Beating Broke

Personal Finance from the Broke Perspective

Is Saving Money a Waste of Money

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Save! Be Frugal! A penny saved is a penny earned. There’s a plethora of maxims meant to encourage us all to save our money for a rainy day. To hoard our excess funds so that we can spend them at a later date and enjoy their usage. But, is saving our money a waste of our money?

The most obvious way that saving money could be a waste of money is in lost opportunity cost.  If your money is tied up in some CD or savings account that you don’t have ready access to, what opportunity are you going to miss out on that could make you even more money.  If you can’t take advantage of an opportunity to make money, your savings is wasting those potential profits.

But, that isn’t the real issue.  Potential profits don’t necessarily mean lost profits.  Maybe that opportunity doesn’t perform as expected and you earn less than you would have in the CD or savings accounts?  No, I don’t think that theory holds up.  Sure, you might miss out on a potential profit boon, but I wouldn’t encourage not saving for that purpose.  In fact, having a readily accessible savings could make it easier to take advantage of an opportunity like that.

But, let’s think for a moment about what we do to save money.  The easiest way to do that is to just have it taken directly from your paycheck and into a 401(k) or to set up an automatic transfer from your paycheck to a savings account.  Easy.  A little bit of set up involved, but very little effort thereafter.  That’s hardly a waste of money!  But, let’s look at the opposite side of the spectrum.  You’re pinching your pennies, saving as much as you possibly can and then some.  You don’t want to miss out on an opportunity, or you want to pay your debt off super fast!  You go so far as to start collecting pop cans.  (assuming you live in a state that has a deposit.)  You walk down the street and throw the cans you find into a bag.  Maybe you even hit the parks and poke through the trash cans there.  Every week, you spend several hours looking for cans.

How much is your time worth?  If you’re spending several hours a week for a few bucks worth of cans, are you making a good use of your time?  Isn’t your effort to save a few bucks a waste of potential money doing something else?  Heck, you could deliver pizzas for a few hours a week and make much more than that.  Not to mention the other ways to make extra money.  You can make money selling ebooks, or working some overtime, or consulting, or just about any second job, or make money on twitter, or even *ahem* blogging.  Sure, the cans are an extreme example.  But, one used to put a spotlight on my point.  What saving practices are you employing that are a waste of money?  Which of them are worth your time, effort, and resources?  And which aren’t?

If we are going to attempt to create a super financial situation, we have to make our saving machine as efficient as possible. It doesn’t hurt to question your tactics.  Find the ones that are causing you to waste your money and find a better use of your time.  Not only will it make your money saving efforts more efficient, but I think it will free up some time to do things that you want to do.  Like spend time with your kids, or walk through the park and not look for cans!

The Great Kitchen Remodel

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As I mentioned before, part of what were doing with our tax refund is to remodel our kitchen.  Our kitchen was in a bit of rough shape, as some of it was likely original to when the house was built in 1950.  The linoleum had been added, as had the carpet and the counter-top, but there was little evidence that anything else had been upgraded in 60 years.  I don’t know about you, but that just screams for updating.  We’d put up with it for almost 6 years, and it was one of the “must do” items on our list of things that had to be done in order for us to eventually sell the house and upgrade to something a bit bigger.  When the opportunity came in the form of our tax refund, we felt that it was a justifiable usage of the money. Here, I’ll let the picture speak for me.  That’s all the old stuff.  Built in place.  The doors on the cabinets had been painted so many times (I counted 6 layers of paint) that they wouldn’t close.  The drawers had the same issue, except that they rubbed on their cases and dropped dust from that rubbing onto all of the pans and such that were in the lower cabinets.

Old Kitchen

Could we have lived with that for a couple of more years?  Probably.  But there’s a limit where saving, budgeting, and repaying debt become a true detriment to your happiness.  When you reach that limit, you can become truly miserable.  We could have used the money we spent on the kitchen on debt repayment.  That would have felt good, but not nearly as good as it is to not have that kitchen any more!  So, that just about covers the why of our kitchen remodel.  Let’s move on to the how.

We didn’t (obviously) want to spend a whole lot of money on the kitchen, but just merely update it.  We hit the not-so-local (100 miles) Menard’s and went about ordering the pieces for delivery.  Also, we managed to squeeze in a dishwasher that was on clearance.  It wasn’t really part of the original plan, but it was actually cheaper than the cabinet that would have had to go where it went.

Here’s how the cost on that broke down.

  • Cabinets: ~$1700 (They are the budget models, but have solid Oak facing and doors and look quite nice.)
  • Dishwasher: ~$180 (again, it was on clearance and was the last one they had.)
  • Flooring: ~$450 (laminate that was on sale to replace the chipping linoleum and stained carpet.)
  • Delivery: ~$180 (it’s a long ways, and it wouldn’t fit in our car.)

All told, that first trip cost us a shade over $2300.  I didn’t go out and compare, but I think that’s a pretty good deal.  Once all the parts and pieces were delivered, my dad came out to help out over a long weekend.  He lives about 950 miles away, so it was quite the trek for him.  And I must admit, the remodel would have likely turned into a small disaster had he not came.  He’s a contractor, so he’s done a few of these before. And there were a few unforeseen issues that would have caused me a huge problem without the knowledge and help.

In the end, the four day weekend turned into a 5 day weekend.  It was more like a 5 day workweek, but with far more physical labor than I normally do.  But, it got done.   There’s only a little bit of trim that I’ve got to put up, and it will be 100% finished.  I’m hoping that I can find the parts for that here in town this weekend and get that wrapped up.

And now, for the grand unveiling!  Here, in all it’s splendor, is our new kitchen.

New Kitchen

What do you think?  Quite the change, isn’t it?  After it was all said and done, we added around $600 more to the bill with odds and ends that we needed throughout making the total bill come in at around $2900.  Of course, if we had had to pay for labor, it would have significantly raised the costs.  Yet another reason to at least try DIY.  You’ve got to know your limits of course.  I got lucky and my dad was able to come help, otherwise this would have easily turned into an example of what happens when you don’t know your limits.  But, it didn’t.  We’re extremely happy with the way it turned out and even though the space is still very small, the luxury of the new cabinets and drawers along with the dishwasher makes it all seem just a tad bigger.

Side note: While my dad was here, he was telling us a story about a remodel he recently worked on where the kitchen alone came in at about $100k.  Incredible.  The client put in solid granite counter-tops that cost $20k!  Even if I won the lottery, I don’t think I could bring myself to spend that much money on something like that.

Tax Day: What We’re Doing With Our Refund

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I dislike getting a refund from the government. I don’t like having to look up the my tax refund status.  I don’t have any good reason to give them an interest free loan, but any changes I make to my W4 don’t seem to make any difference.  I keep getting a refund every year.  This year, the numbers were really off, because we added a dependent last march.  After all the numbers were entered, and the forms filed electronically, the IRS sent us a nice deposit of a little over $3000.  Combined with a bit under $500 from the state, and we end up with $3500 in the bank.

Now, before I go on to tell you what it is we are doing with that money, I need to say something.  For the last several years, we have spent nearly every spare dime we have on paying off debt.  We still have debt that needs to be paid off.  However.  Despite my hate for debt, I’ve come to realize that you cannot let other things slide in order to pay off that debt.  With that in mind, here’s how we’re spending our refund.

We’re getting a new kitchen.  The cupboards in our kitchen are original to the house (circa 1950) and have been painted so many times that they no longer close.  The drawers grind against their frame and the resulting paint dust and wood dust falls down from them onto anything in the cupboards below them.  We have to wash our pans before we can use them because of the dust.  The linoleum on the floor is peeling up.  The carpet is ancient, smelly, and stained.  If you took just the kitchen from our house, it would fit right in with many of the run down slum rentals in town.  We want to move up to a newer (read bigger) house soon, so we need to make this house sellable.  In my opinion, with the kitchen in this condition, it would not sell for what it is worth.  So, we went and bought all new cupboards, countertop, and flooring. Oh, and a dishwasher.  That’s a certifiable luxury, but it helps that we bought it all on sale.  All of the supplies came in at about $2300.  There’s still a few odds and ends that we’ll need to purchase, but we should be able to keep it at about $2700 or less.

This weekend, my father is coming to town to help me install it all.  With any luck, come Monday, it will be mostly finished and usable.

If the plan works, we’ll still have about $800 or so left over.  And with that, we’re buying a couch.  And maybe a loveseat.  Depends on the sale I suppose.   This could be classified as a luxury that we don’t need if it weren’t for the hole in the one cushion, the rips in the spring lining that allows everything to fall between the cushions and disappear into the couch, and the stitching that is coming out at all the seams.  The couches that we are replacing are in dire need of it.  We got them free and have used them for several years.  The couches we had before that were hand me downs and garage sale finds.  It’s time for something new.  And, yes, we could go to garage sales and find new used stuff, but we’ve been saying that for at least a year and haven’t done it, so we’re going to splurge a bit.

When we’re done with all of that, we’ll go back to trying to pay everything off.  My wife’s new business is growing well (that’s another post), and her income is leveling off some, so we can more properly budget for debt repayment.  We’re leaps and bounds from where we were when we got married, and with any luck, 2011 will be the last year we spend with any real debt aside from a mortgage.

What are you doing with your refund?