Balance Junkie » Spending

Use Price Comparison Sites to Get the Best Deal

2 Cents — Fri, 13 Jan 2012 11:58:19 +0000

The following is a guest post. I’ll have my 2012 outlook up on Monday. Have a great weekend! ~ 2 Cents

Looking for a credit card can be difficult because there are so many different types of cards that offer their holders different advantages. Some credit cards have rewards for making purchases from certain stores, but others will offer people cash back when they spend a set amount of money with their cards. Finding the one that is perfect for them has gotten easier because of the credit card comparison sites that have begun to make their way to the Internet.

Credit Cards for People with Excellent Credit

The comparison sites cater to different types of people and cards. For example, some people are looking for a card that will give them a 0 percent interest rate, and these comparison sites will have several examples of credit cards that offer the 0 percent introductory rate for people with excellent credit. As this will not be the only advantage being offered by these cards, everything will be listed on this site. If people would like to apply for the card, they have the opportunity to do so right from the comparison site.

Credit Cards for People with Lower Credit Scores

Comparison sites will even have a list of cards for people with bad credit. Not everyone can qualify for the 0 percent interest rate cards mentioned above, but these sites make it easy for them to seek a credit card for average and low credit scores.

Frequent Flyer Miles or Cash Back

A popular feature for credit cards is the ability to earn points to receive frequent flyer miles. These credit cards may also have a feature that offers the card holders cash back when they have spent a set amount of money. For example, some cards will give people $200 cash back after they have spent $500 in a set amount of time, such as three months. The comparison sites will also help people find several examples of these cards.

The British Love Comparison Websites

The credit card comparison website is a favorite of the people in the United Kingdom. These sites give people hundreds of choices of credit cards, and help them choose the right one by listing the interest rate, the length of time the cards will have a 0 percent interest rate and whether or not balance transfers are allowed. They can also read the reviews written by current card holders. With all of this information on comparison sites, people looking for a credit card can find the best deals.

America is the Most Indulgent of Any Other Country

2 Cents — Fri, 16 Dec 2011 10:45:27 +0000

The following is a guest post. While it speaks to American consumerism, there may be some food for thought for debt-laden Canadians here too.

The economy is in shambles, and while many would like to blame the deterioration of our economy on big government and big business, a large percentage of the blame also lies in the spending habits of the American people. As a whole, we spend too much, borrow too much, and save too little.

“Look at consumption levels and control for purchasing power over the last several decades, and America is simply in a league of its own.” states Sheldon Garon, Princeton Professor and recent author of Beyond Our Means: Why America Spends While the World Saves. “The only people who come close are people in Britain, but they are about 85 percent of the level of American consumption. Germans, French and others are in the 70 percent range, Japanese even a little lower. So American’s spend like no one else.”

We’re willing to pay a couple dollars for a phone number lookup when there are other free services. We are willing to pay $5 a day for coffee when we could just make it at home and save nearly $25 a week. America is a consumerist society and even in the face of the economic downturn we are still struggling to find a balance between saving and spending.

Most entering retirement age are being forced to prolong their careers due to inadequate savings. Many recent college graduates are being forced to move back in with parents because they borrowed too much during college, and are now struggling to find a job that pay enough to cover those high monthly bills.

Consumerism is definitely in every aspect of American culture. It is advertised everywhere and can even be found being promoted in seemingly innocuous institutions such as universities and banks. Other countries provide free or low tuition rates for students while American universities promote spending tens of thousands of dollars by pulling out loans to afford prestigious universities – much like a person who overspends to purchase a nice car. Other countries provide incentives for savings and offer tax breaks to smaller savings accounts while US banks tax small savings accounts and make small banking nearly impossible for lower income households.

For many, binging on credit cards and excessive shopping are no longer an option. Because of the credit crisis, many credit card companies have made it harder to obtain cards which should help limit the amount of debt certain individuals have. But it shouldn’t be the inability to get credit that keeps American consumers from overspending.

If Americans wish to have the comfortable future they have all been raised to believe they are entitled to, they are going to have to remember what it is to work for it and save for it. Taking the time to actually decipher between needs and wants will have to become a priority, and looking at debt in such a cavalier fashion. Not everyone has an excessive mortgage, a high car payment, and thousands of dollars in credit card debt. This should not be our norm.

“If we can’t even talk about the benefits of some saving and we think that only consumer spending is good for the economy, then we’re not even getting to first base on this. We have to begin talking about the benefits of saving, and how we might restore a balance between saving and spending.”

So instead of running through that drive thru for coffee or going out to a fancy lunch or dinner, think about how much you could actually save by choosing to opt out of these luxuries. Overspending shouldn’t be a way of life, and passing rampant and uncontrolled consumerism down through younger generations is only going to continue to trouble our economy. The best financial practice is responsibility, and Americans are going to have to learn it if they wish to be prosperous without excessive debt in the future.

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Are Smart Meters a Dumb Idea?

2 Cents — Wed, 26 Jan 2011 10:45:19 +0000

It’s not that I’m so smart, it’s just that I stay with problems longer.

~Albert Einstein

Last week our electricity meter was taken out and replaced with a smart meter. I live in Ontario, the first Canadian province to install smart meters for all homes and small businesses. The program has cost about $1 billion and has been the source of much debate and political posturing.

I guess I should have done the research before the meter was installed, but human nature and my nature being what they are, I didn’t fully comprehend what the program was all about or how I felt about it until it actually happened. It looks like this type of program is going to be rolled out in British Columbia as well, so I thought I would write about the experience to give others an idea of what may be coming to their neighbourhoods at some point down the road.

What’s a Smart Meter?

A smart meter is a new type of electricity meter that measures your electricity usage more often, allowing the utility company to charge different rates based on time of use (TOU). The idea is to promote conservation and offer a cost savings for those who use energy during off-peak hours. There are basically 3 price points:

On-Peak: In the winter, on-peak hours are weekdays from 7 AM to 11 AM and from 5 PM to 9 PM. In the summer, they are weekdays from 11 AM to 5 PM. The rate is 9.9¢/kWh.
Mid-Peak: In the winter, medium-use hours are weekdays from 11 AM to 5 PM. In the summer, they are weekdays from 7 AM to 11 AM and 5 PM to 9PM. The rate is 8.1¢/kWh.
Off-Peak: All weekends and holidays are considered off-peak times. For both winter and summer weekdays, lower demand hours include 9 PM to 7 AM. The rate is 5.1¢/kWh.

Currently, we’re paying 6.4¢/kWh for the first 1000 kilowatt hours and 7.4¢/kWh for any additional usage. You can see from the information above that, unless you do most of your cooking and laundry on weekends or in the middle of the night, you’re going to see a pretty big bump in your electricity bill once the time of use billing kicks in. It hasn’t become mandatory here yet, but it should take effect in 2012.

In the meantime, many consumers have been less than impressed with smart meters so far. Some have complained that their bills are much higher, even when they try to adjust their usage. Opposition politicians have jumped on the critical bandwagon, going so far as to say that the program should be scrapped.

Big Brother Calling

When I first heard about the smart meter concept, I thought it seemed like a decent idea. I liked the idea of being able to save a few dollars and help out with conservation by adjusting our consumption a little. Now that I’ve seen the math, however, it seems like the amount of adjustment we’re going to realistically be able to implement will be minimal and the charge for using electricity during peak hours is downright punitive.

A couple of aspects of the program didn’t sit well with us:

We didn’t have a choice. This was happening whether we liked it or not.
We didn’t like the idea of information about our electricity usage being transmitted wirelessly.
We didn’t like the thought of having to drastically adjust our electricity consumption just to keep from experiencing an even larger spike in our electricity bills. (The HST has already added considerably to our electricity expenses.)

Concerns about privacy are addressed by our utility in an information brochure:

“Ontario’s electricity distribution companies are required,by law, to ensure that the SMART METERS and communication networks that are put into place are equipped with security features to prevent unauthorized access. We must also comply with federal laws regarding the privacy, protection and disclosure of personal information. Any data that is sent to the central data repository will be provided in such a way as to prevent identification of an individual customer.”

That sounds great, but when I read about the Peaksaver program, where the utility has the ability to lower your air conditioner use during peak times, I realized that the smart meter might be handing over more information and control than I would like. Now the Peaksaver program is optional and it does serve the purpose of reducing the load on the grid, ostensibly when people are at work during the day and wouldn’t be affected anyway.

I’m definitely in favour of energy conservation and sustainability, but I don’t like the idea of someone else being able to control the temperature in my home. Whether it’s for a good cause or not, that just sounds a little too Orwellian for me. I know that the Peaksaver program is optional for now, but I wonder how optional it might be if we really had an energy crunch.

In general, I can see that the smart meter idea could serve a purpose. And we’ve already spent a billion dollars on this, so scrapping it doesn’t seem prudent. But I think it needs a little fine tuning to really make it work for everyone.

What do you think of smart meters? Do you have any experience with them?

Hot Water Heater: Rent or Own?

2 Cents — Mon, 27 Sep 2010 09:45:12 +0000

Nothing diminishes anxiety faster than action.

~Walter Anderson, The Confidence Course, 1997

Update: This story was included in the Carnival of Money Stories #74 posted at Sustainable Life Blog. Thanks!

When we had our home built 7 years ago, we went with a rental for our hot water heater. I realize now that this is not the norm everywhere, although it seems to be the route most people here in Ontario choose. It seemed, at the time, like a good call.

Renting a hot water tank means that your up-front costs are zero, and you just pay a monthly rental fee of $15 – $30. Service is covered for as long as you rent the tank, so you don’t have to worry about unexpected expenses. A couple of years ago, a sensor went on our hot water heater. A technician showed up the same day, fixed the problem, and we had hot water again pretty quickly. Can’t you just hear a giant “but” coming?

The Water Heater Vendetta Is Born . . .

When we moved into our new home at the end of June, 2003, our hot water heater rental was a little less than $19/month. Over the years, however, the rental company regularly raised our rates. Each time I sat down to draft our new annual budget, I had to bump up that water heater rental amount a little more. I grumbled like a grumpy old man, but did nothing about it.

I’m not sure what the reason for consistently raising our rates might have been, but the reality is that we now had a 7-year-old water heater that was costing us almost 40% more than it did when it was brand new. In March of this year, our rate went from $23.45/month to $24.27/month. This month, they raised the rate again to $26.11.

That was the last straw. The simmering anxiety/annoyance we had been feeling for a few years now boiled over and Mr. Cents and I decided that enough was enough. Mr. Cents did a bunch of research that same weekend on what it would cost us to buy a new hot water heater and get out of that money trap once and for all.

Hot Water Heater Math

I always say that doing the math is one of the keys to good personal finance habits. A few minutes with a pencil, paper and calculator have been instrumental in some of our best financial decisions. Many times, just getting started is a lot harder than actually doing the work.

Mr. Cents spoke to a very helpful associate at Home Depot. They chose a 189L tank with a 6-year warranty on parts and a life expectancy of 6-9 years. It’s a little smaller than our current tank, but it’s supposed to be suitable for a 2500 square foot home. (Ours is about 2200 square feet.) It’s also supposed to be more efficient.

Here’s what the math looked like:

Water Heater: $953.72

Accessories: $105.88

Installation: $0

Return Fee: $40

TOTAL COST: $1099.60

It would have cost about $150 to have the water heater installed, but Mr. Cents decided to do it himself, so that saved us some money. He tells me it’s not that hard to do, but I would say you have to be pretty handy to pull it off. I’m not sure what the opposite of handy is, but that’s me. So I would have been happily paying the $150 if not for my husband. (The “accessories” included pipe elbows, couplings, a valve that broke, and a couple of patio stones on which to set the new tank.)

I should mention that renters do have the option of calling the company and buying out the rental. That would have cost us $770 – for a 7-year-old tank. Really?

The bottom line is that the up-front cost of the new hot water tank represents about 42 months of rent if you include the $40 they are charging us to take back their old tank. That’s about 3 and a half years and it suits us fine. We used some money from our savings to cover the cost, but we still have a very nice emergency cushion.

Michael James and Canadian Capitalist have written some good articles on this topic as well. If you’re looking for more information, there’s a decent overview at Natural Resources Canada.

One Last Poke in the Eye

So what happens to the old hot water tank? Well, of course, the rental company does not make it easy. This is another one of those “You’re kidding, right?” situations.

When Mr. Cents called to find out how to do it, they tried to convince us to stay with them, but eventually outlined the following bureaucratic nightmare scenario: We need to bring the tank to a Reliance Home Comfort location during a very limited set of hours. They will give us a receipt for the return. It takes 4-6 weeks for customer service to get the paperwork. In the meantime, we will still be charged rent.

At the end of the 4-6 weeks, they will issue a final bill, which includes the $40 return fee, and a credit for the interim rent they charged. This should net out to a credit for us. In order to get that money, we need to call them and have them issue a cheque. I’m not sure how long it will take to get that cheque, but I would guess it might be the old 4-6 week thing again.

Mr. Cents installed the new hot water tank on Friday night. It took about 4 hours in total, and we were without water for about 2 hours. A round of showers on Saturday morning confirmed that the new tank is working fine. Just before I sat down to write this, I cathartically removed the water heater rental line from our budget. We won’t miss it.

Do you rent or own your hot water heater?

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The Law of Diminishing Returns

2 Cents — Mon, 06 Sep 2010 09:45:30 +0000

You can never get enough of what you don’t need to make you happy.

~ Eric Hoffer

Remember when you were a kid and you begged, pleaded with, and nagged your parents to buy you something for months on end? You wanted it so badly. It would solve all of your problems and provide you with endless happiness.

When your birthday came along and you finally received the desired treasure, it probably did give you the boost you predicted. But how long was it before that treasure ended up collecting dust somewhere and you moved on to the next desperately needed gadget, trinket, or toy?

For many of us, this cycle repeated over the course of our youth. For some of us, it continued well into our adult years. Indeed, the decades following World War II saw society as a whole adopt much the same pattern. Our homes gradually “needed” to be larger, even as the average family size decreased. One car, television, or garage was not enough. The age of consumerism was born. The line between wants and needs blurred until it all but disappeared. Did this increasing consumption lead to increasing satisfaction?

The Law of Diminishing Returns

In economics, the Law of Diminishing Returns states that if one factor of production is increased while other factors are held constant, the amount of resulting output increase will level off over time, and eventually start to decline. In layman’s terms, it basically means getting less bang for your buck over time, much like the child who is continually indulged but somehow less satisfied on each occasion. I’m going to refer to the Law of Diminishing Returns in the latter sense, so I’ll ask for some latitude from the economists out there.

The post war era has seen a dramatic increase in many factors. The returns on these have steadily increased as well – until recently. Let’s take a look at a few different types of factors, the relative returns they provide, and what some of the future trends might look like.

Corporate Factors

Corporations contributed to the economic success (and excess?) of the post war era in a couple of ways:

Mergers & Acquisitions

Many companies, particularly in the financial sector, grew by merging with or acquiring other businesses. This type of activity is stimulative to the economy and the stock market as it provides a lot of revenue for the bankers, lawyers and accountants necessary to facilitate these transactions. M&A activity took a break during the recent credit crisis, but has recently seen a resurgence with several large deals recently announced.

It seems, however, that investors are not viewing this activity quite so positively as they have in the past. The stock market was generally flat to down when these moves were announced. Some have speculated that the lack of enthusiasm might be due to the fact that corporate consolidation often leads to layoffs and hiring reductions. In a market craving jobs more than anything else, this is not a good thing. So M&A doesn’t seem to be providing as much bang for your buck as it did a few years ago because of reduced activity as well as reduced economic benefits.

Stock Buybacks

In the equity heyday, all it took was a rumour that some company was going to buy back its stock and you could count on a sizeable boost in its share price. Like M&A activity, stock buybacks have slowed and so has the enthusiasm with which they are greeted. Investors are generally less confident in equity price increases due to economic and financial market instability and flat to lower returns over the past decade. And in the end, wouldn’t you rather see the company you’re invested in putting cash into R&D or organic growth strategies rather than incestuous stock buybacks?

Government and Central Banking Factors

Global governments and central banks have done everything they can to incite consumers to spend and corporations to grow. The resulting outputs have been accelerated economic growth, an increased perception of prosperity, and a mountain of debt. Here are a few of the ways in which governments and central banks have contributed to economic growth:

Low Interest Rates & QE

Once Paul Volcker conquered inflation by raising interest rates in the early 1980s, a period of steadily declining rates began. The Greenspan era saw the Federal Reserve dramatically lower rates whenever the economy looked like it was ready to take a breather. Lower rates led to asset price increases and higher growth rates as consumers, corporations, and governments took advantage of the cheap borrowing costs to spend, spend, spend.

The result, as we know, was a series of financial bubbles and trillions of dollars of debt on household and sovereign balance sheets. With rates at or near zero, there’s no more bang to be had for your buck in this area – unless you believe further quantitative easing will be effective. Even if it does provide some temporary confidence boost, it seems apparent with each new round that the Law of Diminishing Returns is at work here as well.

Government Stimulus Programs

In the wake of the recent spending and debt-induced financial crisis, governments around the globe came to our rescue with more spending and debt. Cash for clunkers, various incentives and programs for underwater homeowners, and lots of borrowed taxpayer cash for stimulus programs were heralded as the reason for the economic and stock market bounce of 2009.

As recently as August 2nd of this year, U.S. Treasury Secretary Tim Geithner penned an Op-Ed in the New York Times entitled Welcome to the Recovery. Once again, the Law of Diminishing Returns was evident. The market saw a bit of a bump up following Secretary Geithner’s article, and then proceeded to sell off for the remainder of the month of August. The actual economic data painted a picture of sparse to declining activity compared to the lovely pastoral the Treasury Secretary tried to sell.

Consumer Factors

Consumers contributed to the post war boom by buying what the government and advertisers were selling – usually with no money down and easy monthly payments.

Spending on Stuff & Self

In an earlier article entitled How Did We Get Here? I wrote about the post war transition from austerity and selflessness to prosperity and mindfulness to temerity and selfishness. Gradually, we came to believe that we needed – no, deserved - more gadgets, bling and stuff in order to be happy. Did all of this stuff fill a void, distract us from that void, or create a new one?

We’re finally starting to see some signs that these socioeconomic bubbles may be ready to pop, or at least deflate a little. Somehow that Hummer isn’t bringing us the joy we thought it might. Neither is the 3-car garage, the coolest gadget, or the hottest fashion. In fact, dealing with the debt we incurred to buy all this stuff is starting to get downright stressful. Retail therapy just isn’t providing the same bang for your buck it did a few years ago.

Are you noticing any signs of the law of diminishing returns out there? Do you think that’s a good thing?

Variable Returns Can Work Against You in Retirement

Buying a Car: Is It Wrong to Buy Foreign?

2 Cents — Fri, 16 Jul 2010 09:45:44 +0000

Failure is only the opportunity to begin again more intelligently.

~ Henry Ford

Update: This article was featured in the Carnival of Money Stories – Starting a Sideline Edition posted at The Financial Blogger. Thanks!

If only the government had followed the advice of Henry Ford when it came time to decide whether or not to let GM and Chrysler fail. I recently made the case that a failure to fail has made a pretty big contribution to our current financial problems and I pointed to the auto bailouts as an example of this unhealthy trend. I live in Windsor, Ontario, traditionally a huge employment centre for the big 3 automakers. Mr. Cents and I both grew up here. We lived in various parts of the GTA (Greater Toronto Area) for about 5 years, but returned home 12 years ago. (Has it been that long already?)

Unions carry a pretty big stick in this city. Many of my relatives, neighbours, and friends are directly or indirectly employed in (or retired from) the auto industry. There is a prevailing, if somewhat shaken, support for unions in general and the CAW (Canadian Auto Workers) specifically. Many people here support the idea that we should all buy vehicles made by GM, Ford, or Chrysler.

Out of a Job Yet? Keep Buying Foreign.

I’m not sure what it’s like where you live, but I can’t hit the road in Windsor without coming face to face with numerous bumper stickers carrying slogans like the one in the title of this section. I felt terrible when the financial crisis hit and decimated our local economy – not that you couldn’t have seen it coming the way the auto industry was proceeding. A lot of folks here were out of work for a long time while Chrysler and GM were in bankruptcy.

Still, I can’t help but feel upset when I see those bumper stickers. After all, the majority of us don’t have the inflated wages or gold-plated benefits and pension packages that many of these employees enjoy. Further, our tax dollars have gone to bailing out GM and Chrysler, as well as the jobs, benefits, and pensions that go with them.

A lot of other people lost their businesses and jobs. They received no government loans. They have no pension. And now, as these big 3 supporters drive down the road in their subsidized vehicles, they also want to tell us which car we should buy – or else.

That doesn’t sit well with me. I’m sure I’m not alone, but it’s not advisable to make opinions like that known in these parts. You can become persona non grata (or worse) pretty quickly.

Still, there are those, even in this city, who draw a direct line from the government loans given to Chrysler and GM, to the growing government deficits and debt, to the new HST here in Ontario. They see it as no coincidence that, less than 2 years after the auto bailout, they are being hit with increased expenses as a result of the Harmonized Sales Tax, which went into effect in Ontario on July 1st, 2010. Oh Canada.

What’s a Foreign Car?

I guess the idea is that we should support our local economy by buying domestic vehicles. But what is a domestic vehicle? What if your GM car is built in Mexico? What about a Toyota that’s built in the southern U.S., or even a few kilometres down the 401 in Woodstock, Ontario? What if it’s assembled here, but all of the parts come from offshore, or vice versa? What about the fact that Chrysler is mostly owned by Fiat (an Italian car maker)?

I actually do like the idea of supporting local businesses whenever possible. But I think I would be more likely to buy their products if I actually felt like they were superior to the alternatives. I’m less likely to want to support a company with a history of shoddy management which I already support through generous government loans, or one that uses coercion or veiled threats to get me to buy.

Should I patronize a restaurant owned by a friend even though the service isn’t very good and I don’t like the food? The whole idea of capitalism is that the cream is supposed to rise to the top. If your company makes a product that suits my needs at a price I can afford to pay, and offers consistently higher quality and service, I’m going to buy from you rather than your competitor. If your competitor offers the better product, service or experience, I think I should be free to buy from them without a guilty conscience.

Do you think it’s wrong to buy a car from anyone but the big 3? Does it factor into your purchase decision at all?

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Preemptive Purchases: Wasteful or Worth It?

2 Cents — Fri, 22 Jan 2010 10:45:03 +0000

Today is the tomorrow we worried about yesterday.

~ Author Unknown

Update: This post is included in The Carnival of Personal Finance @ My Journey to Millions. Thanks Evan!

Have you ever replaced an item before it really stopped working? Recently, we bought a new washer and dryer. Our old ones were working fine, but they were over 10 years old, and we began to worry about a sudden service interruption. We do a lot more laundry at our house than we used to. Here’s a tip for those of you with really young children out there: their clothes get bigger too! This means it takes a lot fewer pairs of jeans to fill the washer.

Mr. Cents did a lot of research online and decided that the most likely future problem would be that a bearing might go on the washer. It would not be worth it to pay to have it fixed. So we did some more research and decided on a few new models (bigger ones) that we liked. We debated whether or not the purchase was justified, or whether it would just be nice to have a new (and bigger) washer and dryer. Recently, the Canadian Finance Blog had a post on How to Make Your Appliances Last Longer that might be helpful to you if you’re trying to squeeze a little more life out of yours.

In the end, we bought a new washer and dryer a few days after the New Year, as a local appliance store had a good deal on a nice set. They had lots of inventory, and free delivery. Sometimes seasonality can affect how much we pay for things. A guest post by April Dykman on Get Rich Slowly recently highlighted The Best Time to Buy Almost Everything.

We ended up paying just a bit more than we had paid 10 years ago for our existing set, we got a larger capacity set, and we sold our current set on Kijiji for $175. We used our PC MasterCard to pay for it, so we’ll also get about $15 toward groceries as well. I’m glad we did it, and Mr. Cents is happy to have avoided a hysterical phone call from me in the future when our washer would eventually have conked out.

Just before Christmas, our coffee maker started acting up, so we bought a new one when we saw it on sale for 40% off – another preemptive purchase. We didn’t want to be without coffee for ourselves or our guests around the holidays. We actually gave up on the old one last week and got out the new one. One thing to think about in a case like this is how it might affect your warranty situation. Your warranty will be effective from the date on your receipt, not the date you plug it in.

So how do you decide whether a preemptive purchase is wasteful or worth it? Well, it may depend on the following factors:

1. Your Financial Situation

If you have a lot of consumer debt already, it makes more sense to try to save up in advance for the purchase in order to avoid taking on more debt. If you absolutely need it, maybe you could try to get something much cheaper on a site like Kijiji to tide you over until you can afford what you need. If you have enough money to pay for the item without debt and your budget won’t be severely impacted, go for it. Get the best value you can for your dollars.

2. The Item You Are Replacing

a. Big Ticket or Small Potatoes?

If you’re looking at a large purchase like a vehicle or major appliance, you need to be a lot more careful about your decision. It makes more sense to wait if you haven’t saved enough. If it’s a smaller item, it will have less effect on your finances. But if you really don’t need it, it still doesn’t make sense to spend the cash. If you’re going to replace something large, but you have done your research, you feel like the peace of mind it will give you is worth the price, and you can afford it, then go ahead.

b. Staple or Extra?

If this item is an extra that you really could do without for a while and you can’t afford it, it’s not worth stressing yourself and your balance sheet to buy it now. If it’s an essential item but you are not ready to buy it without taking on debt, you may want to wait. If you must take on debt for a staple item, get the best interest rate and terms you can and adjust your budget to pay it off as soon as possible. As long as you can afford it, you can spend on staples or extras. Just make sure you don’t end up buying a model that is more than you need for more than you wanted to spend.

3. Your Motivation

If you are replacing an item because you want a newer, bigger, or better car, washer, or whatever, the purchase doesn’t make sense. The idea behind a worthwhile preemptive purchase is that you are replacing something that you know will have outlived its useful life soon. If that’s not the case, why spend the money?

4. Your Personal Situation

If you have a young family where finding time to go shopping (preferably without toddlers in tow) is nearly impossible, give yourself a break. Do as much research and shopping online ahead of time as you can. Be prepared for when your car, fridge, or whatever you’re worried about gives up the ghost and keep your eyes on the flyers for sales. If you have more time on your hands, it would be easier for you to handle an essential going on the fritz unexpectedly.

The decision about whether to preemptively purchase something (or not) is yours. It depends on so many factors that it’s impossible to say “this is the right way”. I hope these tips help!

Have you ever purchased something preemptively? Did you regret it, or did it give you peace of mind?