Random musing
Find a Conversation
| Fri, 02-03-2006 - 1:36pm |
I have been to debt-ville and back via divorce-town, cc-city, and general irresponsibility.
There is a common factor more prevalent now than in days of old. People have a sense of entitlement regardless of their financial status or station in life. Believe what you will, but everyone is NOT entitled to a new car, a yearly vacation, Starbucks everyday, restaurant meals, expensive attire and accesories, etc. Cliched as it may seem, keeping up with the Joneses is a sure way of plunging into spiralling debt. We must simply work hard and sacrifice for financial success and solvency just as our parents did in order for us to have the luxuries they never had. Ultimately and ironically, this has fed in to the current mantra of entitlement.
I am not saying that we do not deserve the niceties in life, but that it takes accountability and responsibility to acquire them without indenturing ourselves to banks.

True, true, true. But sometimes I haven't been sure what to do -- we needed a refigerator for example, but couldn't afford it. So credit card -- then needed the car fixed, couldn't afford it. So credit card. You know how it goes. So now we are trying to climb back out of the hole. Hopefully all appliances, children and dogs will stay healthy.
Megan
Here, here.
All my best,
Danni
Hello,
Regarding those unexpected expenses, like getting a new refrigerator, fixing a car, or a medical bill, that is what "sinking funds" or "freedom accounts" are for. Basically, if you didn't have access to credit cards or loans, what would you do? You'd make sure that every month, you'd set aside a little money in a separate account for the times when you'd need to replace something, purchase something, or pay for an unexpected illness.
This year, for the first time, I've set up several Ing Direct savings accounts. One is for saving up money for our auto insurance premium. I looked at the total annual cost of $1060.46 and divided it up by 12. Then divided it up by 2, since we get two paychecks a month. So, every paycheck, $44 goes to the auto insurance fund. In July, when the next premium payment is due, it won't sneak up on me this time! I'll actually have the money ready, without scrimping and saving the two weeks before the due date.
I've done the same with our christmas budget, auto maintenance, house maintenance (replacing appliances, deductibles for homeowners insurance) and a vacation fund.
I read somewhere (can't remember where) that when you buy a new appliance, find out how long the appliance tends to last with regular, normal use. I found a lifespan chart for major appliances here: http://repair2000.com/lifespan.html
I usually use the lowest estimate. For instance, the above site says a refrigerator lasts about 8-14 years. I use 8 years for my calculations. If I bought a mid-price refrigerator, it might cost about $1000. Divide the cost by the number of years it's expected to last, and you'll see how much you should be saving each year you own the appliance. By the time it needs to be replaced, you'll have some of the purchase price saved up.
$1000 price / 8 years = $125 per year. $125 per year / 12 months = $10 per month.
Can you put aside $10 per month in a savings account so you can pay for a new refrigerator in 8 years? Most people could afford that ... and it would be earning interest all those years too! You'd even be able to use that money if the refrigerator needed repairs.
When we built our house, all of the appliances were installed at the same time and are now 5 years old. Here are the lowball average lifespans of my appliances:
Stove: 8 years
Refrigerator: 8 years
Clothes washer: 7 years
Clothes dryer: 8 years
Dishwasher: 7 years
It looks like I might have to replace our dishwasher and clothes washer in 2 years. I could expect to replace our stove, refrigerator, and dryer in 3 years. I know for a fact that our dishwasher is already going "downhill", but some of our appliances may last much longer. I'm going to "plan" for them to need replacement around the lowball estimate and set aside enough money so that I can afford to do so without creating more debt.
Midrange Cost for appliances:
Range: $1200
Refrigerator: $1000
Washer: $700
Dryer: $600
Dishwasher: $500
Amount needed to replace when expected lifespan runs out:
Dishwasher: $500 price / 2 years = $250 per year.
$250 per year / 12 months = $20 per month.
Clothes Washer: $700 / 2 years = $350 per year.
$350 per year / 12 months = $30 per month.
Refrigerator: $1000 / 3 years = $333 per year.
$333 per year / 12 months = $27 per month.
Stove: $1200 / 3 years = $400 per year.
$400 per year / 12 months = $33 per month.
Dryer: $600 / 3 years = $200 per year.
$200 per year / 12 months = $16 per month.
------------------------------------------------------
Savings per month needed for everything above: $126
Amount per bi-weekly paycheck: $63
I think that I would rather put away $63 per month (we pay more than that for our cell phone bill!) and have the money for replacements when needed than charge it on a credit card and pay interest!
Sincerely,
Lindsey Schocke
Sincerely,
Lindsey Schocke
Geeks on Tap: Mission Accomplished