When things around the house break down, or are being held together with duct tape and chewing gum, a decision has to be made whether to incur the costs of fixing them or whether it is better to simply replace them. There are several criteria that must be considered when making the decision, including the age of the item, the cost of the repair, the likelihood that it will need to be repaired again in the near future, and the cost of a new one. In many cases, it makes financial sense to repair old items rather than spend money on new ones.
Sometimes though, pouring money into outdated, energy-inefficient assets is simply sending good money in after bad. Here are four common groups of personal and household items that will likely break down on you at some point in your life. (Big ticket purchases can put a strangle-hold on your finances, to help identify those dangers read
5 Horrific Things That Can Haunt Your Finances.)
TUTORIAL: Budgeting Basics
1. VehiclesWhether to sell or junk your used car is one of the most difficult decisions you can make. New cars are expensive, but so are major repairs on old ones. There are times when the decision is easy, such as when it will cost $5,000 to put a new engine into a car that will only be worth $3,000 after the repair. Gas mileage is also an important consideration. If you are patching up an old
clunker that gets 15 miles to the gallon, it may make more financial sense to buy a new or slightly used car that gets 30 miles to the gallon. As long as your old car is reasonably fuel-efficient and the repairs are less than 25% of the value of the car, and as long as the mechanic feels it is otherwise sound, it is worth repairing rather than buying a new car.
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2. Household AppliancesAppliances like refrigerators, air conditioners, and dishwashers always seem to break down right after the
warranty ends. Warranty periods are shrinking and the increasing complexity of the construction of these appliances boosts the odds that you will have to make the repair/replace decision more often. One of the main determinants is the age of the appliance.
Older appliances suck much more energy than newer ones on average. This is especially true of old refrigerators and freezers. If they are more than 10 years old, it is almost always better to buy new than to try to fix old compressors. With dishwashers and washing machines, it's both energy-efficiency and water usage that will help you make the right choice. New washers can use less than one-quarter of the hot water as old ones, which saves on both the water bill and the energy bill. It may also be difficult to obtain parts for older machines, raising the cost of the repair. In general, if a household appliance is more than five years old, give serious consideration to replacing it. (For tips on how to make shopping an easier experience on your wallet, see
5 Money-Saving Shopping Tips.)
3. Clothes
There was a time when clothes lasted a lot longer than they do now. Part of it was the fact that they were made to last, not made to be sold for a few dollars. Part of it was also that people mended, patched, and altered clothes until they were worn out. Today, people are more likely to throw out old clothes or send them off to charity. There is a financial benefit to buying high-quality clothes and fixing them when hems get dropped or tears appear. Low-end clothing is
mass-produced and meant to be expendable at the end of the first season of wear. Good quality clothing can last years and are worth mending. Buy clothes that are simple and classic and can pair with many other pieces. This way, they won't go out of style long before they wear out. Clothing repairs and alterations at local seamstresses are often inexpensive ways to get another few years out of well-made piece of clothing.
4. Computers and Electronics
Computers break - frequently. So do the myriad of electronic devices we have around our homes, such as CD players, GPS units, televisions and alarm clocks. Electronic devices can be expensive to fix, and often, impossible to fix. As the price of most electronics continues to decrease while the features and capabilities increase, it is often not worth the cost to repair them. This applies doubly to computers.
As new programs and online applications grow in size and complexity, they take up more memory. Older computers often cannot keep up after three or four years. While new memory can be added and minor repairs and disc cleanups can be made, using a clunky four-year-old computer often takes more time than it is worth. If time equals money for you, buying a new computer is often the best choice if the existing one is more than a few years old.
The Bottom Line
Making the right decision about repairing or replacing your household goods can save you thousands of dollars over the years. Consider all of factors rather than just the cost of the repair before deciding if something is worth hanging on to. (Stores are constantly offering extended warranties, but to see if it is truly worth it, check out
Extended Warranties: Should You Take The Bait?)
by
Angie Mohr is a Chartered Accountant and Certified Management Accountant who has worked with thousands of business and personal finance clients from home-based entrepreneurs to rock bands to celebrity chefs. She is also the author of the Numbers 101 for Small Business series of books which have been translated into several languages and are sold worldwide. Her new book: Money$marts: Teaching Your Kids the Value of a Buck will be released in the fall of 2011.
Angie also freelances for several newspapers and magazines, both in print and online. She is passionate about gardening, cooking and bringing more local foods into our diet. She is Canadian through and through but lives by the ocean in Savannah, Georgia with her husband, two children, six cats and innumerable chickens.
