Author Topic: Spending in order to save? What would you do?  (Read 3240 times)

kdms

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Spending in order to save? What would you do?
« on: September 29, 2012, 06:04:52 AM »
Good morning all....

First....thanks for taking the time to read this; this forum has helped my family tremendously, and we've made huge strides towards getting off the consumer merry-go-round and making a bee-line for the smaller and smarter camp of the debt-free/financially secure.

We've been actually living on a budget (gasp!) for over a year now, and it's been really successful in helping us adjust to living within our means, making savings a non-negotiable expense, setting up an e-fund, projecting future expenses, and really forcing us to evaluate our financial priorities.  Along the way, as happens to everyone, life throws curveballs every once in a while.  We had to do major repairs on both cars (at the same time) that weren't expected, hubby had to take a few days off work due to injury (no work, no pay for him), water pump in the well failed, etc, etc.  Whatever.  It happens, and we muscled through it, without having to resort to credit, which I'm actually quite proud of, because two years ago it never would have even occurred to me to not pull out the credit card.  :)

But...right now I'm a little nervous, because the e-fund is really low.  Practically non-existant, in fact, and that scares the crap out of me, because if something happened right now, we'd have to dip into credit to fix whatever the problem is.  We've also got around 10K of leftover pre-mustachian debt, which is sitting at 0% (balance transfers have worked great for us for maxing out the value of our debt payments), and we've been throwing everything spare at that great big zit, because it's driving us insane to have it there as a reminder of past spending habits.

So, I've spent some time with my trusty excel spreadsheet sheet and worked out a plan that, in theory, would get us debt-free (bar mortgage) and with a relatively decent e-fund by December 2013.  Because the e-fund is more important to me (peace of mind) than getting rid of the debt (annoying but manageable) I've focused on that first.  However, we got smacked by a couple of curveballs again in the last week and now I'm wondering if I've made the right decisions.

1.  Our trailer has suffered four blown tires in the last month.  The first two were old, so ok, but after the two brand new ones went as well, we took it apart and discovered the axle was damaged, as well as the bearings.  We use this trailer extensively to collect free firewood for heating in the winter, which saves us over $3000 a year in electricity.  We also use it for hauling bear, deer, and anything else hubby can shoot for meat.  Sigh.
2.  The jeep needs new u-bolts in the front suspension.  Safety issue.  Sigh.
3.  I've been trying to sell my motorcycle since spring; there's been little interest, but I finally got someone who's ready to make an offer...if it's certifiable.  It's not, although getting the parts to make it certifiable would not be expensive or difficult to replace.  Sigh.

On the plus side, I had forgotten about some extra work I had done at work and was pleasantly surprised to find the pay stub on my desk the other day.  I've also got an acting assignment coming up that'll produce a similar cheque in a few weekss time.  It's large enough to make some of the repairs, but not all, not and still be able to put some into the e-fund.

So I guess my question is how would you divy up extra funds?  I read with interest a post the other day from someone who now looks at pay raises as extra means to save.  My first thought was to put the whole amount into the e-fund immediately, but hubby and I are both ex-professional mariners and planned maintenance of assets is entrenched in our psyche.  There's just so much preventative maintenance that needs to be done around here (that we've been putting off due to lack of liquidity) that I'm afraid that if we don't start some of it, it'll cost us more in the long run.  And in the case of the motorcycle, if I throw some money into getting it fixed, I could possibly end up a few thousand dollars ahead....but there's no guarantee because the market's dried up and it's the wrong time of year, and the money for parts could be more useful in the short term elsewhere.

I know this is a short-term problem, until we can no longer see the bottom of the e-fund barrel, as it were, but right now we need to find a balance to liquidity for unforseen problems vs problems that can be seen already...and may get bigger faster than we want.  And I'm talking about non-safety related issues here....anything to do with safety gets dealt with right away.  That's not something we're willing to risk the consequences of not dealing with immediately.

What's your balance?  How would other mustachians approach this?  TIA.... :)

rjack

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Re: Spending in order to save? What would you do?
« Reply #1 on: September 29, 2012, 06:20:35 AM »
You've given a nice level of details. Here are a few ideas:

  • Those curveballs you described are part of life. You need to create a budget for Home maintenance/repair and Auto maintenance/repair. You won't know the exact repairs, but can predict that you will spend some money on repair.
  • I would look at the maintenance/repair issues you have and figure out the ROI of fixing things now versus fixing bigger problems later. I would do the things that have a high ROI now.
  • Next in priority, I would pay down the debt as soon as possible.
  • Finally, I would add money to the emergency funds. However, you will have a lot less "emergencies" if you do step 1.

totoro

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Re: Spending in order to save? What would you do?
« Reply #2 on: September 29, 2012, 10:00:21 AM »
You are not alone with unexpected maintenance costs.  It is easy to forget.  Even loads of cities and businesses get into financial trouble with failing to account for asset management properly.  It is also one of the first areas to get cut when times get tough.  If you have ever been on a Russian airplane you would notice this effect!

That said, in your shoes, I would stress less about your emergency fund right now as you don't have the ability to do this immediately.  I would fix your trailer or buy a new used one.  Ours cost $600 and saves us a lot of money each year because we use it to get firewood too, to landscape and to do renos ourselves.  Over the past two weeks we have dumped three loads of concrete, one of reno materials, and have carted back a used stove, a used stacking washer-dryer, various reno materials and three loads of laminate flooring ourselves.  Our trailer likely has the highest ROIs of any of our investments.

Do you need to use the Jeep?  Does it make or save you money?  Is there a cheaper alternative?

I would get the motorcycle certified even though the season is not ideal for selling.  Advertising on craigslist or other online locations is free and it only takes one buyer to give you big enough payoff to make a profit which could pay for the trailer repair (and maybe the Jeep?) and get you back on track.  Perhaps the buyer who offered might still be interested if it was certifiable.

Until you are back on track with your plans, your credit, which currently costs you zero, is something you can continue to manage and keep for emergency use.

kelly1mm

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Re: Spending in order to save? What would you do?
« Reply #3 on: September 29, 2012, 12:23:01 PM »
New to the game and rural as well (I assume you are based on the OP).  A couple of points:

1) do you have another vehicle that can pull the trailer?  If so, park the Jeep and use the remaining vehicle to fix the trailer.
2) or, do you have the firewood in for this coming winter?  If so, and if you NEED the Jeep fixed, fix the Jeep and use it for hauling out the game.  Use a tarp to protect the interior if you must.
3) If the cost to fix the motorcycle will be the same in the spring, I would wait till then if the price you can get for it then is 20-25% more than doing the work now.  That saves the outflow now for repairs with no for sure sale.  If you use $$$ to fix it you will feel pressure to get it sold, further reducing what you may be able to get for it 6-8 months from now.

All of the above point to liquidity preservation.  Do the minimum needed to get till next spring, then sell the MC.  That will hopefully leave you a bit of an emergency fund to make it till then if something else comes up.

I am sure others will have other points of view, but I am risk adverse, especially about the emergency fund.  Even when I was a consumerholic I had a 15k+ emergency fund (while having CC debt even - that is how risk adverse I was and how much I value ready access to cash)

travelbug

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Re: Spending in order to save? What would you do?
« Reply #4 on: September 29, 2012, 07:21:44 PM »
I would also fix the trailer or replace it, depending on the cost involved.

I agree that maintenance needs to be budgeted too. That takes away the stress alot. The money will be there.

Otherwise, others have said what I would advise too; is there another vehicle? If you have a serious buyer for the bike can you take the costs of repair off the asking price?

The emergency fund would be the last place for us to put money into as well. If your budget includes all aspects of your lifestyle and leaves you to focus on debt reduction, an emergency fund will build naturally and quickly.

Good on you for making such great changes, it's the change of mindset that is important.

Good luck

kdms

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Re: Spending in order to save? What would you do?
« Reply #5 on: September 30, 2012, 04:57:42 AM »
Thanks for the replies....I really appreciate people's willingness to share their thoughts and experience here :)

We had more or less come to the same decisions....fix/replace the trailer (thanks, rjack, I was so focused on getting it fixed it didn't even occur to me that it might be cheaper just to replace it), delay the motorcycle for a few months, keep dealing with the debt, and have patience with the e-fund.

Common question appears to be about the jeep.  Over the last 11 years it's gone from our primary vehicle to our secondary vehicle, and it gets a lot more regular usage in the winter than summer because DH has to use it to get to work (instead of his motorcycle) to get to the nearest park n ride, which is around 20km away.  During the spring, summer, and fall, it sees a lot of use around the property as an over-sized work ATV.  The other car also has a hitch, and we do frequently use the other car for hauling the trailer, but because the jeep's also a commuter vehicle, we haven't really found any way to take it off the road (not to mention we don't have the option of only paying insurance for part of the year, so there's not a lot of savings there, unfortunately.)

The good thing is that we're learning to do the maintenance ourselves....so that'll save some cash right there as well.

I have to say the first time he hauled a deer home in the back of my jeep I was a little appalled....but quickly mellowed out.  It's not like we can't just hose the thing out, after all.  :D