, it might help to imagine that you are buying a house instead. This might give you the mindset needed to save up at least twenty percent as a down payment on your new car in cash. A solid cash deposit at the table is the best way to avoid fallout from the epic depreciation that your car will experience in the first few years you have it. After you buy the car, do everything you can to pay more than the monthly minimum. If you absolutely must take out a loan, try to get a five-year loan so your monthly payment will be small. Then, if you can, pay up to double the minimum payment. You’ll pay off more of the principal earlier, which means you’ll build up less interest. The faster you pay off the loan, the better. Plus, a low payment gives you some wiggle room if your income is someday reduced.

Another way to beat the evils of depreciation is to do your part to keep your car in pristine shape so that it holds the maximum value possible. Don’t skip those oil changes! Don’t put more miles on it than you absolutely need to. Keep up with all scheduled engine inspections, fluid top-offs, and other preventative care. Take care of the paint job with frequent cleanings. Keep the interior clean and tidy. The better you treat the car, the higher the resale value will be. Make sure you can check off “excellent condition” when you look up the value, and you will milk every penny out of your auto.

Another pretty foolproof way to save money is to keep tabs on your use of electronics. Many people in this environmentally-conscious day and age already do this, but make sure that your household is in the habit of unplugging appliances whenever possible… not just turning them off. Apparently, unplugging the TV instead of just switching it off can save a lot of electricity! When not in a room, switch off the lights and the fan. It takes a little while to get in the habit, but you will soon be doing it without even thinking. Also, consider the use of a programmable thermostat to control your A/C and heater usage. Yes, you may need to shell out a little bit of money to replace the one that you have, but the savings can really justify the initial cost before too long. At the very least, educate yourself on what each appliance uses and unplug a few of them. You might really be amazed how much money you can shave off your electric bill, which is a major source of spending for many households.

You can also save money on your vacations, if you are willing to put in a bit of work. Some financial “experts” would argue that you should not indulge on a vacation if you are truly trying to live an austere lifestyle, but I argue back that getting away every so often is a necessary part of saving our sanity in the busy lives that we lead. There can be no realistic doubt, of course, that vacations are also a huge drain on the family finances. Did you know, though, that you can cut the cost of a vacation significantly by planning and booking ahead of time? Well ahead of when you plan on leaving town, be sure to bookmark travel sites for finding inexpensive airfare, hotel etc., and book at least two weeks in advance for the greatest savings. Make sure that you always weigh the price of driving somewhere versus taking a plane when you have the time to do so, since fluctuating gas prices can really change things in this issue.

As a final lifestyle tip towards saving money, do yourself a favor and keep your distance from lavish, high-roller friends who will set a bad example and encourage you (either to your face or subconsciously) to break your budget habits in an attempt to keep up with their free-wheeling spending. You know the type of folks I am talking about: they buy a new car every other year – or worse yet, lease it; they have large screen TVs, iPads, iPhones, and every other conceivable electronics gadget from the day it hits the market; they eat out at fancy restaurants every other night, and they generally live way beyond their means. Please do yourself a favor and keep your distance from these folks, no matter how nice they may seem. It’s not that these people necessarily mean you any harm, and it’s not that they are bad people – it’s just that jealousy is a bear, and there’s no need to expose yourself to discontent and longing when you are making positive steps towards improving your financial situation and staying on the right track. What’s more important – your friends or your peace of mind? Keep in mind that all their goodies now won’t mean much in a few decades when you have a well-funded retirement fund and no debt.

With all this said – I’m not necessarily saying that you should take all these tips to heart and follow each and every one. Just as too much work and not enough play can make Jack a dull boy, so can too much frugality suck the juice out of life. Being too cheap can make both you and the people around you very miserable – and yes, there is a difference between thrifty and cheap. So, pick out a few tips at a time that will work for you and make them a habit, before deciding if you can incorporate more money saving habits in your daily routine. You may really go with some of them, you may lose some and pick up others. It may take some time for you to really get in the groove of what lifestyle habits you want to stick with to help you realize your personal goals of financial solvency and freedom from debt. It’s worth the time and effort that you expend. Any steps you take towards a financially-healthier future will pay dividends in the long run!

Let’s talk about your car for a moment. I know that most people don’t want to hear this, because most of us enjoy having a shiny, late-model ride, but you really should aim to keep your car for as long as possible. Sure, you can buy a new car every two years in an attempt to Of course, when you have an older car, you always need to be mindful of the point where it is no longer frugal for you to hold on. There are numerous online resources for calculating the balance between the money spent on repairs versus the monthly payment on another vehicle. As long as the maintenance costs are low, it makes sense to drive an old car for as long as possible.

To that end, make sure that you are staying on top of regularly scheduled maintenance on your vehicles. Sure, it can seem tempting to blow off an oil change or belt replacement if funds are tight, but these are not savings that will pay off in the long run. Please, for the sake of your wallet, do not skimp on or forget to do regular oil changes. Remember to check the air in your tires often, and to have the proper tools to gauge the correct pressure. Always use the grade of fuel that the owner’s manual recommends. These small acts can significantly lengthen the life of your car, giving you years of use that well justify the minor expenses of keeping your auto running smoothly.

If your trusty ride finally shifts over into the category of a junker, or if your vehicle is totaled in an accident, you will ultimately need to get another car. Here’s a pro tip: don’t buy a new car. In almost every case, a pre-owned vehicle is the right way to go. A used car has already weathered that tremendous initial depreciation, whereas a new car depreciates significantly the moment you drive it out the dealership, but the loan you take out will still be for the new, marked-up price! Is the new car small really worth thousands of dollars in negative equity on your auto loan? I’m thinking that the much-coveted “new car smell” just isn’t a worthy trade-off. Pre-owned cars that are only a few years old with low mileage are the best bargains, especially when you pick them up at a dealership that has maintenance guarantees on them for the first several years. Of course, getting a good price on your new-to-you car is just as important as making the decision to buy used in the first place: you absolutely must learn to negotiate with car dealers. This is not the place to go into those details, but there are plenty of resources to help you settle on a fair price when you deal with car dealers.

Another reliable way to save some money is to give your car a break and either ride your bike or carpool whenever possible. Unlike using gas and oil, which both cost lots of money, the power of your own two feet is free – making a bike your best (not to mention healthiest) bet. Unfortunately, many cities in America simply do not have the infrastructure to accommodate bicyclists and/or pedestrians, and it is almost impossible to get by without a car. That said, just because you have a car does not mean you have to use it every day. Sharing rides to work with a few coworkers (or sharing with a spouse, should your schedules work out) will save both gas and carbon emissions, which is another move that is not only frugal, but good for Mother Earth.

If you are a stay-at-home type (like me!) and watch a lot of DVDs for entertainment, go ahead and splurge on an online DVD store membership. This is another case where a small initial outlay of cash turns into a very worthy investment in the long run. After all, membership to online movie stores like Netflix or Blockbuster Online can save you a lot of money compared to buying DVDs or renting it from a local store. Buying a movbie the week it comes out – when they are usually on sale, granted – will set you back fifteen to twenty dollars a disc. Heaven forbid you prefer BluRay, because then you are really looking at a pile of cash to build even a modest collection! And renting discs from a regular video store will often cost you about five bucks apiece, which is still a ripoff. True, if you order a movie online with Netflix, you will need to wait to get it in the mail. I can tell you as a Netflix user of years, however, that if you watch a lot of movies at home, then you can easily get into the habit of ordering ahead of time so you always have something at home. I simply set my queue with plenty of movies I’m interested in, so there is always something appealing to watch. And honestly, it takes maybe two days for Netflix to get me a given movie. The wait is well worth the money saved, in my humble opinion. As a second option: if you are patient and your library has the resources, check to see if they have a movie section. You won’t get anything very new, but they are free – and you can’t beat that for frugality!

Before you buy anything expensive at all, you should be running a price check. Ideally, you can set a price alert for the item(s) you want and track the prices so that you can grab a great deal when it comes along. Frequently available online coupons make it even easier to save some money. This is especially true while purchasing any electronics. You should never just jump into a purchase without doing research into how you can best bring down the price of your chosen item.

We touched on this earlier with regards to groceries, but it’s a general rule that you should always avoid impulse purchases. Do you really, REALLY want something? Make it a personal rule that you need to wait at least twenty-four hours before buying it. You might be surprised that, after a “cooling off” period, that item no longer seems all that necessary. If you really still want it, at least you have had a bit of time to check prices and make an informed decision to buy it at the best possible price. But I know that I am often surprised by how seldom the time and effort does not seem worth it to go back for that item I so desperately assumed I couldn’t live without!

Another area where we spend a lot of needless cash is on bottled water. Yes, water is best for your health, and it’s great to drink a lot of it. Some of the healthiest people I know are never without their trusty cup of H2O. On the other hand, bottled water is anything but healthy for your wallet. We tend to like drinking water in this format because it is easy to tote around and helps prevent spills. Still, there is no reason – financial or environmental – that you need to be constantly buying and then trashing water bottles. Consider saving those bottles to refill with tap water a few times. You will buy water a lot less often, yet won’t give up the convenience. Of course, the best buy of all is a BPA-free plastic water bottle that you fill time and time again! If you dislike the taste of tap water, invest in a Brita faucet filter or pitcher. In time, you could save yourself a lot of money!

Speaking of plastic: you should stay far away from credit cards with annual fees. While credit cards with their cash back bonuses and reward points are a great way to save some money, annual fees are a way that banks greedily suck the oomph out of your wallet, even if you are diligent and pay your balance off each month. When you are weighing your options on which plastic to use, always opt against a card that carries an annual fee. It’s not as if there is a shortage on rewards cards that DON’T make you pay for the privilege of using them, so it’s not as if the use of an annual fee card is ever justified. Just say no!

Another great way to save money painlessly is to part ways with your landline telephone. Unless you have small kids in the house (who need to be taught to dial 911 in an emergency) or old people, you are very likely safe with just your cell phone(s) and no landline. I personally have been without a traditional telephone for over seven years now, and I don’t ever miss it. Our internet, like that of so many other folks out there, comes via cable. Now that our older children are toddlers, I suppose we may need to reintroduce a landline… but it will be with regret on my part, because I honestly don’t think a landline is useful ninety-nine percent of the time. I know that my parents still have a landline, because they have a fax machine, and I have literally never seen them use it in the last half-decade.

Here’s a real money saver: stop buying books. Yes indeed, my friends, stop giving Amazon your business. This is another of those no-brainers, but books are always free at the library. Most libraries are well-stocked, and in this digital age, you need not even be restricted to just the book supply at your local branch! In my county, for instance, the library branches are connected electronically. I can request and reserve any book in the system, and have it brought to my local branch for pickup. It’s super easy and convenient. There have been very few titles that I couldn’t obtain in recent years by this method.

Do you buy trash bags/bin liners for your small trash cans, like the ones in your bathroom or office? Shame on you. That four or five dollars a box could be easily saved by using plastic grocery bags to line your trash. No, that bag will not work for your big kitchen trash can – but there’s no excuse to buy expensive bags for little cans! Remember that we are literally talking about something that is bought solely to throw away. Reusing plastic grocery bags anywhere you can in the home is not only a great way to save a few bucks over the course of a year, but it is also vastly better for the environment in the sense of keeping extra plastic out of landfills.

Let’s talk about debt for a moment. If you want to truly save money in 2012, there is no better way to start than to commit to consolidating and eliminating debt as quickly as possible. Every month that you carry debt on your credit cards, you are paying interest that need not come out of your budget! Of course, paying down debt is not an overnight process. If you carry balances on your cards, make your first priority to consolidate your debt to a lower interest and to pay it off as soon as possible. Why spend your hard-earned cash to make the financial institutions rich? It can seem like a burden to eliminate our debt, but it we keep focused on our goals, it can really help the progress.

Towards the end of avoiding debt in the first place, be sure that you are paying your bills on time every month and avoiding late fees like the bubonic plague. To this end, make sure that you are organized with your regular monthly bills. If you can, try to automate your payments to prevent any forgotten bills. Nowadays, the majority of utilities and other recurring bills can be set to be charged to a credit card or deducted from a checking account these days. If not, know that many banks offer free bill pay programs. It’s easy to set up, with step-by-step instructions to baby even the most tech-ignorant consumer out there. In short, there is no excuse not to take advantage of these services and risk getting late fees! Fees, after all, are just money thrown away. If you choose not to take this advice and you do happen to forget a bill legitimately, gird your loins and make a polite phone call to the company in question requesting that your fee be waived as a first-time offender. If you are sweet and genuinely have a clean payment history, many companies will do right by you on this one.

Another account to watch carefully is your checking account. Be on the lookout for any low balances that could potentially lead to overdrafts! Overdraft fees are high, even with new laws restricting what banks can charge as penalties, and they will take a giant shark bite out of your paycheck. If you use your checking account often or have some bills that are paid automatically from your checking account, be aware of the balance and avoid overdraft fees. The best way to prevent trouble is to kick it old school and utilize a paper checkbook in which you record all your transactions. Use your online transaction log to balance your checkbook every week or so (depending on how often you use it), and you will avoid trouble.

The next tip is one that I myself started using halfway through 2011 with great success: making a list before going shopping. This has saved my butt at the grocery store, and really put the kibosh on all those midweek trips to pick up “just one or two things” that ended up costing thirty or forty bucks every single time. Look, there’s a reason that “impulse buying” has the name and reputation that it does. It’s not your fault specifically; humans are just hardwired to resist the temptation to purchase extras while shopping. Without a list you will buy items that you simply do not need. It’s so much easier to stay focused and on-task with a list – take it from someone who does it! Plus, you will curtail that annoying feeling of going to the store and forgetting everything you came for. I myself plan meals out for two weeks when I go shopping, and write down every ingredient I will need. I shop off that list (plus other essentials like snacks, non-edibles, etc.) and aim for zero extra trips out during the next two weeks. I have managed to make it work! Just know that getting all that you need in one trip can help avoid another unnecessary trips (no wasted gas money) and temptation both.

Speaking of grocery shopping: do you purposely go shopping when you have plenty of time to linger, knowing that it can be a time-consuming errand? Well, stop that! The pros advise you to actually go grocery shopping when you know that you have somewhere to be in a few hours. It sounds counterproductive, but grab that list (that you already wrote out, naturally!) and run to the store when you are in a hurry. What you are aiming for is a very speedy in-and-out trip with little time to hang around and get tempted to buy things you don’t need. Try going after work, knowing that you need to get home to make dinner. Or even on a night when you know that your favorite TV show is coming on!

Another important way to save money is by minimizing waste. To that end, while we are still talking about groceries, be sure to watch out for expiration dates on perishable goods when you are out shopping. This sounds so elementary, but think about it: do you always remember to check the expiry on that gallon of milk before you throw it in your cart? What if you grab one that is set to expire in just a few days, and you tend to need your milk to last a week or so? This also goes for fresh meat, eggs, yogurt, spreads, frozen goods, and items from the deli or bakery. Sure, you can probably use the item a few days outside its sell-by date and be just fine – but is that really how you want to play the risk to your family? Sky-high medical bills for food poisoning can wreck your grocery budget for years! Best not to risk it and to pay close attention to these things before you leave the store.

If an item is not going to expire, however, don’t be afraid to buy in bulk. In fact, say the pros, you should embrace this form of buying when you find something for a great sale! Items on which it makes sense to stock up in large quantities include breakfast cereals, anything tinned or canned, staples like rice/beans/pasta, soda, toothpaste, bodywash, shampoo, and that holy grail of coupon queens everywhere: toilet paper. In terms of these items, buying a membership and shopping at Costco, Sam’s Club etc can save you quite a bit of money, provided you stick strictly to your shopping list when you shop at these places. If you have a big family that can burn through these items reasonably fast so that you don’t need to store it forever, all the better.

You will be in good company as you commit yourself to saving money in 2012. The aftermath of the Great Recession and continued instability in the housing market has made it so that many, many people are finding themselves needing to tighten their belts. As a result, the “market” for frugality has blossomed! With hundreds of TV shows, websites, and books dedicated to achieving financial freedom, there has never been a better time to try and bail yourself out of debt. You just have to know the best avenue to get there.

First of all – stop eating out! There is no reason that you can’t cook at home often, even if both the adults in a household work. Don’t set your expectations too high to start with: begin with the modest habit of cooking at home once a week and slowly increase the frequency until you find a balance between saving money and getting stressed out. After all, the goal here isn’t to give yourself a nervous stress breakdown. One great way for working professionals to make homemade dinners without too much work is by embracing the power of the crockpot. The web is a great resource for finding recipes for delicious meals that you can prep ahead of time (think: the weekend) and store in individual Ziploc bags in the freezer until you are ready to make dinner. Throw all the ingredients into the crock before you leave for work, turn it on low, and eight hours later – voila! Yummy dinner, hot and ready.

Speaking of spending money on food: if you are still blowing cash on Starbucks each morning, what on earth are you doing? Make your own coffee! You can save a boatload of money by skipping that daily latte at the green mermaid. Yes, you will have to do a little bit of work. No, you won’t be able to flirt with that hot barista anymore. Still, the reduction in spending that you achieve by skipping your morning coffee run is not to be underestimated. Again, shoot for achievable goals. If you know that Thursday mornings are crazy because you have to be at work extra early for a staff meeting, go ahead and treat yourself. Even if you manage only a reduction in your weekly coffee spending, those extra bucks can really add up!

It’s believed that between ten and twelve percent of all used cars have hidden damage of some kind or another. That’s a tough pill to swallow when you take possession of your “new to you” auto, buffed and polished and detailed until it glimmers, and are taking for granted the assumption that you are getting a cherry deal. Most people assume that sellers of used cars use some sort of rigorous quality control rubric to make sure they are offering only the best for sale, but this is not the case. That car might look like a perfect “10,” but there could be a nasty surprise lurking in its past. It’s a sad fact that cars with a history of serious damage like fires, floods, or major accidents, sometimes end up on dealers’ lots. That by itself is not hard to believe, and that wouldn’t be so bad, if the damage were properly disclosed. Too often, however, these vehicles’ shady pasts get bafflingly erased, leaving no evidence for the new owner that anything catastrophic ever took place. Used car dealers are prone to do everything they can to hide damage when possible, and it’s a fact that gets swept under the rug often enough that many people might not even know what to look for. How can you protect yourself from this type of fraud? You simply have to get to know the signs, so that you have a well-honed sense for if you are being fleeced.

First of all, you should know that you cannot judge a book by its cover when it comes to used cars. Think that your new used car is in beautiful exterior shape, yet the price is shockingly low? (No, you aren’t simply getting a great deal.) Did you run a title check on it through Carfax or a similar service, and it came back totally clear? Surprise! That means nothing. In this situation, you may assume that you are getting a steal and happily fork over the cash to buy the car. You would be making a mistake by ignoring these red flags, however. It may seem like you are getting a great deal, but think again. You may, in fact, be setting yourself up for a frustrating and expensive mess.

I read a story online, linked through an Acura owners’ forum I visited, about a gentleman who test-drove and bought a used Acura that he figured was in perfect condition. The gentleman bought the Acura MDX from a “reputable” used dealer, only to find out that the vehicle had a bent rear sub-frame and a cracked engine block. Not only was the car inspected by Mile High Acura, his local Acura dealership, but he also took the time and spent the money to get his hands on a Carfax report, which indicated the car had never been in an accident. Unfortunately, the used car inspection was not performed carefully. For example, he reports, it turns out that when the inspecting mechanic checks “ok” for alignment, they are only inspecting tire wear.

Let’s talk about Carfax for a moment. People assume that Carfax is like a golden ticket to ensuring that the used car they buy is a cherry, and not a lemon. Well, know this: Carfax is far from foolproof. The Acura guy’s mechanic stated that he fixes structural damage all the time and never reports the work to anyone. How many others like him are out there? Plus, the story goes on to reveal, it appears that if an accident does not generate a police report, it will never find its way into the Carfax database. Often accidents occur and for insurance reasons, owners decide to work things out without engaging insurance companies so that they don’t end up with a jacked-up premium.

What’s really scary is the scale on which is this fraud may be occurring. It’s believed that millions of cars every year are either flood-damaged or totaled in an accident on an annual basis, only to be rebuilt or repaired and then blithely labeled with a fraudulently “clean” title. If you happen to be unlucky enough to end up with one of these cars, trucks, or SUVs, you may be in for a major letdown with very little legal recourse. See, these vehicles are legally supposed to be labeled as “flood titled” or “salvage titled,” letting all prospective future owners know that there have been catastrophic damages in the car’s past. It seems to be a lot easier than you’d think to erase these title blemishes, however. In the worst of cases, the vehicle might actually be unreliable and possibly even unsafe, yet it is presented as a perfectly normal car with a clean past. The fact of the matter is that some of these used car dealers are truly so unscrupulous that they just don’t care about your safety or your family’s safety.

One major source of fraud in the used car industry is called “title washing.” A lot of this took place in the wake of Hurricane Katrina in New Orleans, when who-knows-how-many cars were destroyed by flood waters. Title washing hides the history of a vehicle that’s been salvaged. In the used car industry, salvage titles are those assigned to cars that are have been determined to be a complete and total write-off by insurance companies. Another way you might hear this referred to is as “branding” a vehicle. Don’t be mistaken – branding or salvaging a vehicle doesn’t necessarily mean the car can’t be driven. On the other hand, vehicles branded with salvage titles have lower market values and are difficult to sell. Let’s face it – with that amount of damage, even the best-repaired car is prone to problems further down the road. Like a warm bath, title washing washes away a vehicles branding or salvage status, giving it a squeaky clean title that can then be used to sell the car for a much higher value. Once the branding is eliminated, the car’s value goes up and it’s a lot easier to sell. It’s not rocket science to figure out why so many car owners might be motivated to “wash” their titles.

In terms of a dealership, where there may be hundreds of thousands of dollars of difference in the longterm between washed and unwashed titles, title washing allows dealers and individuals to remove salvage branding from car titles to minimize their losses. Titles are washed by transferring a salvaged vehicle to a state that doesn’t recognize the brand, all the better to erase the vehicle’s spotty history for good. When the state issues a new title, it may no longer show that it had been salvaged. If not, the seller will move it from state to state until the branding is gone. When it is, the vehicle’s history will have been “washed” clean. It’s like a form of money laundering, only for vehicles instead. Picture the underworld version of a car wash, if you will.

You would really be amazed at the extent to which crooks will go to wash a vehicle’s title. A damaged car may just be bought and sold through two or three different owners in different states might erase the salvage label off a car’s title. The pros say that shady dealers and individuals might twist these legal loopholes to their advantage. They might buy a salvaged car in Florida, register it in Alabama, then relocate to North Carolina and re-register it. By the time it’s arrived at that last destination, it is no longer considered a salvage vehicle… despite the fact that this process can be executed very quickly and that the car may be in no better shape than it was when it was salvaged. The loser is the person who unsuspectingly buys the car with a flooded past or a sloppily re-welded frame, not knowing that their vehicle is inherently unsafe at this point. The Acura buyer I mentioned earlier found out that not only had his car been involved in an accident that had shattered the windows of both doors, but the frames of said doors were filled with broken glass.

It’s not as if this is a problem that the government hasn’t taken pains to fix, mind you. Back in 1982, the National Motor Vehicle Title Information System was created with the intention of uniting state departments of motor vehicles with an electronic link and obliging auto insurers to disclose information when cars are considered to be totaled. In the insurance industry, this usually comes about if a vehicle has lost at least three-quarters of its value due to damages. The problem is that there are delays in reporting and in updating the system. At present, it can take over three months for a vehicle to be re-titled as a salvage. That gives unscrupulous dealers plenty of time to pull the little trick on the car’s title by either registering it in several different states or by bringing it to states with lenient laws on titling cars.

A proposed law would have put a serious damper in this little game, reducing the turnaround time on updating the system to just seven days. This would have made it almost impossible for crooks to “wash” the title of a damaged car, since car insurers would now be required to electronically notify vehicle-history providers like Carfax of the VIN numbers of totaled vehicles within one week of the incident. Unfortunately, the so-called “”Damaged Vehicle Information Act” made no headway in 2010 or 2011. It remains to be seen whether 2012 will be the year that Congress gets their act together and really takes a stand for the safety of used car buyers.

Let’s not be mistaken, though: crooks always had and always will have a back-up plan waiting in the wings. An alternative to the aforementioned racket is the practice of “title washing,” in which a seller illicitly transfers the vehicle serial number plates from a “clean” (read: undamaged) vehicle to a repaired vehicle, giving thousands of dollars of value back to a car, truck, or SUV that would otherwise have hemorrhaged resale value as a marked “salvage only” vehicle. A lack of uniform state laws regarding the rules for salvaged vehicles is what’s needed, says Loretta Worters of the Insurance Information Institute.

In states like my home of Florida, a tendency towards severe storms has led to the adoption of strict laws regarding how the titles of flood-salvaged vehicles must be labeled. If a car has been flood-damaged and rebuilt, the buyer must be notified through a written disclosure that there was water damage in the car’s past. Unfortunately, not all states are this aggressive. The end result is an unfortunate tendency towards certain states becoming what Worters calls “a dumping ground for undeclared flood vehicles.”

How exactly can you protect yourself as a buyer, if you can’t even trust the title of the car or truck you are buying? Worters’ recommendation is that you thoroughly investigate a vehicle’s comprehensive history and service records with either AutoCheck (which compares state records to a vehicle’s purchase history and service records), CarChex (which recommends mechanics from a nationwide network who will scrutinize used vehicles for harm from water or accidents), Carfax (the ever-popular option, which flags salvage vehicles by matching identification numbers against public DMV records), or The National Insurance Crime Bureau, which is a great resource for finding out whether a specific car has ever been reported stolen or as a salvage vehicle.

Title washing is a dirty trick but consumers can do an AutoCheck or CarFax VIN Check which track a vehicle’s history even if it’s moved to another state. Once a vehicle has been branded and that information is reported to AutoCheck, it remains in their records no matter how many states it’s sold in. The title may no longer indicate severe damage, but a vehicle history report will. “Washing” a title doesn’t wash away computer records. Keep in mind that title washed vehicles are sold by individual sellers as well as car dealers. Don’t assume that because you are purchasing a car on a lot that it’s title hasn’t been washed clean. If you can, obtain a title guarantee from the dealer in writing. This shouldn’t be difficult if the seller is a reputable dealer.

As obnoxious, unethical, and devastating as it can be to find out that your car was a salvage that was covered up, it can be just as bad to willingly take possession of a salvage vehicle that is properly marked. It’s important to keep in mind how egregiously you can get shafted as a driver by ending up with a vehicle that is branded a salvage. True, you could save thousands of dollars… and this can be tempting, if you are short on cash and have some mechanical expertise. Unfortunately, it’s likely that you will end up paying back every cent of that savings when it comes to insuring that vehicle. Many standard car insurance companies will refuse to write a full-coverage policy on a flooded or salvaged car. It’s possible that you might be able to obtain liability-only car insurance coverage on such a vehicle, but few insurers will venture to provide collision or comprehensive auto insurance coverage. Why is this? Because, let’s face it, these cars are just inherently unsafe.

Flooded cars in particular remain dangerous even after a thorough repair, say the experts. There is virtually no way to completely rid the vehicle of all moisture, which will get you in trouble where it seeps in out of sight. The modules of the vehicle, its air bags, the seat belts, and any/all electronic components are especially vulnerable to dampness, and may never again work properly or safely after a dunking.

It’s important that used-car buyers stay alert and aware of the fact that a vehicle’s history can be all-too-easily fabricated. Modern-day vehicle history services have lulled drivers into a false sense of security, thinking that they are protected from unsafe vehicles by a database. In fact, experts confirms, these reports don’t always provide sufficient information about how a car was damaged to determine whether it is safe to drive. Even if you know about the damage, there’s no saying that you can adequately determine if it is safe, anyway. Be careful when purchasing a vehicle with an out-of-state title, or which appears to have been shipped to several states within a short period of time. You might become the victim of a title-washing scam.